A supply contract is one of the most common types of contract in commercial transactions. For businesses seeking to expand their operations and enter new markets, cross-border cooperation is becoming increasingly important. The particularly close economic ties between Germany and Poland mean that supply contracts with Polish companies are playing an increasingly important role for German suppliers.<\/p>\n
Cross-border trade relations, however, also present legal challenges. Which regulations need to be taken into account? Which law applies to the contract? How can German suppliers ensure that the contracts they enter into are valid in international trade as well?<\/p>\n
In such cases, a mere knowledge of German law is not always sufficient. It is also important to understand the possible differences between the German and Polish legal systems, as well as the specific nature of cross-border trade in goods.<\/p>\n
Below, we set out the key points to bear in mind when entering into a contract.<\/p>\n
Regulating liability for defects in goods is one of the most important issues when concluding a supply contract. Appropriate contractual provisions make it possible to specify who is liable for any defects found, and on what terms. However, the relevant provisions of national and international law must be taken into account.<\/p>\n
It is advisable to set out the following matters in particular in the contract:<\/p>\n
Inspection of goods.<\/p>\n<\/div>\n<\/div>\n<\/li>\n
Reporting faults.<\/p>\n<\/div>\n<\/div>\n<\/li>\n
The buyer\u2019s rights.<\/p>\n<\/div>\n<\/div>\n<\/li>\n
Liability for damages.<\/p>\n<\/div>\n<\/div>\n<\/li>\n
Limitation of liability.<\/p>\n<\/div>\n<\/div>\n<\/li>\n<\/ul>\n
In the case of cross-border contracts concluded between Polish and German businesses, the United Nations Convention on Contracts for the International Sale of Goods (CISG), also known as the Vienna Convention, is of particular importance. Where the Convention applies to a given contract, it governs, amongst other things, the conformity of the goods with the contract, the obligation to inspect them, the notification of defects and the buyer\u2019s rights. As a general rule, the buyer should inspect the goods as soon as possible and notify the seller of any non-conformities found in good time. The Convention also provides, in principle, for a two-year limitation period for notifying non-conformity of the goods with the contract. In this regard, account must be taken of the exceptions provided for therein and the possibility for the parties to regulate specific matters differently within the limits permitted by the Convention. It is therefore not sufficient merely to state in the contract that the supplier is liable for defects. It is also advisable to set out the complaints procedure, the method of documenting defects, the time limits for rectifying them or supplying replacement goods, as well as the rules governing the bearing of costs for the return transport of goods subject to a complaint.<\/p>\n
Our recommendation: the rights and obligations of both parties in the event of defects in the goods should be set out as precisely as possible. This will help to minimise the risk of subsequent ambiguities and disputes.<\/p>\n
You may also be interested in: Cross-border transport contract<\/a><\/p>\n A delay in delivery occurs when a supplier fails to deliver the goods by the agreed deadline. This can have significant consequences for the buyer, such as production downtime, delays in fulfilling orders for their own customers, or additional transport costs.<\/p>\n In particular, the contract should set out the following:<\/p>\n Delivery date.<\/p>\n<\/div>\n<\/div>\n<\/li>\n Contractual penalties.<\/p>\n<\/div>\n<\/div>\n<\/li>\n Liability for damages.<\/p>\n<\/div>\n<\/div>\n<\/li>\n An extension to the deadline for performance of the contract.<\/p>\n<\/div>\n<\/div>\n<\/li>\n The right to withdraw from the contract.<\/p>\n<\/div>\n<\/div>\n<\/li>\n<\/ul>\n It should be borne in mind, however, that simply including a specific provision in a contract is not always sufficient to adequately safeguard the company\u2019s interests. It is therefore worth considering seeking the assistance of a specialist who can assess which provisions should be included in the contract, how they should be worded, and how to adapt them to the specific nature of the contractual relationship in question.<\/p>\n Our recommendation: delivery deadlines and the consequences of failing to meet them should be clearly specified. In particular, it is worth analysing the validity of contractual penalties and the grounds for terminating the contract.<\/p>\n When securing payments, it is essential to take into account the interests of both parties to the contract. The supplier is keen to receive the payment due, whilst the buyer wishes to avoid a situation in which they pay for goods that are faulty or that are not delivered at all.<\/p>\n There are several ways to secure payments.