As an entrepreneur you enter into agreements on a regular basis. Also with other companies. General terms and conditions are often part of the agreement. The general terms and conditions regulate (legal) subjects that are important in every agreement, such as payment terms and liabilities. If, as an entrepreneur, you purchase goods and/or services, you may also have a set of general purchasing conditions. If you do not have these, you could consider drawing them up. A lawyer from Law & More will be pleased to help you with this. This blog will discuss the most important aspects of the general terms and conditions of purchase and will highlight some conditions for specific sectors. In our blog ‘General terms and conditions: what you should know about them‘ you can read more generic information about general terms and conditions and information that is of interest to consumers or companies that focus on consumers.
What are general terms and conditions?
General terms and conditions often contain standard stipulations that can be used again for every contract. In the contract itself the parties agree on what exactly they expect from each other: the core agreements. Every contract is different. The general conditions lay down the preconditions. The general terms and conditions are intended to be used over and over again. You use them if you regularly enter into the same type of agreement or can do so. General terms and conditions make it a lot easier to enter into new contracts, because a number of (standard) subjects do not have to be laid down each time. Purchase conditions are the conditions that apply to the purchase of goods and services. This is a very broad concept. Purchase conditions can therefore be found in all kinds of sectors such as the construction industry, the health care sector and other service sectors. If you are active in the retail market, purchasing will be the order of the day. Depending on the type of business carried on, appropriate general terms and conditions need to be drawn up.
When using general terms and conditions, two aspects are of great importance: 1) when can general terms and conditions be invoked, and 2) what can and cannot be regulated in general terms and conditions?
Invoking your own general terms and conditions
In the event of a conflict with the supplier, you may wish to rely on your general purchasing conditions. Whether you can actually rely on them depends on a number of aspects. First of all, general terms and conditions must be declared applicable. How can you declare them applicable? By stating in the request for quotation, order or purchase order or in the agreement that you declare your general purchase conditions applicable to the agreement. For example, you can include the following sentence: ‘The general purchasing conditions of [name of company] apply to all our agreements’. If you deal with different kinds of purchases, for example both the purchase of goods and the contracting of work, and you work with different general conditions, you must also clearly indicate which set of conditions you declare to be applicable.
Secondly, your general purchase conditions must be accepted by your trading party. The ideal situation is that this is done in writing, but this is not necessary for the conditions to be applicable. The conditions can also be tacitly accepted, for example, because the supplier has not protested against the declaration of applicability of your general purchase conditions and subsequently enters into the contract with you.
Finally, the user of the general purchase conditions, i.e. you as purchaser, have an information duty (Section 6:233 under b of the Dutch Civil Code). This obligation is fulfilled if the general purchase conditions have been handed over to the supplier before or at the conclusion of the agreement. If handing over the general purchase conditions before or at the time of the conclusion of the contract is not reasonably possible, the obligation to provide information can be fulfilled in another manner. In that case it shall be sufficient to state that the conditions are available for inspection at the user’s office or at a Chamber of Commerce indicated by him or that they have been filed with a court registry, and that they will be sent upon request. This statement must be made prior to the conclusion of the contract. The fact that delivery is not reasonably possible can only be assumed in exceptional cases.
Delivery can also take place electronically. In this case, the same requirements apply as for the physical handover. In that case, the purchase conditions must be made available before or at the time of concluding the contract, in such a way that the supplier can store them and they are accessible for future reference. If this is not reasonably possible, the supplier must be informed prior to the conclusion of the agreement where the conditions can be consulted electronically and that they will be sent electronically or otherwise on request. Please note: if the agreement is not concluded electronically, the supplier’s consent is required for the general purchase conditions to be made available electronically!
If the obligation to provide information has not been fulfilled, you may not be able to invoke a clause in the general terms and conditions. The clause is then voidable. A large counterparty cannot invoke nullity due to breach of the obligation to provide information. The other party may, however, rely on reasonableness and fairness. This means that the other party may argue that and why a provision in your general purchase conditions is unacceptable in view of the aforementioned standard.
Battle of forms
If you declare your general purchase conditions applicable, it may happen that the supplier rejects the applicability of your conditions and declares his own general delivery conditions applicable. This situation is called ‘battle of forms’ in legal jargon. In the Netherlands, the main rule is that the conditions referred to first apply. You should therefore ensure that you declare your general purchasing conditions applicable and hand them over at the earliest possible stage. The conditions can be declared applicable as early as at the time of the request for an offer. If the supplier does not explicitly reject your conditions during the offer, your general purchase conditions apply. If the supplier includes his own terms and conditions in the quotation (offer) and explicitly rejects yours and you accept the offer, you must again refer to your purchase conditions and explicitly reject those of the supplier. If you do not explicitly reject them, an agreement will still be established to which the supplier’s general terms and conditions of sale apply! It is therefore important that you indicate to the supplier that you only wish to agree if your general purchase conditions apply. In order to reduce the chance of discussions, it is best to include the fact that the general purchase conditions apply in the agreement itself.
