Distribution through digital platforms | Main novelties

29.03.2023

  • Европа
  • Распространение

The commercial agent has the right to obtain certain information about the sales of the principal. The Spanish Law on Agency Contracts provides (15.2 LCA) that the agent has the right to demand to see the accounts of the principal in order to verify all matters relating to the commissions due to him. And also, to be provided with the information available to the principal and necessary to verify the amount of such commissions.

This article is in line with the 1986 Commercial Agents Directive, according to which (12.3) the agent is entitled to demand to be provided with all information at the disposal of the principal, particularly an extract from the books of account, which is necessary to verify the amount of commission due to the agent. This may not be altered to the detriment of the commercial agent by agreement.

The question is, does this right remain even after the termination of the agency contract? In other words: once the agency contract is terminated, can the agent request the information and documentation mentioned in these articles and is the Principal obliged to provide it?

In our opinion, the rule does not say anything that limits this right, rather the opposite is to be expected. Therefore, to the extent that there is still any possible commission that may arise from such verification, the answer must be yes. Let us see.

The right to demand the production of accounts exists so that the agent can verify the amount of commissions. And the agent is entitled to commissions for acts and operations concluded during the term of the contract (art. 12 LCA), but also for acts or operations concluded after the termination of the contract (art. 13 LCA), and for operations not carried out due to circumstances attributable to the principal (art. 17 LCA). In addition, the agent is entitled to have the commission accrued at the time when the act or transaction should have been executed (art. 14 LCA).

All these transactions can take place after the conclusion of the contract. Consider the usual situation where orders are placed during the contract but are accepted or executed afterwards. To reduce the agent’s right to be informed only during the term of the contract would be to limit his entitlement to the corresponding commission unduly. And it should be borne in mind that the amount of the commissions during the last five years may also influence the calculation of the client (goodwill) indemnity (art. 28 LCA), so that the agent’s interest in knowing them is twofold: what he would receive as commission, and what could increase the basis for future indemnity.

This has been confirmed, for example, by the Provincial Court (Audiencia Provincial) of Madrid (AAP 227/2017, of 29 June [ECLI:ES:APM:2017:2873A]) which textually states:

[…] art. 15.2 of the Agency Contract Act provides for the right of the agent to demand the exhibition of the Principal’s accounts in the particulars necessary to verify everything relating to the commissions corresponding to him, as well as to be provided with the information available to the Principal and necessary to verify the amount. This does not prevent, […], the agency contract having already been terminated, as this does not imply that commissions would cease to accrue for policies, contracted with the mediation of the agent, which remain in force.

The question then arises as to whether this right to information is unlimited in time. And here the answer would be in the negative. The limitation of the right to receive information would be linked to the statute of limitations of the right to claim the corresponding commission. If the right to receive the commission were undoubtedly time-barred, it could be argued that it would not be possible to receive information about it. But for such an exception, the statute of limitations must be clear, therefore, taking into account possible interruptions due to claims, even extrajudicial ones. In case of doubt, it will be necessary to recognise the right to demand the information, without prejudice to later invoking and recognising the impossibility of claiming the commission if the right is time-barred. And for this we must consider the limitation period for claiming commissions (in general, three years) and that of the right to claim compensation for clientele (one year).

In short: it does not seem that the right to receive information and to examine the principal’s documentation is limited by the term of the agency contract; although, on the other hand, it would be appropriate to analyse the possible limitation period for claiming commissions. In the absence of a clear answer to this question, the right to information should, in our opinion, prevail, without prejudice to the fact that the result may not entitle the claim because it is time-barred.

SUMMARY: In large-scale events such as the Paris Olympics certain companies will attempt to «wildly» associate their brand with the event through a practice called «ambush marketing», defined by caselaw as «an advertising strategy implemented by a company in order to associate its commercial image with that of an event, and thus to benefit from the media impact of said event, without paying the related rights and without first obtaining the event organizer’s authorization» (Paris Court of Appeal, June 8, 2018, Case No 17/12912). A risky and punishable practice, that might sometimes yet be an option yet.

Key takeaways

  • Ambush marketing might be a punished practice but is not prohibited as such;
  • As a counterpart of their investment, sponsors and official partners benefit from an extensive legal protection against all forms of ambush marketing in the event concerned, through various general texts (counterfeiting, parasitism, intellectual property) or more specific ones (e.g. sport law);
  • The Olympics Games are subject to specific regulations that further strengthen this protection, particularly in terms of intellectual property.
  • But these rights are not absolute, and they are still thin opportunities for astute ambush marketing.

The protection offered to sponsors and official partners of sporting and cultural events from ambush marketing

With a budget of over 4 billion euros, the 2024 Olympic and Paralympic Games are financed mostly by various official partners and sponsors, who in return benefit from a right to use Olympic and Paralympic properties to be able to associate their own brand image and distinctive signs with these events.

Ambush marketing is not punishable as such under French law, but several scattered texts provide extensive protection against ambush marketing for sponsors and partners of sporting or cultural continental-wide or world-wide events. Indeed, sponsors are legitimately entitled to peacefully enjoy the rights offered to them in return for large-scale investments in events such as the FIFA or rugby World Cups, or the Olympic Games.

In particular, official sponsors and organizers of such events may invoke:

  • the «classic» protections offered by intellectual property law (trademark law and copyright) in the context of infringement actions based on the French Intellectual Property Code,
  • tort law (parasitism and unfair competition based on article 1240 of the French Civil Code);
  • consumer law (misleading commercial practices) based on the French Consumer Code,
  • but also more specific texts such as the protection of the exploitation rights of sports federations and sports event organizers derived from the events or competitions they organize, as set out in article L.333-1 of the French Sports Code, which gives sports event organizers an exploitation monopoly.

The following ambush marketing practices were sanctioned on the abovementioned grounds:

  • The use of a tennis competition name and of the trademark associated with it during the sporting event: The organization of online bets, by an online betting operator, on the Roland Garros tournament, using the protected sign and trademark Roland Garros to target the matches on which the bets were organized. The unlawful exploitation of the sporting event, was punished and 400 K€ were allowed as damages, based on article L. 333-1 of the French Sports Code, since only the French Tennis Federation (F.F.T.) owns the right to exploit Roland Garros. The use of the trademark was also punished as counterfeiting (with 300 K€ damages) and parasitism (with 500 K€ damages) (Paris Court of Appeal, Oct. 14, 2009, Case No 08/19179);
  • An advertising campaign taking place during a film festival and reproducing the event’s trademark: The organization, during the Cannes Film Festival, of a digital advertising campaign by a cosmetics brand through the publication on its social networks of videos showing the beauty makeovers of the brand’s muses, in some of which the official poster of the Cannes Film Festival was visible, one of which reproduced the registered trademark of the “Palme d’Or”, was punished on the grounds of copyright infringement and parasitism with a 50 K€ indemnity (Paris Judicial Court, Dec. 11, 2020, Case No19/08543);
  • An advertising campaign aimed at falsely claiming to be an official partner of an event: The use, during the Cannes Film Festival, of the slogan «official hairdresser for women» together with the expressions «Cannes» and «Cannes Festival», and other publications falsely leading the public to believe that the hairdresser was an official partner, to the detriment of the only official hairdresser of the Cannes festival, was punished on the grounds of unfair competition and parasitism with a 50 K€ indemnity (Paris Court of Appeal, June 8, 2018, Case No 17/12912).

