Hand­ling of Long-Term Sup­p­ly Obli­ga­ti­ons in Case of Pandemic-Related Difficulties

The coro­na­vi­rus con­ti­nues to hold the glo­bal eco­no­my firm­ly in its grasp. Near­ly every com­pa­ny is con­ten­ding with the impact of the pan­de­mic, par­ti­cu­lar­ly sup­p­ly shorta­ges, and hig­her cos­ts are making it dif­fi­cult for com­pa­nies to meet their sup­p­ly obli­ga­ti­ons (which are fre­quent­ly dic­ta­ted by long-term con­tracts). In this con­text, you will find infor­ma­ti­on below about some issues in Ger­man law which are the topic of inten­si­ve dis­cus­sion at the moment, sum­ma­ri­zed in over­view form.

Basic Prin­ci­ples of Con­trac­tu­al Agreements

A key prin­ci­ple is pac­ta sunt ser­van­da: con­tracts must be hono­red. Under the gene­ral prin­ci­ples of the Ger­man legal sys­tem, deve­lo­p­ments which result in added cos­ts for one of the con­trac­ting par­ties, or even los­ses, typi­cal­ly have to be tole­ra­ted and do not fur­nish ade­qua­te grounds for (uni­la­te­ral) adjus­t­ments of any kind.

But ano­ther prin­ci­ple is also play­ing a key role right now: con­trac­tu­al agree­ments (whe­ther in the form of indi­vi­du­al­ly nego­tia­ted con­tracts or set down by means of stan­dard terms and con­di­ti­ons) gene­ral­ly take pre­ce­dence over gene­ral prin­ci­ples. Alt­hough the vali­di­ty of stan­dard clau­ses is sub­ject to review to a cer­tain ext­ent, even in the b2b sphe­re (espe­ci­al­ly in case of liti­ga­ti­on), com­pa­nies should nevert­hel­ess look for and con­sider appro­pria­te for­mu­la­ti­ons in a “top-down” manner.

Acts of God and Force Majeure

In times when sup­p­ly is con­sis­tent, pri­ces are rising and mate­ri­als are dif­fi­cult or impos­si­ble to obtain, com­pa­nies are eager to find a way out of their sup­p­ly obli­ga­ti­ons or to secu­re a pri­ce adjus­t­ment. This is always pos­si­ble if the con­trac­ting par­ties agree, but it can rare­ly be done uni­la­te­ral­ly. Whe­ther such pos­si­bi­li­ties exist depends pri­ma­ri­ly on the pro­vi­si­ons of the con­tract. Very careful exami­na­ti­on is requi­red to deter­mi­ne whe­ther and which of the requi­re­ments spe­ci­fied in the rele­vant clau­ses have been met. For exam­p­le, if the ques­ti­on invol­ves the “fore­seea­bi­li­ty” of extre­me cir­cum­s­tances due to the pan­de­mic, it is neces­sa­ry to ask whe­ther such cir­cum­s­tances were actual­ly unfo­re­seeable, cer­tain­ly in the case of con­tracts con­cluded after March 2020.

If the­re are no con­trac­tu­al pro­vi­si­ons in this regard, then the legal situa­ti­on beco­mes rele­vant. The Ger­man Civil Code and Com­mer­cial Code do not express­ly address the issues of “force majeu­re” or “acts of God” in this con­text. Ins­tead, they con­sider issues such as “ina­bi­li­ty” in terms of § 275 of the Civil Code, “frus­tra­ti­on of con­tract” in accordance with § 313 of the Civil Code and ordi­na­ry (or extra­or­di­na­ry) ter­mi­na­ti­on of con­tracts in accordance with § 314 of §§ 623 and 724 of the Civil Code. Howe­ver, it is neces­sa­ry to pay clo­se atten­ti­on to the requi­re­ments and con­se­quen­ces of the various statutes.

Once again: under the law, typi­cal entre­pre­neu­ri­al risks do not fur­nish ade­qua­te grounds for the uni­la­te­ral adjus­t­ment of exis­ting obligations.