International Agreement
The above may not apply if there is an international sales contract. In that case the court may have to look at the Vienna Sales Convention. In that convention the ‘knock out rule’ applies. The main rule is that the contract is concluded and the provisions in the terms and conditions that are agreed upon form part of the contract. Provisions of both general conditions that conflict do not become part of the contract. The parties therefore have to make arrangements about the conflicting provisions.
Freedom of contract and restrictions
Contract law is governed by the principle of freedom of contract. This means that you are not only free to decide which supplier you enter into a contract with, but also what exactly you agree on with that party. However, not everything can be laid down in the conditions without limitation. The law also stipulates that and when general conditions can be ‘invalid’. This way consumers are offered extra protection. Sometimes entrepreneurs can also invoke the protection rules. This is called reflex action. These are usually small counterparties. These are, for example, natural persons acting in the exercise of a profession or business, such as a local baker. It depends on the specific circumstances whether such a party can rely on the protective rules. As a purchasing party you do not have to take this into account in your general conditions, because the other party is always a party who cannot appeal to the consumer protection rules. The other party is often a party that sells/delivers or provides services on a regular basis. If you do business with a ‘weaker party’ separate agreements can be made. If you choose to use your standard purchase conditions, you run the risk that you cannot rely on a certain clause in the general conditions because, for example, it is nullified by your counterparty.
The law also has restrictions on the freedom of contract that apply to everyone. For example, agreements between parties may not be contrary to the law or public order, otherwise they are void. This applies both to arrangements in the contract itself and to provisions in general terms and conditions. In addition, terms can be nullified if they are unacceptable according to the standards of reasonableness and fairness. Because of the aforementioned freedom of contract and the rule that agreements made must be performed, the aforementioned standard must be applied with restraint. If the application of the term in question is unacceptable, it can be annulled. All the circumstances of the specific case play a role in the assessment.
What topics are covered in the general terms and conditions?
In the general terms and conditions you can anticipate any situation you may find yourself in. If a provision is not applicable in a specific case, the parties can agree that this provision – and any other provisions – will be excluded. It is also possible to make different or more specific arrangements in the contract itself than in the general terms and conditions. Below are a number of topics which could be regulated in your purchase conditions.
Definitions
First of all, it is useful to include a list of definitions in the general purchase conditions. This list explains important terms that recur in the conditions.
Liability
Liability is a subject that needs to be properly regulated. In principle, you want the same liability scheme to apply to every contract. You want to exclude your own liability as much as possible. This is therefore a subject to be regulated in advance in the general purchase conditions.
Intellectual Property Rights
A provision on intellectual property should also be included in some general terms and conditions. If you often commission architects to design construction drawings and/or contractors to deliver certain works, you will want the final results to be your property. In principle, an architect, as the maker, has the copyright to the drawings. In the general conditions, for example, it can be stipulated that the architect transfers ownership or gives permission for changes to be made.
Confidentiality
When negotiating with the other party or when making an actual purchase, (business) sensitive information is often shared. It is therefore important to include a provision in the general terms and conditions which ensures that your counterparty cannot use confidential information (just like that).
Guarantees
If you purchase products or commission a party to provide services, you naturally want that other party to guarantee certain qualifications or results.
Applicable law & competent judge
If your contracting party is located in the Netherlands and the delivery of the goods and services also takes place in the Netherlands, a provision on the law applicable to the contract may seem less important. However, in order to prevent unforeseen situations, it is a good idea to always include in your general terms and conditions which law you declare to be applicable. In addition, you can indicate in the general terms and conditions to which court any dispute should be submitted.
Contracting of work
The above list is not exhaustive. There are of course many more subjects that can be regulated in general terms and conditions. This also depends on the type of company and the sector in which it operates. By way of illustration, we will go into a number of examples of subjects that are interesting for the general purchase conditions in the event of contracting for work.
Chain liability
If you as a principal or contractor engage a (sub) contractor to perform a material work, then you fall under the regulation of the chain liability. This means that you are liable for the payment of payroll taxes by your (sub)contractor. Payroll taxes and social security contributions are defined as payroll taxes and social security contributions. If your contractor or subcontractor does not comply with the payment obligations, the Tax and Customs Administration can hold you liable. In order to avoid liability as much as possible and to reduce the risk, you should make certain agreements with your (sub)contractor. These can be laid down in the general terms and conditions.
Warning obligation
For example, as a principal you can agree with your contractor that before he starts work he will investigate the situation on site and then report to you if there are any errors in the assignment. This is agreed upon to prevent the contractor from carrying out the job blindly and forces the contractor to think along with you. In this way, any damage can be prevented.
Safety
For safety reasons, you want to impose requirements on the qualities of the contractor and the contractor’s staff. For example, you may require VCA certification. This is pre-eminently a subject to be dealt with in the general terms and conditions.
UAV 2012
As an entrepreneur you may want to declare the Uniform Administrative Terms and Conditions for the execution of Works and Technical Installation Works 2012 applicable to the relationship with the other party. In that case it is also important to declare them applicable in the general purchase conditions. In addition, any deviations from the UAV 2012 must also be explicitly indicated.
The Law & More lawyers assist both buyers and suppliers. Do you want to know exactly what the general terms and conditions are? Lawyers from Law & More can advise you on this. They can also draw up general terms and conditions for you or assess existing ones.