These financial penalties may be combined with injunctions to cease these behaviors, and/or publication in the press under penalty.

An even greater protection for the Paris 2024 Olympic Games

The Paris 2024 Olympic Games are also subject to specific regulations.

Firstly, Article L.141-5 of the French Sports Code, enacted for the benefit of the «Comité national olympique et sportif français” (CNOSF) and the “Comité de l’organisation des Jeux Olympiques et Paralympiques de Paris 2024” (COJOP), protects Olympic signs such as the national Olympic emblems, but also the emblems, the flag, motto and Olympic symbol, Olympic anthem, logo, mascot, slogan and posters of the Olympic Games, the year of the Olympic Games «city + year», the terms «Jeux Olympiques», «Olympisme», «Olympiade», «JO», «olympique», «olympien» and «olympienne». Under no circumstances may these signs be reproduced or even imitated by third-party companies. The COJOP has also published a guide to the protection of the Olympic trademark, outlining the protected symbols, trademarks and signs, as well as the protection of the official partners of the Olympic Games.

Secondly, Law no. 2018-202 of March 26, 2018 on the organization of the 2024 Olympic and Paralympic Games adds even more specific prohibitions, such as the reservation for official sponsors of advertising space located near Olympic venues, or located on the Olympic and Paralympic torch route. This protection is unique in the context of the Olympic Games, but usually unregulated in the context of simple sporting events.

The following practices, for example, have already been sanctioned on the above-mentioned grounds:

  • Reproduction of a logo imitating the well-known «Olympic» trademark on a clothing collection: The marketing of a collection of clothing, during the 2016 Olympic Games, bearing a logo (five hearts in the colors of the 5 Olympic colors intersecting in the image of the Olympic logo) imitating the Olympic symbol in association with the words «RIO» and «RIO 2016», was punished on the grounds of parasitism (10 K€ damages) and articles L. 141-5 of the French Sports Code (35 K€) and L. 713-1 of the French Intellectual Property Code (10 K€ damages) (Paris Judicial Court, June 7, 2018, Case No16/10605);
  • The organization of a contest on social networks using protected symbols: During the 2018 Olympic Games in PyeongChang, a car rental company organized an online game inviting Internet users to nominate the athletes they wanted to win a clock radio, associated with the hashtags «#JO2018» («#OJ2018”), «#Jeuxolympiques» (“#Olympicsgame”) or «C’est parti pour les jeux Olympiques» (“let’s go for the Olympic Games”) without authorization from the CNOSF, owner of these distinctive signs under the 2018 law and article L.141-5 of the French Sport Code and punished on these grounds with 20 K€ damages and of 10 K€ damages for parasitism (Paris Judicial Court, May 29, 2020, n°18/14115).

These regulations offer official partners greater protection for their investments against ambush marketing practices from non-official sponsors.

Some marketing operations might be exempted

An analysis of case law and promotional practices nonetheless reveals the contours of certain advertising practices that could be authorized (i.e. not sanctioned by the above-mentioned texts), provided they are skillfully prepared and presented. Here are a few exemples :

  • Communication of information for advertising purposes: The use of the results of a rugby match and the announcement of a forthcoming match in a newspaper to promote a motor vehicle and its distinctive features was deemed lawful: «France 13 Angleterre 24 — the Fiat 500 congratulates England on its victory and looks forward to seeing the French team on March 9 for France-Italy» (France 13 Angleterre 24 — la Fiat 500 félicite l’Angleterre pour sa victoire et donne rendez-vous à l’équipe de France le 9 mars pour France-Italie) the judges having considered that this publication «merely reproduces a current sporting result, acquired and made public on the front page of the sports newspaper, and refers to a future match also known as already announced by the newspaper in a news article» (Court of cassation, May 20, 2014, Case No 13-12.102).
  • Sponsorship of athletes, including those taking part in Olympic competitions: Subject to compliance with the applicable regulatory framework, particularly as regards models, any company may enter into partnerships with athletes taking part in the Olympic Games, for example by donating clothing bearing the desired logo or brand, which they could wear during their participation in the various events. Athletes may also, under certain conditions, broadcast acknowledgements from their partner (even if unofficial). Rule 40 of the Olympic Charter governs the use of athletes’, coaches’ and officials’ images for advertising purposes during the Olympic Games.

The combined legal and marketing approach to the conception and preparation of the message of such a communication operation is essential to avoid legal proceedings, particularly on the grounds of parasitism; one might therefore legitimately contemplate advertising campaigns, particularly clever, or even malicious ones.

In this first episode of Legalmondo’s Distribution Talks series, I spoke with Ignacio Alonso, a Madrid-based lawyer with extensive experience in international commercial distribution.

Main discussion points:

  • in Spain, there is no specific law for distribution agreements, which are governed by the general rules of the Commercial Code;
  • therefore, it is essential to draft a clear and comprehensive contract, which will be the primary source of the parties’ rights and obligations;
  • it is also good to be aware of Spanish case law on commercial distribution, which in some cases applies the law on commercial agency by analogy.
  • the most common issues involving foreign producers distributing in Spain arise at the time of termination of the relationship, mainly because case law grants the terminated distributor an indemnity of clientele or goodwill if similar prerequisites to those in the agency regulations apply.
  • another frequent dispute concerns the adequacy of the notice period for terminating the contract, especially if there is no agreement between the parties: the advice is to follow what the agency regulations stipulate and thus establish a minimum notice period of one month for each year of the contract’s duration, up to 6 months for agreements lasting more than five years;
  • regarding dispute resolution tools, mediation is an option that should be carefully considered because it is quick, inexpensive, and allows a shared solution to be sought flexibly without disrupting the business relationship.
  • if mediation fails, the parties can provide for recourse to arbitration or state court. The choice depends on the case’s specific circumstances, and one factor in favor of jurisdiction is the possibility of appeal, which is excluded in the case of arbitration.

Go deeper

Summary

On 1 June 2022, Regulation EU n. 720/2022, i.e.: the new Vertical Block Exemption Regulation (hereinafter: «VBER»), replaced the previous version (Regulation EU n. 330/2010), expired on 31 May 2022.

