The announcement of delivery stops as an unlawful threat
This was confirmed by the Stuttgart Higher Regional Court (OLG) in its judgment of 7 April 2022 (case no.: 2 U 63/21) , where the court had to decide an action for damages brought by an automotive supplier against a globally operating car manufacturer.
The court found in particular that declarations of intent that are only intended to avoid unlawfully threatened delivery stops are voidable and therefore agreements based on them can be null and void pursuant to § 142 (1) of the German Civil Code (BGB).
The supplier “Prevent” had been supplying “Mercedes Benz Group AG” (formerly: Daimler AG and hereinafter “Mercedes”) with car seat covers since 2010. Since the supplier’s costs had increased over time and it held that supplying Mercedes was no longer economical, the supplier gave notice of termination for cause of all existing supply contracts with Mercedes on 13 December 2013, effective as of 31 January 2014. At the same time, the supplier offered to conclude new supply contracts with the manufacturer on adjusted terms. Mercedes initially rejected this kind of contract adjustment.
Since the parties were unable to reach an agreement, Prevent informed Mercedes on 31 January 2014 that it would no longer provide any deliveries from the following day, 1 February 2014. It was out of this situation of duress that Mercedes agreed to the adjusted conditions on 4 February 2014. These included, among other things, monthly compensation payments to the supplier in the amount of approximately EUR 80,000.
Half a year later, on 1 August 2014, Mercedes voided its declaration of intent which had led to the adjusted agreement on the grounds of unlawful threat and terminated all other existing contracts with the supplier for cause on the same grounds. Mercedes then also stopped accepting seat covers from the supplier from September 2014. Prevent then claimed damages in court against Mercedes in the amount of double millions for lost profits.
The Stuttgart Higher Regional Court confirmed the opinion of the lower court (Stuttgart Regional Court) and essentially dismissed Prevent’s action.
The Stuttgart Higher Regional Court found that Mercedes was no longer obliged from 1 August 2014 to accept the seat covers. Therefore, Mercedes was not liable for damages to Prevent due to the non-acceptance. With the valid declaration of voidance of 1 August 2014, Mercedes was released from the agreement made on 4 February 2014 with immediate effect.
The court considered the unlawful threat by Prevent to impose a delivery stop as a legitimate reason for the declaration of voidance. This was due to the fact that Prevent had neither the right to terminate the contract without notice nor the right to stop deliveries from the announced date.
Termination without notice could not be declared by Prevent for lack of cause. Prevent had invoked the “economic distress” of one of its sites. However, according to the Stuttgart Higher Regional Court, this is not sufficient to invoke cause in the form of a compelling reason pursuant to § 314 of the German Civil Code (BGB) or a serious and (no longer) reasonable change in the basis of the contract pursuant to § 313 of the German Civil Code (BGB). In both cases, it is decisive that “economic distress” generally falls within the supplier’s sphere of risk and that Prevent was not able to prove otherwise (e.g. that the continuation of the contract was nevertheless unreasonable for Prevent).
Moreover, the Stuttgart Higher Regional Court also ruled out the reinterpretation of the extraordinary termination for cause into an ordinary termination. This failed because a “reasonable notice period” would have had to be observed in the case of ordinary termination. In the opinion of the court, the period of 7 weeks set by Prevent was “obviously […] unreasonable” in view of the many years of (planned) cooperation and the time needed to set up an alternative supplier.
Like the judgments of the Düsseldorf Higher Regional Court and the Celle Higher Regional Court, the judgment in the Prevent case points out once more that communication towards business partners should be done with caution and only after sufficient examination of one’s own legal position.
At the same time, the decision of the Stuttgart Higher Regional Court and its explanations on the reinterpretation of an extraordinary termination for cause into an ordinary termination made it clear that ordinary termination of supplier contracts with reasonable notice is generally possible on the basis of §§ 623, 724 of the German Civil Code (BGB).
In any case, care should already be taken when drafting the contract to reflect and exclude identified (price) risks in the contract as far as possible in order to avoid finding oneself in a situation like the one described above in the first place.
More articles on this topic
Renegotiations (of prices) in the supply chain and their risks
Silence in the supply relation (not) a ground for termination?
Handling of Long-Term Supply Obligations in Case of Pandemic-Related Difficulties
Contract design in supply chains in times of crisis
Contract design in supply chains in times of crisis Part 2