Con­tract design in sup­ply chains in times of cri­sis Part 2

Sin­ce the out­break of the Covid 19 pan­de­mic, the asso­cia­ted dis­rup­ti­ons in sup­ply rela­ti­ons have been an ongo­ing issue. As alrea­dy repor­ted in our pre­vious news, such dis­rup­ti­ons can be coun­te­red – at least in part – with smart, forward-looking con­tract design. The text below pro­vi­des examp­les of how sup­pliers can pre­vent typi­cal cri­sis situa­tions in the sup­ply chain through con­trac­tu­al arrangements.

Con­trac­tu­al design options

Self-delivery reser­va­ti­on

One pos­si­bi­li­ty is the so-called “self-delivery reser­va­ti­on”. Such a reser­va­ti­on grants a con­trac­ting par­ty the right to with­draw from the con­tract if it is not sup­plied by its sup­plier. In sup­ply rela­ti­ons, the sel­ler may uni­la­te­ral­ly with­draw from a con­tract in such a case.

In addi­ti­on to a con­trac­tu­al pro­vi­si­on, howe­ver, this pre­sup­po­ses that the con­trac­ting par­ty con­cer­ned has con­clu­ded a “con­gru­ent hedge” and is “left in the lurch” by its sup­plier, i.e., is not its­elf sup­plied. It should also be noted that, in the absence of any agree­ment to the con­tra­ry, cases in which the sup­plier can only obtain the goods at an incre­a­sed pri­ce are not encompassed.

The requi­re­ments for the admis­si­bi­li­ty of such clau­ses in gene­ral terms and con­di­ti­ons are lower in the B2B area than in the B2C area. In both cases, howe­ver, a reser­va­ti­on of self-delivery is gene­ral­ly per­mis­si­ble if cor­rect­ly for­mu­la­ted (cf. Federal Supre­me Court, Ruling of 14 Novem­ber 1984 – Case VIII ZR 283/83; Hig­her Regio­nal Court of Stutt­gart, Jud­ge­ment of 16 Febru­a­ry 2011 – Case 3 U 136/10).

Pri­ce sca­les tied to volumes

Cus­to­mers’ con­tracts often do not pro­vi­de for long-term bin­ding volu­mes that the cus­to­mer has to purcha­se. In the­se cases, the sup­plier must expect that a customer’s call-ups will be lower than expec­ted or even fail to mate­ria­li­se altog­e­ther. This is often pro­ble­ma­tic becau­se the sup­plier has usual­ly based its pri­ce cal­cu­la­ti­on on a cer­tain purcha­se quantity.

This can be reme­di­ed, at least in part, by agre­eing on a pri­cing struc­tu­re that is sca­led accord­ing to the sales volu­me. The pri­ce per unit can depend on the actu­al quan­ti­ty cal­led up by the cus­to­mer wit­hin a cer­tain peri­od. As a rule, the pri­ce will then incre­a­se for each pro­duct with lower call-up volumes.

Sin­ce this is a main pri­ce agree­ment, it is not sub­ject to con­trol in the GTC and is only sub­ject to trans­pa­ren­cy con­trol in accordance with § 307, Para­graph 1, Sen­tence 2 and Para­graph 3, Sen­tence 2 of the Civil Code.

Pri­ce esca­la­ti­on clause

If the­re is a risk for the sup­plier that the pro­cu­re­ment cos­ts of any input pro­ducts will incre­a­se, the­se incre­a­sed cos­ts can be “pas­sed on” to the cus­to­mer with the help of a pri­ce esca­la­ti­on clause.

Pri­ce esca­la­ti­on clau­ses are usual­ly desi­gned in such a way that the sup­plier is gran­ted a uni­la­te­ral right to deter­mi­ne per­for­mance in the terms of § 315 of the Civil Code. The sup­plier is ther­eby enti­t­led to fix or adjust the pri­ces sub­se­quent­ly and/or for the future.

In the B2C sec­tor, such clau­ses are only pos­si­ble under the nar­row pre­re­qui­si­tes of § 309(1) of the Civil Code. In the B2B area, they are only to be mea­su­red in terms of § 307 of the Civil Code and may not unre­a­son­ab­ly dis­ad­van­ta­ge the con­trac­tu­al part­ner. In order for the­re to be no unre­a­son­ab­le dis­ad­van­ta­ge, the sup­plier must have a legi­ti­ma­te inte­rest in pas­sing on the cost incre­a­ses to the cus­to­mer. Fur­ther­mo­re, the requi­re­ments and the scope of the right to deter­mi­ne per­for­mance must be suf­fi­ci­ent­ly spe­ci­fied in the pro­vi­si­on. Clau­ses that allow the user to incre­a­se the pri­ce bey­ond just pas­sing on the cost incre­a­se without any limit are not permitted.

In addi­ti­on, clau­ses may also be con­si­de­red which, alt­hough not estab­li­shing a right to adjust pri­ces, obli­ge the con­trac­ting par­ty to nego­tia­te new pri­ces at least in cer­tain situa­tions. This can also be an expe­dient mecha­nism for making mutual­ly agree­ab­le adjus­t­ments to prices.

Pro­vi­si­ons on capa­ci­ty reservations

In long-term sup­ply rela­ti­ons, the sup­plier is often obli­ged to ensu­re per­ma­nent pro­duc­tion capa­ci­ty. This can beco­me pro­ble­ma­tic if the cus­to­mer does not sub­se­quent­ly use the­se capacities.

To avoid such a situa­ti­on, arran­ge­ments for hol­ding cer­tain capa­ci­ties in reser­ve should be exami­ned and, at best, avoided. Howe­ver, it is often not pos­si­ble to dele­te the­se out­right during con­trac­tu­al nego­tia­ti­ons. In the­se cases, it makes sen­se, for examp­le, to agree on con­trac­tu­al com­pen­sa­ti­on for unused capa­ci­ty with the customer.

Sum­ma­ry

The abo­ve explana­ti­ons repre­sent only some of the pos­si­bi­li­ties for pre­ven­ting risks from being rea­li­sed through con­trac­tu­al pro­vi­si­ons and thus aver­ting dama­ge to one’s own com­pa­ny as far as pos­si­ble. If typi­cal sup­plier risks are not cove­r­ed in a con­tract, the sup­plier has no or few rights in times of cri­sis, or only rights that are dif­fi­cult to jus­ti­fy, to enfor­ce its own claims against the cus­to­mer or to ward off (dama­ge) com­pen­sa­ti­on claims by the customer.

back

Stay up-to-date

We use your e-mail address exclusively for sending our newsletter. You have the right to revoke your consent at any time with effect for the future. For further information, please refer to our privacy policy.