The new VBER and the new vertical guidelines (hereinafter: “Guidelines”) have received the main evidence gathered during the lifetime of the previous VBER and contain some relevant provisions affecting the discipline of all B2B agreements among businesses operating at different levels of the supply chain.

In this article, we will focus on the impact of the new VBER on sales through digital platforms, listing the main novelties impacting distribution chains, including a platform for marketing products/services.

The general discipline of vertical agreements

Article 101(1) of the Treaty on the Functioning of the European Union (“TFEU”) prohibits all agreements that prevent, restrict, or distort competition within the EU market, listing the main types, e.g.: price fixing; market partitioning; limitations on production/development/investment; unfair terms, etc.

However, Article 101(3) TFEU exempts from such restrictions the agreements that contribute to improving the EU market, to be identified in a special category Regulation.

The VBER establishes the category of vertical agreements (i.e., agreements between businesses operating at different levels of the supply chain), determining which of these agreements are exempted from Article 101(1) TFEU prohibition.

In short, vertical agreements are presumed to be exempted (and therefore valid) if they do not contain so-called «hardcore restrictions» (i.e., severe restrictions of competition, such as an absolute ban on sales in a territory or the manufacturer’s determination of the distributor’s resale price) and if neither party’s market share exceeds 30%.

The exempted agreements benefit from what has been termed the “safe harbour” of the VBER. In contrast, the others will be subject to the general prohibition of Article 101(1) TFEU unless they can benefit from an individual exemption under Article 101(3) TFUE.

The innovations introduced by the new VBER to online platforms

The first relevant aspect concerns the classification of the platforms, as the European Commission excluded that the online platform generally meets the conditions to be categorized as agency agreements.

While there have never been doubts concerning platforms that operate by purchasing and reselling products (classic example: Amazon Retail), some have arisen concerning those platforms that merely promote the products of third parties without carrying out the activity of resale (classic example: Amazon Marketplace).

With this statement, the European Commission wanted to clear the field of doubt, making explicit that intermediation service providers (such as online platforms) qualify as suppliers (as opposed to commercial agents) under the VBER. This reflects the approach of Regulation (EU) 2019/1150 («P2B Regulation»), which has, for the first time, dictated a specific discipline for digital platforms. It provided for a set of rules to create a “fair, transparent, and predictable environment” for smaller businesses and customers” and for the rationale of the Digital Markets Act, banning certain practices used by large platforms acting as “gatekeepers”.

Therefore, all contracts concluded between manufacturers and platforms (defined as ‘providers of online intermediation services’) are subject to all the restrictions imposed by the VBER. These include the price, the territories to which or the customers to whom the intermediated goods or services may be sold, or the restrictions relating to online advertising and selling.

Thus, to give an example, the operator of a platform may not impose a fixed or minimum sale price for a transaction promoted through the platform.

The second most impactful aspect concerns hybrid platforms, i.e., competing in the relevant market to sell intermediated goods or services. Amazon is the most well-known example, as it is a provider of intermediation services (“Amazon Marketplace”), and – at the same time – it distributes the products of those parties (“Amazon Retail”). We have previously explored the distinction between those 2 business models (and the consequences in terms of intellectual property infringement) here.

The new VBER explicitly does not apply to hybrid platforms. Therefore, the agreements concluded among such platforms and manufacturers are subject to the limitations of the TFEU, as such providers may have the incentive to favour their sales and the ability to influence the outcome of competition between undertakings that use their online intermediation services.

Those agreements must be assessed individually under Article 101 of the TFEU, as they do not necessarily restrict competition within the meaning of TFEU, or they may fulfil the conditions of an individual exemption under Article 101(3) TFUE.

The third very relevant aspect concerns the parity obligations (also referred to as Most Favoured Nation Clauses, or MFNs), i.e., the contract provisions in which a seller (directly or indirectly) agrees to give the buyer the best terms it makes available to any other buyer.

Indeed, platforms’ contractual terms often contain parity obligation clauses to prevent users from offering their products/services at lower prices or on better conditions on their websites or other platforms.

The new VBER deals explicitly with parity clauses, making a distinction between clauses whose purpose is to prohibit users of a platform from selling goods or services on more favourable terms through competing platforms (so-called “wide parity clauses”), and clauses that prohibit sales on more favourable terms only in respect of channels operated directly by the users (so-called “narrow parity clauses”).

Wide parity clauses do not benefit from the VBER exemption; therefore, such obligations must be assessed individually under Article 101(3) TFEU.

On the other hand, narrow parity clauses continue to benefit from the exemption already granted by the old VBER if they do not exceed the threshold of 30% of the relevant market share set out in Article 3 of the new VBER. However, the new Guidelines warn against using overly narrow parity obligations by online platforms covering a significant share of users, stating that if there is no evidence of pro-competitive effects, the benefit of the block exemption is likely to be withdrawn.

Impact and takeaways

The new VBER entered into force on 1 June 2022 and is already applicable to agreements signed after that date. Agreements already in force on 31 May 2022 that satisfy the conditions for exemption under the current VBER but do not satisfy the requirements under the new VBER shall benefit from a one-year transitional period.

The new regime will be the playing field for all platform-driven sales over the next 12 years (the regulation expires on 31 May 2034). Currently, the rather restrictive novelties on hybrid platforms and parity obligations will likely necessitate substantial revisions to existing trade agreements.

Here, then, are some tips for managing contracts and relationships with online platforms:

  • the new VBER is the right opportunity to review the existing distribution networks. The revision will have to consider not only the new regulatory limits (e.g., the ban on wide parity clauses) but also the new discipline reserved for hybrid platforms and dual distribution to coordinate the different distribution channels as efficiently as possible, by the stakes set by the new VBER and the Guidelines;
  • platforms are likely to play an even greater role during the next decade; it is, therefore, essential to consider these sales channels from the outset, coordinating them with the other existing ones (retail, direct sales, distributors, etc.) to avoid jeopardizing the marketing of products or services;
  • the European legislator’s attention toward platforms is growing. Looking up from the VBER, one should not forget that they are subject to a multitude of other European regulations, which are gradually regulating the sector and which must be considered when concluding contracts with platforms. The reference is not only to the recent Digital Market Act and P2B Regulation but also to the protection of IP rights on platforms, which — as we have already seen — is still an open issue.

Summary

To avoid disputes with important suppliers, it is advisable to plan purchases over the medium and long term and not operate solely on the basis of orders and order confirmations. Planning makes it possible to agree on the duration of the ‘supply agreement, minimum volumes of products to be delivered and delivery schedules, prices, and the conditions under which prices can be varied over time.
The use of a framework purchase agreement can help avoid future uncertainties and allows various options to be used to manage commodity price fluctuations depending on the type of products , such as automatic price indexing or agreement to renegotiate in the event of commodity fluctuations beyond a certain set tolerance period.