<\/p>\n This arrangement is particularly advantageous for the supplier, as they receive all or part of the payment before the goods are dispatched.<\/p>\n With this form of payment, the bank undertakes to make the payment provided that the requirements specified in the letter of credit are met and the required documents are correctly presented. This helps to minimise commercial risk. However, it is essential to carefully define the terms of the letter of credit and the documents required for payment to be made.<\/p>\n The bank undertakes to pay a specified amount once the agreed conditions have been met. This may, for example, be a payment guarantee issued in favour of a supplier or a guarantee of the repayment of an advance payment in favour of a buyer.<\/p>\n Agreeing on a deferred payment date allows the buyer to make payment only after receiving the goods. In such cases, particular attention should be paid to specifying when the payment period begins and the consequences of failing to meet it.<\/p>\n Our recommendation: the method of securing payments should be tailored to the nature of the commercial relationship in question and the associated commercial risk. It is crucial to clearly define the terms of payment, taking into account the interests of both parties to the contract.<\/p>\n Find out more about: Recovery of debts from business partners in the European Union<\/a><\/p>\n It is not always possible to avoid legal disputes in commercial transactions. In such situations, businesses are faced with the question of which court will have jurisdiction to hear the case: a Polish court, a German court, or perhaps a court in another country?<\/p>\n Of particular significance in this regard is, amongst other things, the Brussels I bis Regulation (Regulation (EU) No 1215\/2012 of the European Parliament and of the Council). As a general rule, the courts of the Member State in which the defendant is domiciled have jurisdiction; in the case of companies, their registered office applies accordingly. However, in matters relating to contractual obligations, specific grounds for jurisdiction may also apply, for example those relating to the place where the goods were delivered or were to be delivered. As a general rule, the parties to a contract may agree which court shall have jurisdiction to settle disputes arising from their cooperation. Care must be taken to ensure that the choice-of-court agreement complies with the applicable legal and formal requirements.<\/p>\n Our recommendation: it is worth considering, at the stage of drawing up the contract, which court will be most favourable from the point of view of the company\u2019s interests. A clear and effective provision regarding the competent court can help to avoid any subsequent doubts as to jurisdiction.<\/p>\n The choice of the law applicable to a contract is often equated with the choice of the court with jurisdiction to hear disputes. In reality, however, these are two separate issues. The choice of a court in a particular country does not automatically mean that the law of that country will apply to the contract. Matters relating to the determination of the applicable law have also been regulated at European Union level. As a general rule, the parties may choose for themselves the law to which their contract will be subject. However, the relevant provision should be worded clearly and unambiguously. If the parties have not chosen the applicable law, Article 4(1)(a) of the Rome I Regulation, amongst other provisions, is relevant. Under this provision, a contract for the sale of goods is, as a general rule, governed by the law of the country in which the seller has his habitual residence. In the case of businesses, the relevant registered office of the business is of fundamental importance in this context. It should also be borne in mind that both Poland and Germany are parties to the United Nations Convention on Contracts for the International Sale of Goods (CISG).<\/p>\n This means that the Convention may apply to cross-border sales of goods between Polish and German businesses, provided that the relevant conditions are met. Importantly, it may also apply even where the parties have chosen Polish or German law, as the CISG may form part of the law applicable to a given sales contract. The parties may, however, exclude the application of the Convention by means of a relevant contractual provision.<\/p>\n Our recommendation: it is worth clearly specifying which law will govern the contract, and also checking whether the Vienna Convention will apply to it, or whether the parties should exclude its application. This will ensure greater clarity regarding the legal principles governing the cooperation.<\/p>\n2. Delays in delivery: deadlines and contractual penalties<\/h2>\n
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3. Payment security in supply contracts<\/h2>\n
1. Prepayment<\/h3>\n
2. Documentary letter of credit<\/h3>\n
3. Bank guarantee<\/h3>\n
4. Deferred payment<\/h3>\n
4. Jurisdiction in Polish-German supply contracts<\/h2>\n
5. Applicable law and the Vienna Convention (CISG)<\/h2>\n