Have you run out of flowers at your hotel or a particular food item on the shelf at your local shop? Are you missing an agricultural commodity that you need to process your own products? For the ordinary buyer, there is nothing easier than to dial the supplier’s phone number. However, if you are a buyer with a significant market power vis-à-vis such supplier, you should quickly put down your phone and read the third part of our series. It deals with the requirement that contracts with suppliers of food and agricultural products must be in writing.
As we wrote in the previous episode, the amendment to the SMPA has significantly broadened the scope of the addressees of the regulation. A number of buyers will now be required to put in writing all commercial agreements with suppliers in relation to which they have significant market power. And always before the start of the supply of products or provision of related services.
In practice, the requirement of written form affects a wide range of commercial situations, from the conclusion of framework supply agreements, through individual orders, to various promotional agreements or changes to agreed price lists. The written form must also be observed throughout the entire process of communication with the supplier, including cancellation of the agreement or changes to the terms and conditions of a contract that has already been agreed.
Does this mean that contracts with suppliers should only be signed on paper following the entry into force of the SMPA amendment? We have good news for you. It’s not that bad. The possibilities are wider.
Obligation of a written form and how to comply with it
The requirement of written form is generally met if the chosen form enables to capture the content of the arrangement and guarantee the authenticity of its origin and integrity of the content over time.
Thus, in addition to a paper document with a handwritten signature, commercial arrangements may also be concluded electronically, for example by sending a message to a data mailbox or using certified services that allow electronic signing of documents.
The situation is a bit more complex when supplier-buyer contracts are concluded via e-mail with a simple electronic signature or, for example, via DocuSign or EDI system. According to the Office for the Protection of Competition, additional measures must be taken in such cases to specifically ensure the authenticity of the origin and integrity of the content of commercial agreements.
For example, by defining the rules for e-mail communication (who and how can send e-mails on behalf of each party and what can be agreed through them). The measures must, of course, be agreed in advance, either in a contract concluded between the buyer and the supplier specifically for this purpose (typically contracts for the use of EDI or DocuSing), or together with other commercial terms in the framework contract (typically dealing with the communication by e-mail).
As on call… or rather not?
Although there are numerous options for negotiating agreements, the requirement of a written form is certainly not satisfied by verbal or telephone communication. This can cause difficulties in practice, especially when it comes to ensuring a quick replenishment of fresh goods or maintaining a certain minimum quantity of products on the shelf (this applies in particular to the itinerant trading method).
The obligation of a written form applies not only to the act of placing the order, but also to the subsequent acceptance of the order by the supplier (without this acceptance there is no agreement). It is further not possible, without further arrangement, for the buyer to send an e-mail with the order and for the supplier simply to deliver the goods (or be fined for not delivering the goods at the time and in the quantity as expected in the order).
This can of course be solved by setting up an appropriate order acceptance method in the framework agreement. However, such a method cannot include automatic acceptance of orders (i.e. a rule that the order is accepted by the supplier if it has not been expressly rejected by the supplier within a specified period), even if agreed in advance. This method of order and acceptance does not satisfy the presumption of a written agreement on all relevant terms and conditions of supply, as the Office for the Protection of Competition has explained.
We hope we have helped you navigate the pitfalls of writing. However, if you’re still not sure how to fulfil this requirement correctly, please contact us (in writing or by phone 😉).
WHAT TO REMEMBER?
- Where the buyer has significant market power vis-à-vis the supplier, all commercial arrangements must be in writing before the supplies or related services begin.
- Contracts can be concluded in paper form, but also electronically (sometimes it is necessary to set up such a method of concluding agreements between the parties in advance).
- It is not possible to use the concept of automatic order acceptance by the supplier.
AND WHAT’S NEXT?
- We will look at the payment period, which must not exceed 30 days.