I read in a press release: “These days, the glass industry is sending wine companies new unilateral contract amendments with price changes of 20%…”

What can one do to avoid the imposition of price increases by suppliers? 

  • Know your rights and act in an informed manner
  • Plan and organise your supply chain

Does my supplier have the right to increase prices?

If contracts have already been concluded, e.g., orders have already been confirmed by the supplier, the answer is often no.

It is not legitimate to request a price change. It is much less legitimate to communicate it unilaterally, with the threat of cancelling the order or not delivering the goods if the request is not granted.

What if he tells me it is force majeure?

That’s wrong: increased costs are not a force majeure but rather an unforeseen excessive onerousness, which hardly happens.

What if the supplier canceled the order, unilaterally increased the price, or did not deliver the goods?

He would be in breach of contract and liable to pay damages for violating his contractual obligations.

How can one avoid a tug-of-war with suppliers?

The tools are there. You have to know them and use them.

It is necessary to plan purchases in the medium term, agreeing with suppliers on a schedule in which are set out:

  • the quantities of products to be ordered
  • the delivery terms
  • the durationof the agreement
  • the pricesof the products or raw materials
  • the conditions under which prices can be varied

There is a very effective instrument to do so: a framework purchase agreement.

Using a framework purchase agreement, the parties negotiate the above elements, which will be valid for the agreed period.

Once the agreement is concluded, product orders will follow, governed by the framework agreement, without the need to renegotiate the content of individual deliveries each time.

For an in-depth discussion of this contract, see this article.

  • “Yes, but my suppliers will never sign it!”

Why not? Ask them to explain the reason.

This type of agreement is in the interest of both parties. It allows planning future orders and grants certainty as to whether, when, and how much the parties can change the price.

In contrast, acting without written agreements forces the parties to operate in an environment of uncertainty. Suppliers can request price increases from one day to the next and refuse supply if the changes are not accepted.

How are price changes for future supplies regulated?

Depending on the type of products or services and the raw materials or energy relevant in determining the final price, there are several possibilities.

  • The first option is to index the price automatically. E.g., if the cost of a barrel of Brent oil increases/decreases by 10%, the party concerned is entitled to request a corresponding adjustment of the product’s price in all orders placed as of the following week.
  • An alternative is to provide for a price renegotiation in the event of a fluctuation of the reference commodity. E.g., suppose the LME Aluminium index of the London Stock Exchange increases above a certain threshold. In that case, the interested party may request a price renegotiationfor orders in the period following the increase.

What if the parties do not agree on new prices?

It is possible to terminate the contract or refer the price determination to a third party, who would act as arbitrator and set the new prices for future orders.

Summary

The framework supply contract is an agreement that regulates a series of future sales and purchases between two parties (customer and supplier) that take place over a certain period of time. This agreement determines the main elements of future contracts such as price, product volumes, delivery terms, technical or quality specifications, and the duration of the agreement.

The framework contract is useful for ensuring continuity of supply from one or more suppliers of a certain product that is essential for planning industrial or commercial activity. While the general terms and conditions of purchase or sale are the rules that apply to all suppliers or customers of the company. The framework contract is advisable to be concluded with essential suppliers for the continuity of business activity, in general or in relation to a particular project.

What I am talking about in this article:

  • What is the supply framework agreement?
  • What is the function of the supply framework agreement?
  • The difference with the general conditions of sale or purchase
  • When to enter a purchase framework agreement?
  • When is it beneficial to conclude a sales framework agreement?
  • The content of the supply framework agreement
  • Price revision clause and hardship
  • Delivery terms in the supply framework agreement
  • The Force Majeure clause in international sales contracts
  • International sales: applicable law and dispute resolution arrangements

What is a framework supply agreement?

It is an agreement that regulates a series of future sales and purchases between two parties (customer and supplier), which will take place over a certain period.

It is therefore referred to as a «framework agreement» because it is an agreement that establishes the rules of a future series of sales and purchase contracts, determining their primary elements (such as the price, the volumes of products to be sold and purchased, the delivery terms of the products, and the duration of the contract).

After concluding the framework agreement, the parties will exchange orders and order confirmations, entering a series of autonomous sales contracts without re-discussing the covenants already defined in the framework agreement.

Depending on one’s point of view, this agreement is also called a sales framework agreement (if the seller/supplier uses it) or a purchasing framework agreement (if the customer proposes it).

What is the function of the framework supply agreement?

It is helpful to arrange a framework agreement in all cases where the parties intend to proceed with a series of purchases/sales of products over time and are interested in giving stability to the commercial agreement by determining its main elements.

In particular, the purchase framework agreement may be helpful to a company that wishes to ensure continuity of supply from one or more suppliers of a specific product that is essential for planning its industrial or commercial activity (raw material, semi-finished product, component).

By concluding the framework agreement, the company can obtain, for example, a commitment from the supplier to supply a particular minimum volume of products, at a specific price, with agreed terms and technical specifications, for a certain period.

This agreement is also beneficial, at the same time, to the seller/supplier, which can plan sales for that period and organize, in turn, the supply chain that enables it to procure the raw materials and components necessary to produce the products.

What is the difference between a purchase or sales framework agreement and the general terms and conditions?

Whereas the framework agreement is an agreement that is used with one or more suppliers for a specific product and a certain time frame, determining the essential elements of future contracts, the general purchase (or sales) conditions are the rules that apply to all the company’s suppliers (or customers).

The first agreement, therefore, is negotiated and defined on a case-by-case basis. At the same time, the general conditions are prepared unilaterally by the company, and the customers or suppliers (depending on whether they are sales or purchase conditions) adhere to and accept that the general conditions apply to the individual order and/or future contracts.

The two agreements might also co-exist: in that case; it is a good idea to specify which contract should prevail in the event of a discrepancy between the different provisions (usually, this hierarchy is envisaged, ranging from the special to the general: order — order confirmation; framework agreement; general terms and conditions of purchase).

When is it important to conclude a purchase framework agreement?

It is beneficial to conclude this agreement when dealing with a mono-supplier or a supplier that would be very difficult to replace if it stopped selling products to the purchasing company.

The risks one aims to avoid or diminish are so-called stock-outs, i.e., supply interruptions due to the supplier’s lack of availability of products or because the products are available, but the parties cannot agree on the delivery time or sales price.

Another result that can be achieved is to bind a strategic supplier for a certain period by agreeing that it will reserve an agreed share of production for the buyer on predetermined terms and conditions and avoid competition with offers from third parties interested in the products for the duration of the agreement.

When is it helpful to conclude a sales framework agreement?

This agreement allows the seller/supplier to plan sales to a particular customer and thus to plan and organize its production and logistical capacity for the agreed period, avoiding extra costs or delays.

