Unfair terms in B2B contracts - a practical guide (II)
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The Law on unfair terms (B2B law) applies to almost all contracts concluded between businesses, irrespective of the nature of the contract.
In this section of our guide, we deal with the issue which parties are affected by the law and which clauses are subject to this law. We also deal with the situation with regard to contracts in force on 1 December 2020.
1. Who are the parties concerned the B2B law?
The law on unfair B2B terms applies to almost all contracts concluded between businesses.
Traditionally, a "business" is defined as any natural or legal person who pursue an economic purpose on a lasting basis (including its associations).
In other words, any individual or legal person acting in the course of a paid activity (directly or indirectly), such as a company, a self-employed person registered with the CBE , an independent professional (doctor, lawyer,…) and an association, is concerned by the B2B law.
The consequence is that an NPO (ASBL/VZW) that carries out an activity against payment within the limits of its corporate object, even indirectly, would be affected by this law.
Authorities and public entities are also considered as businesses when they provide goods or services against payment and are therefore also affected by this new law.
2. Which clauses and which agreements are subject to these principles?
The law on unfair B2B terms applies in principle to all legal terms of contracts concluded between businesses, regardless of the nature of the contract.
However, there are a few exceptions.
2.1 Contracts that are not subject to the law
This law does not apply to the following contracts:
- Contracts relating to financial services, i.e. any service relating to banking, credit, insurance, individual pensions, investments and payments ;
- Public tender contracts and contracts arising therefrom (including subcontracts which the successful tenderer may conclude with its subcontractors).
2.2 The distinction between "essential terms" and "ancillary terms"
It is important to note that the purpose of this law is to sanction any situation of legal imbalance.
An economic disproportion between companies is not the criterion to be taken into consideration and can therefore never be the only reason to be sanctioned under the law on unfair B2B terms.
As a result, the (so-called) "essential terms", such as those determining the nature, the price, the quantity or the quality of the goods or services to be delivered, will escape the control of the court.
The legal terms (known as "ancillary terms") will be those to be subject to the court's assessment, for example provisions that modulate the services to be provided, price adjustment clauses or clauses waiving or limiting the liability of a party.
In practice, it will not always be easy to determine whether terms should be considered "essential" (of an economic nature and therefore not sanctionable) or an "ancillary" legal term (and therefore subject to the law).
However, this difference is essential under this B2B law.
As a matter of fact, if a term is considered ancillary, the court will be able to assess whether or not it may be deemed unfair in the light of the overall terms of the contract, of another contract on which that contract depends, but also of the sector of activity, the nature of the products and the commercial practices to which the contract relates.
Therefore, extra care must be taken when drafting any contract , and in the process of examination of the various provisions it contains.
3. Are contracts concluded prior to 1 December 2020 also affected?
The law on unfair B2B terms came into force on 1 December 2020 and is applicable to all contracts concluded, renewed or modified after this date.
Consequently, contracts already existing and in force on 1 December 2020 will not be subject to this law, until their modification or renewal. As soon as a current contract is modified or renewed after 1 December 2020, it will be affected by the law.
4. Would it be possible to avoid this regulation by submitting the contract to foreign law?
The law on unfair B2B terms will certainly apply when a contract between two businesses is made subject to Belgian law.
However, a contract with a link to Belgium, for example if the parties involved are Belgian and/or if the contract is executed in Belgium, can be always be made subject to another law system by a simple provision in that contract.
Is such clause sufficient to avoid that a contract falls within the scope of this law on unfair B2B terms?
That would be of course too easy.
We believe that the law on unfair B2B terms could be applicable, even if the parties have agreed on a foreign law, in the following two cases:
- if all the elements of the contract are located in Belgium, the law on unfair B2B terms would certainly apply even if there was an intention to circumvent Belgian law;
- If this is not the case (e.g. because one of the businesses is not Belgian or because goods are manufactured or delivered abroad), then a court may have to be convinced to decide that application of the law on unfair B2B terms is to be deemed essential for the Belgian economic system (which is something that has not yet been decided) and apply the law accordingly.
5. Conclusion
One thing is for sure, this issue will certainly be subject to future debate.
It is therefore essential to assess all elements at stake when drafting new contracts or terms.
For any further questions or if you want to be assisted ... our Seeds of Law specialists are available to inform or assist you. Please contact them via info@seeds.law or +32 (0)2 747 40 07.