Pro­cu­re­ment Obligation/Procurement Risk

If a sup­pli­er is sub­ject to a pro­cu­re­ment obli­ga­ti­on, it is requi­red to adhe­re to this obli­ga­ti­on even if this means incur­ring an addi­tio­nal finan­cial expen­se. All (reasonable) opti­ons for pro­cu­ring the goods must be con­side­red and exer­cis­ed. This duty appli­es regard­less of whe­ther the sup­pli­er is respon­si­ble for a hin­drance to sup­p­ly. By law, strict requi­re­ments app­ly for releasing sup­pli­ers from their pro­cu­re­ment obli­ga­ti­ons: the afo­re­men­tio­ned sta­tu­tes, § 275 of the Civil Code and § 313 of the Civil Code, come into con­side­ra­ti­on in this regard, for exam­p­le. As a result, sup­pli­ers which are bound to sup­p­ly cer­tain mate­ri­als should con­sider sug­gest­ing alter­na­ti­ve mate­ri­als to their cus­to­mers and dis­cuss whe­ther they can be released from their obligations.


In Ger­man law, a duty to pay dama­ges for non-performance of con­trac­tu­al obli­ga­ti­ons typi­cal­ly depends on negli­gence, i.e. the con­trac­ting party’s fail­ure to adhe­re to an appro­pria­te ext­ent to the due dili­gence requi­re­ments which it is expec­ted to per­form. With regard to sup­p­ly chains, pri­ce chan­ges, the avai­la­bi­li­ty of mate­ri­als on the one side and sup­p­ly obli­ga­ti­ons on the other, sup­pli­ers can be expec­ted to set up and mana­ge their sup­p­ly chain in a man­ner con­sis­tent with their rele­vant situa­ti­on (and know­ledge), i.e. to make reasonable efforts in order to com­ply with their obli­ga­ti­ons. Sup­pli­ers would be well-advised to docu­ment the rele­vant measures.

Uni­la­te­ral Con­trac­tu­al Adjus­t­ments or Extra­or­di­na­ry Termination

Uni­la­te­ral adjus­t­ment of exis­ting con­tracts or extra­or­di­na­ry ter­mi­na­ti­on con­flicts with the basic prin­ci­ples men­tio­ned abo­ve and is the­r­e­fo­re pos­si­ble to just a limi­t­ed extent.

  • Efforts to secu­re con­trac­tu­al adjus­t­ments based on “frus­tra­ti­on of con­tract” in accordance with § 313 of the Civil Code often fail due to an ina­bi­li­ty to meet the appli­ca­ble requi­re­ments. In par­ti­cu­lar, the con­trac­ting par­ty must show that con­ti­nuing to adhe­re to the con­tract would lead to an unbe­ara­ble result which is “sim­ply incom­pa­ti­ble with law and jus­ti­ce.” To date, the courts have ten­ded to view even dra­stic increa­ses in the pri­ce of raw mate­ri­als as a typi­cal entre­pre­neu­ri­al risk, and the­r­e­fo­re one which the sup­pli­er can reason­ab­ly be expec­ted to assume.
  • A simi­lar situa­ti­on appli­es for the pos­si­bi­li­ty of extra­or­di­na­ry ter­mi­na­ti­on for good cau­se in accordance with § 314 of the Civil Code. In this case as well, the sup­pli­er must show that it can­not be reason­ab­ly expec­ted to con­ti­nue the con­trac­tu­al rela­ti­onship to the end after taking all cir­cum­s­tances into account and weig­hing the inte­rests of both parties.

Ordi­na­ry Termination

The law does not express­ly address the ordi­na­ry ter­mi­na­ti­on of frame­work sup­p­ly con­tracts. In accordance with recent case law, howe­ver, this pos­si­bi­li­ty does come into con­side­ra­ti­on through ana­log­ous appli­ca­ti­on of §§ 623 and 724 of the Civil Code. In this case as well, cer­tain requi­re­ments have to be met:

  • the con­tract must not con­tain any clau­se which excludes ordi­na­ry termination;
  • the sup­p­ly con­tract must repre­sent a con­ti­nuing obli­ga­ti­on, i.e. ces­sa­ti­on of the con­trac­tu­al rela­ti­onship must not be defi­ned in advan­ce (whe­ther in the form of a spe­ci­fic expi­ra­ti­on date or through an iden­ti­fia­ble event, such as a defi­ned sup­p­ly quantity);
  • an “ade­qua­te” noti­ce peri­od must be obser­ved in each case. This peri­od may be based e.g. on the time nee­ded to make chan­ges to the company’s pro­duct range.

The who­le cli­ent infor­ma­ti­on by Dani­el Wuhr­mann can be down­loa­ded here.


Stay up-to-date

We use your email 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.