Planning sales also makes it possible to correctly manage financial obligations and cash flows with a medium-term vision, harmonizing commitments and investments with the sales to one’s customers.

What is the content of the supply framework agreement?

There is no standard model of this agreement, which originated from business practice to meet the requirements indicated above.

Generally, the agreement provides for a fixed period (e.g., 12 months) in which the parties undertake to conclude a series of purchases and sales of products, determining the price and terms of supply and the main covenants of future sales contracts.

The most important clauses are:

  • the identification of products and technical specifications (often identified in an annex)
  • the minimum/maximum volume of supplies
  • the possible obligation to purchase/sell a minimum/maximum volume of products
  • the schedule of supplies
  • the delivery times
  • the determination of the price and the conditions for its possible modification (see also the next paragraph)
  • impediments to performance (Force Majeure)
  • cases of Hardship
  • penalties for delay or non-performance or for failure to achieve the agreed volumes
  • the hierarchy between the framework agreement and the orders and any other contracts between the parties
  • applicable law and dispute resolution (especially in international agreements)

How to handle price revision in a supply contract?

A crucial clause, especially in times of strong fluctuations in the prices of raw materials, transport, and energy, is the price revision clause.

In the absence of an agreement on this issue, the parties bear the risk of a price increase by undertaking to respect the conditions initially agreed upon; except in exceptional cases (where the fluctuation is strong, affects a short period, and is caused by unforeseeable events), it isn’t straightforward to invoke the supervening excessive onerousness, which allows renegotiating the price, or the contract to be terminated.

To avoid the uncertainty generated by price fluctuations, it is advisable to agree in the contract on the mechanisms for revising the price (e.g., automatic indexing following the quotation of raw materials). The so-called Hardship or Excessive Onerousness clause establishes what price fluctuation limits are accepted by the parties and what happens if the variations go beyond these limits, providing for the obligation to renegotiate the price or the termination of the contract if no agreement is reached within a certain period.

How to manage delivery terms in a supply agreement?

Another fundamental pact in a medium to long-term supply relationship concerns delivery terms. In this case, it is necessary to reconcile the purchaser’s interest in respecting the agreed dates with the supplier’s interest in avoiding claims for damages in the event of a delay, especially in the case of sales requiring intercontinental transport.

The first thing to be clarified in this regard concerns the nature of delivery deadlines: are they essential or indicative? In the first case, the party affected has the right to terminate (i.e., wind up) the agreement in the event of non-compliance with the term; in the second case, due diligence, information, and timely notification of delays may be required, whereas termination is not a remedy that may be automatically invoked in the event of a delay.

A useful instrument in this regard is the penalty clause: with this covenant, it is established that for each day/week/month of delay, a sum of money is due by way of damages in favor of the party harmed by the delay.

If quantified correctly and not excessively, the penalty is helpful for both parties because it makes it possible to predict the damages that may be claimed for the delay, quantifying them in a fair and determined sum. Consequently, the seller is not exposed to claims for damages related to factors beyond his control. At the same time, the buyer can easily calculate the compensation for the delay without the need for further proof.

The same mechanism, among other things, may be adopted to govern the buyer’s delay in accepting delivery of the goods.

Finally, it is a good idea to specify the limit of the penalty (e.g.,10 percent of the price of the goods) and a maximum period of grace for the delay, beyond which the party concerned is entitled to terminate the contract by retaining the penalty.

The Force Majeure clause in international sales contracts

A situation that is often confused with excessive onerousness, but is, in fact, quite different, is that of Force Majeure, i.e., the supervening impossibility of performance of the contractual obligation due to any event beyond the reasonable control of the party affected, which could not have been reasonably foreseen and the effects of which cannot be overcome by reasonable efforts.

The function of this clause is to set forth clearly when the parties consider that Force Majeure may be invoked, what specific events are included (e.g., a lock-down of the production plant by order of the authority), and what are the consequences for the parties’ obligations (e.g., suspension of the obligation for a certain period, as long as the cause of impossibility of performance lasts, after which the party affected by performance may declare its intention to dissolve the contract).

If the wording of this clause is general (as is often the case), the risk is that it will be of little use; it is also advisable to check that the regulation of force majeure complies with the law applicable to the contract (here an in-depth analysis indicating the regime provided for by 42 national laws).

Applicable law and dispute resolution clauses

Suppose the customer or supplier is based abroad. In that case, several significant differences must be borne in mind: the first is the agreement’s language, which must be intelligible to the foreign party, therefore usually in English or another language familiar to the parties, possibly also in two languages with parallel text.

The second issue concerns the applicable law, which should be expressly indicated in the agreement. This subject matter is vast, and here we can say that the decision on the applicable law must be made on a case-by-case basis, intentionally: in fact, it is not always convenient to recall the application of the law of one’s own country.

In most international sales contracts, the 1980 Vienna Convention on the International Sale of Goods («CISG») applies, a uniform law that is balanced, clear, and easy to understand. Therefore, it is not advisable to exclude it.

Finally, in a supply framework agreement with an international supplier, it is important to identify the method of dispute resolution: no solution fits all. Choosing a country’s jurisdiction is not always the right decision (indeed, it can often prove counterproductive).

Eventually, after more than 30 years of negotiations, the world is now looking at the first pan-African trade agreement, which entered into force in 2019: the African Continental Free Trade Area, or AfCFTA.

Africa, with its 55 countries and around 1.3 billion inhabitants, is the second largest continent in the world after Asia. The continent’s potential is huge: more than 50% of Africa’s population is under 20 years old and the population is growing at the fastest rate in the world. By 2050, one in four new-born babies is expected to be African. In addition, the continent is rich in fertile soil and raw materials.

For Western investors, Africa has become considerably more important in recent years. As a result, a considerable amount of international trade has emerged, not least promoted by the “Compact with Africa” initiative adopted by the G20 countries in 2017, also known as the “Marshall Plan with Africa”. Its focus is on expanding Africa’s economic cooperation with the G20 countries by strengthening private investment.

At the same time, however, intra-African trade has stagnated so far: partly still existing high intra-African tariffs, non-tariff barriers (NTBs), weak infrastructure, corruption, cumbersome bureaucracy, as well as non-transparent and inconsistent regulations, ensured that interregional exports could hardly develop and most recently accounted for only 17 % of the pan-African trade and only 0.36 % of world trade. It’s already been a long time since the African Union (AU) had put the creation of a common trade area on its agenda.

What is behind AfCFTA?

The establishment of a pan-African trade area was preceded by decades of negotiations, which finally resulted in the entry into force of the AfCFTA on 30 May 2019.

AfCFTA is a free trade area established by its members, which — with the exception of Eritrea — covers the entire African continent and is thus the largest free trade area in the world by number of member states after the World Trade Organisation (WTO).

How the common market was to be structured in detail was the subject of several individual negotiations, which were discussed in Phases I and II.

Phase I comprises the negotiations on three protocols and is almost completed.

The Protocol on Trade in Goods

This protocol provides for the elimination of 90 % of all intra-African tariffs in all product categories within five years of entry into force. Of these, up to 7 % of products can be classified as sensitive goods, which are subject to a tariff elimination period of ten years. For the least developed countries (LDCs), the preparation period is extended from five to ten years and for sensitive products from ten to thirteen years, provided they demonstrate their need. The remaining 3 % of tariffs are fully exempted from tariff dismantling.

A prerequisite for tariff dismantling is the clear delimitation of rules of origin. Otherwise, imports from third countries could benefit from the negotiated tariff advantages. Agreement has already been reached on most of the rules of origin.

The Protocol on Trade in Services

The AU General Assembly has so far agreed on five priority areas (transport, communications, tourism, financial and business services) and guidelines for the commitments applicable to them.  47 AU member states have so far submitted their offers for specific commitments and the review of 28 has been completed. In addition, negotiations, for example, on the recognition of professional qualifications, are still ongoing.

The Protocol on Dispute Settlement

With the Protocol on Rules and Procedures Governing the Dispute Settlement, the AfCFTA creates a dispute settlement system modelled on the WTO Dispute Settlement Understanding. Under this, the Dispute Settlement Body (DSB) administers the AfCFTA Dispute Settlement Protocol and establishes an Adjudicating Panel (Panel) and an Appellate Body (AB). The DSB is composed of a representative of each member state and intervenes as soon as there are differences of opinion between the contracting states on the interpretation and/or application of the agreement with regard to their rights and obligations.

For the remaining Phase II, negotiations are planned on investment and competition policy, intellectual property issues, online trade and women and youth in trade, the results of which will be reflected in further protocols.

The implementation of the AfCFTA

In principle, the implementation of trade under a trade agreement can only begin once the legal framework has been finally clarified. However, AU Heads of State and Government agreed in December 2020 that trade can begin for goods for which negotiations have been finalised. Under this «transitional arrangement«, after a pandemic-related postponement, the first AfCFTA trade settlement from Ghana to South Africa took place on 4 January 2021.

Building blocks of the AfCFTA

All 55 members of the AU were involved in the AfCFTA negotiations. Of these, 47 belong to at least one — and some to more than one — recognised Regional Economic Communities (RECs), which, according to the preamble of the AfCFTA agreement, are to continue as building blocks of the trade agreement. It was therefore they who acted as the voice of their respective members in the AfCFTA negotiations. The AfCFTA provides for RECs to retain their legal instruments, institutions and dispute settlement mechanisms.

Within the AU, there are eight recognised RECs, overlapping in some countries, which are either preferential trade agreements (Free Trade Agreements — FTAs) or customs unions.

Under the AfCFTA, the RECs have various responsibilities. These are in particular:

  • coordinating negotiating positions and assisting member states in the implementation of the agreement.
  • solution-oriented mediation in the event of disagreements between member states
  • supporting member states in the harmonisation of tariffs and other border protection regulations
  • promoting the use of the AfCFTA notification procedure to reduce NTBs

Outlook of the AfCFTA

The AfCFTA has the potential to facilitate Africa’s integration into the global economy and creates the real possibility of a realignment of international integration and cooperation patterns.

A trade agreement alone is no guarantee of economic success. For the agreement to achieve the predicted breakthrough, member states must have the political will to implement the new rules consistently and create the necessary capacity to do so. In particular, the short-term removal of trade barriers and the creation of a sustainable physical and digital infrastructure are likely to be crucial.

If you are interested in the AfCFTA, you can read an extended version of this article here.

The Legalmondo Africa Desk

We help companies invest and do business in Africa with our experts in Algeria, Tunisia, Morocco, Senegal, Sudan, Egypt, Ghana, Lybia, Côte d’Ivoire, Cameroon, and Malawi.

We can also assist foreign entities in African countries where we are not directly present with an office through our network of local partners.

How it works

  • We set up a meeting (in person or online) with one of our experts to understand the client’s needs.
  • Once we start working together, we follow the client with a dedicated counsel for all its legal needs (single cases, or ongoing legal assistance)

Get in touch to know more.

Summary

Political, environmental or health crises (like the Covid-19 outbreak and the attack of Ukraine by the Russian army) can cause an increase in the price of raw materials and components and generalized inflation. Both suppliers and distributors find themselves faced with problems related to the often sudden and very substantial increase in the price of their own supplies. French law lays down specific rules in that regard.

Two main situations can be distinguished: where the parties have just established a simple flow of orders and where the parties have concluded a framework agreement fixing firm prices for a fixed term.

Price increase in a business relationship

The situation is as follows: the parties have not concluded a framework agreement, each sales contract concluded (each order) is governed by the General T&Cs of the supplier; the latter has not undertaken to maintain the prices for a minimum period and applies the prices of the current tariff.

In principle, the supplier can modify its prices at any time by sending a new tariff. However, it must give written and reasonable notice in accordance with the provisions of Article L. 442-1.II of the Commercial Code, before the price increase comes into effect. Failure to respect sufficient notice, it could be accused of a sudden «partial» termination of commercial relations (and subject to damages).

A sudden termination following a price increase would be characterized when the following conditions are met:

  • the commercial relationship must be established: broader concept than the simple contract, taking into account the duration but also the importance and the regularity of the exchanges between the parties;
  • the price increase must be assimilated to a rupture: it is mainly the size of the price increase (+1%, 10% or 25%?) that will lead a judge to determine whether the increase constitutes a «partial» termination (in the event of a substantial modification of the relationship which is nevertheless maintained) or a total termination (if the increase is such that it involves a termination of the relationship) or if it does not constitute a termination (if the increase is minimal);
  • the notice granted is insufficient by comparing the duration of the notice actually granted with that of the notice in accordance with Article L. 442-1.II, taking into account in particular the duration of the commercial relationship and the possible dependence of the victim of the termination with respect to the other party.

Article L. 442-1.II must be respected as soon as French law applies to the relation. In international business relations, to know how to deal with Article L.442-1.II and conflicts of laws and jurisdiction of competent courts, please see our previous article published on Legalmondo blog.

Price increase in a framework contract

If the parties have concluded a framework contract (such as supply, manufacturing, …) for several years and the supplier has committed to fixed prices, how, in this case, can it change these prices?

In addition to any indexation clause or renegotiation (hardship) clause which would be stipulated in the contract (and besides specific legal provisions applicable to special agreements as to their nature or economic sector), the supplier may seek to avail himself of the legal mechanism of «unforeseeability» provided for by article 1195 of the civil code.

Three prerequisites must be cumulatively met:

  • an unforeseeable change in circumstances at the time of the conclusion of the contract (i.e.: the parties could not reasonably anticipate this upheaval);
  • a performance of the contract that has become excessively onerous (i.e.: beyond the simple difficulty, the upheaval must cause a disproportionate imbalance);
  • the absence of acceptance of these risks by the debtor of the obligation when concluding the contract.

The implementation of this mechanism must stick to the following steps:

  • first, the party in difficulty must request the renegotiation of the contract from its co-contracting party;
  • then, in the event of failure of the negotiation or refusal to negotiate by the other party, the parties can (i) agree together on the termination of the contract, on the date and under the conditions that they determine, or (ii) ask together the competent judge to adapt it;
  • finally, in the absence of agreement between the parties on one of the two aforementioned options, within a reasonable time, the judge, seized by one of the parties, may revise the contract or terminate it, on the date and under the conditions that he will set.

The party wishing to implement this legal mechanism must also anticipate the following points:

  • article 1195 of the Civil Code only applies to contracts concluded on or after October 1, 2016 (or renewed after this date). Judges do not have the power to adapt or rebalance contracts concluded before this date;
  • this provision is not of public order. Therefore, the parties can exclude it or modify its conditions of application and/or implementation (the most common being the framework of the powers of the judge);
  • during the renegotiation, the supplier must continue to sell at the initial price because, unlike force majeure, unforeseen circumstances do not lead to the suspension of compliance with the obligations.

Key takeaways:

  • analyse carefully the framework of the commercial relationship before deciding to notify a price increase, in order to identify whether the prices are firm for a minimum period and the contractual levers for renegotiation;
  • correctly anticipate the length of notice that must be given to the partner before the entry into force of the new pricing conditions, depending on the length of the relationship and the degree of dependence;
  • document the causes of the price increase;
  • check if and how the legal mechanism of unforeseeability has been amended or excluded by the framework contract or the General T&Cs;
  • consider alternatives strategies, possibly based on stopping production/delivery justified by a force majeure event or on the significant imbalance of the contractual provisions.

Giuliano Stasio

Области практики

  • Арбитраж
  • Контракты
  • Электронная коммерция
  • Интеллектуальная собственность
  • Недвижимость
Связаться Giuliano
Franchising Spain - Legalmondo

Spain | Franchising, Theory Of Risk and Guarantees By Franchisee
  • Распространение
  • Судебная практика
  • Испания
Vietnam - Legalmondo

Vietnam on the EU Tax Blacklist: A Guide for EU Buyers
  • Корпоративный
  • Распространение
  • Вьетнам
Brazil - Legalmondo

Brazil’s New Digital Child Protection Law: Practical Implications for Foreign Tech Companies
  • Конфиденциальность - Защита данных
  • Бразилия
France - Legalmondo

France | Pre-contractual disclosure in distribution and franchise agreements
  • Распространение
  • Франчайзинг
  • Франция
International distribution agreements - Key Clauses and Lessons learned from the history of Nike - Legalmondo

International distribution agreements | Key Clauses and Lessons learned from the history of Nike
  • Контракты
  • Распространение
  • Италия
Saudi Arabia - Legalmondo

How to Joint Venture in Saudi Arabia
  • Контракты
  • Корпоративный
  • Саудовская Аравия
Contracts Responsibility - Legalmondo

Corporate Sustainability in Practice – How Contracts Shape Responsibility
  • Контракты
  • Распространение
  • Finland
Legalmondo - Oil prices

Rising Oil Prices and International Contracts: How to Manage Hardship in Global Supply Chains
  • Контракты
  • Распространение
  • Италия
African Continental Free Trade-Agreement - Legalmondo

Why the African Continental Free Trade Agreement has not yet turned into Reality — and What That Means for Egypt
  • Распространение
  • Иностранные инвестиции
  • Египет
Spain lawyer-coach - Legalmondo

The lawyer-coach: a new way of practising
  • Альтернативное разрешение споров
  • Контракты
  • Испания
Spain - Legalmondo

Agency and distribution agreements. Phrases to avoid when ending a business relationship without a written contract
  • Без категории
  • Контракты
  • Испания
Business people Legalmondo

Spain | Appropriate Means of Dispute Resolution (ADR) as a prerequisite for litigation
  • Альтернативное разрешение споров
  • Судебная практика
  • Испания
Spain Influencer-Legalmondo

Spain – Can an influencer be considered a «commercial agent»?
  • Без категории
  • Распространение
  • Испания
Spain advance payment - Legalmondo

Spain — Is it possible to advance payment of customer indemnity in agency contracts?
  • Без категории
  • Испания
Companies in Spain - Legalmondo

Spain — Powers of Representation of Companies
  • Корпоративный
  • Испания
Spain - Legalmondo

Spain | Clientele Compensation for Agents and Distributors
  • Без категории
  • Контракты
  • Испания
Debt - Legalmondo

International debt recovery: risk prevention and best practices
  • Распространение
  • Судебная практика
  • Испания
mediation - legalmondo

The importance of Mediation in Distribution Contracts
  • Альтернативное разрешение споров
  • Распространение
  • Испания

Scrivi a Giuliano





    Read the privacy policy of Legalmondo.
    This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

    How to manage price changes in the supply chain

    27.03.2023

    • Италия
    • Контракты
    • Распространение

    The commercial agent has the right to obtain certain information about the sales of the principal. The Spanish Law on Agency Contracts provides (15.2 LCA) that the agent has the right to demand to see the accounts of the principal in order to verify all matters relating to the commissions due to him. And also, to be provided with the information available to the principal and necessary to verify the amount of such commissions.

    This article is in line with the 1986 Commercial Agents Directive, according to which (12.3) the agent is entitled to demand to be provided with all information at the disposal of the principal, particularly an extract from the books of account, which is necessary to verify the amount of commission due to the agent. This may not be altered to the detriment of the commercial agent by agreement.

    The question is, does this right remain even after the termination of the agency contract? In other words: once the agency contract is terminated, can the agent request the information and documentation mentioned in these articles and is the Principal obliged to provide it?

    In our opinion, the rule does not say anything that limits this right, rather the opposite is to be expected. Therefore, to the extent that there is still any possible commission that may arise from such verification, the answer must be yes. Let us see.

    The right to demand the production of accounts exists so that the agent can verify the amount of commissions. And the agent is entitled to commissions for acts and operations concluded during the term of the contract (art. 12 LCA), but also for acts or operations concluded after the termination of the contract (art. 13 LCA), and for operations not carried out due to circumstances attributable to the principal (art. 17 LCA). In addition, the agent is entitled to have the commission accrued at the time when the act or transaction should have been executed (art. 14 LCA).

    All these transactions can take place after the conclusion of the contract. Consider the usual situation where orders are placed during the contract but are accepted or executed afterwards. To reduce the agent’s right to be informed only during the term of the contract would be to limit his entitlement to the corresponding commission unduly. And it should be borne in mind that the amount of the commissions during the last five years may also influence the calculation of the client (goodwill) indemnity (art. 28 LCA), so that the agent’s interest in knowing them is twofold: what he would receive as commission, and what could increase the basis for future indemnity.

    This has been confirmed, for example, by the Provincial Court (Audiencia Provincial) of Madrid (AAP 227/2017, of 29 June [ECLI:ES:APM:2017:2873A]) which textually states:

    […] art. 15.2 of the Agency Contract Act provides for the right of the agent to demand the exhibition of the Principal’s accounts in the particulars necessary to verify everything relating to the commissions corresponding to him, as well as to be provided with the information available to the Principal and necessary to verify the amount. This does not prevent, […], the agency contract having already been terminated, as this does not imply that commissions would cease to accrue for policies, contracted with the mediation of the agent, which remain in force.

    The question then arises as to whether this right to information is unlimited in time. And here the answer would be in the negative. The limitation of the right to receive information would be linked to the statute of limitations of the right to claim the corresponding commission. If the right to receive the commission were undoubtedly time-barred, it could be argued that it would not be possible to receive information about it. But for such an exception, the statute of limitations must be clear, therefore, taking into account possible interruptions due to claims, even extrajudicial ones. In case of doubt, it will be necessary to recognise the right to demand the information, without prejudice to later invoking and recognising the impossibility of claiming the commission if the right is time-barred. And for this we must consider the limitation period for claiming commissions (in general, three years) and that of the right to claim compensation for clientele (one year).

    In short: it does not seem that the right to receive information and to examine the principal’s documentation is limited by the term of the agency contract; although, on the other hand, it would be appropriate to analyse the possible limitation period for claiming commissions. In the absence of a clear answer to this question, the right to information should, in our opinion, prevail, without prejudice to the fact that the result may not entitle the claim because it is time-barred.

    SUMMARY: In large-scale events such as the Paris Olympics certain companies will attempt to «wildly» associate their brand with the event through a practice called «ambush marketing», defined by caselaw as «an advertising strategy implemented by a company in order to associate its commercial image with that of an event, and thus to benefit from the media impact of said event, without paying the related rights and without first obtaining the event organizer’s authorization» (Paris Court of Appeal, June 8, 2018, Case No 17/12912). A risky and punishable practice, that might sometimes yet be an option yet.

    Key takeaways

    • Ambush marketing might be a punished practice but is not prohibited as such;
    • As a counterpart of their investment, sponsors and official partners benefit from an extensive legal protection against all forms of ambush marketing in the event concerned, through various general texts (counterfeiting, parasitism, intellectual property) or more specific ones (e.g. sport law);
    • The Olympics Games are subject to specific regulations that further strengthen this protection, particularly in terms of intellectual property.
    • But these rights are not absolute, and they are still thin opportunities for astute ambush marketing.

    The protection offered to sponsors and official partners of sporting and cultural events from ambush marketing

    With a budget of over 4 billion euros, the 2024 Olympic and Paralympic Games are financed mostly by various official partners and sponsors, who in return benefit from a right to use Olympic and Paralympic properties to be able to associate their own brand image and distinctive signs with these events.

    Ambush marketing is not punishable as such under French law, but several scattered texts provide extensive protection against ambush marketing for sponsors and partners of sporting or cultural continental-wide or world-wide events. Indeed, sponsors are legitimately entitled to peacefully enjoy the rights offered to them in return for large-scale investments in events such as the FIFA or rugby World Cups, or the Olympic Games.

    In particular, official sponsors and organizers of such events may invoke:

    • the «classic» protections offered by intellectual property law (trademark law and copyright) in the context of infringement actions based on the French Intellectual Property Code,
    • tort law (parasitism and unfair competition based on article 1240 of the French Civil Code);
    • consumer law (misleading commercial practices) based on the French Consumer Code,
    • but also more specific texts such as the protection of the exploitation rights of sports federations and sports event organizers derived from the events or competitions they organize, as set out in article L.333-1 of the French Sports Code, which gives sports event organizers an exploitation monopoly.

    The following ambush marketing practices were sanctioned on the abovementioned grounds:

    • The use of a tennis competition name and of the trademark associated with it during the sporting event: The organization of online bets, by an online betting operator, on the Roland Garros tournament, using the protected sign and trademark Roland Garros to target the matches on which the bets were organized. The unlawful exploitation of the sporting event, was punished and 400 K€ were allowed as damages, based on article L. 333-1 of the French Sports Code, since only the French Tennis Federation (F.F.T.) owns the right to exploit Roland Garros. The use of the trademark was also punished as counterfeiting (with 300 K€ damages) and parasitism (with 500 K€ damages) (Paris Court of Appeal, Oct. 14, 2009, Case No 08/19179);
    • An advertising campaign taking place during a film festival and reproducing the event’s trademark: The organization, during the Cannes Film Festival, of a digital advertising campaign by a cosmetics brand through the publication on its social networks of videos showing the beauty makeovers of the brand’s muses, in some of which the official poster of the Cannes Film Festival was visible, one of which reproduced the registered trademark of the “Palme d’Or”, was punished on the grounds of copyright infringement and parasitism with a 50 K€ indemnity (Paris Judicial Court, Dec. 11, 2020, Case No19/08543);
    • An advertising campaign aimed at falsely claiming to be an official partner of an event: The use, during the Cannes Film Festival, of the slogan «official hairdresser for women» together with the expressions «Cannes» and «Cannes Festival», and other publications falsely leading the public to believe that the hairdresser was an official partner, to the detriment of the only official hairdresser of the Cannes festival, was punished on the grounds of unfair competition and parasitism with a 50 K€ indemnity (Paris Court of Appeal, June 8, 2018, Case No 17/12912).

    These financial penalties may be combined with injunctions to cease these behaviors, and/or publication in the press under penalty.

    An even greater protection for the Paris 2024 Olympic Games

    The Paris 2024 Olympic Games are also subject to specific regulations.

    Firstly, Article L.141-5 of the French Sports Code, enacted for the benefit of the «Comité national olympique et sportif français” (CNOSF) and the “Comité de l’organisation des Jeux Olympiques et Paralympiques de Paris 2024” (COJOP), protects Olympic signs such as the national Olympic emblems, but also the emblems, the flag, motto and Olympic symbol, Olympic anthem, logo, mascot, slogan and posters of the Olympic Games, the year of the Olympic Games «city + year», the terms «Jeux Olympiques», «Olympisme», «Olympiade», «JO», «olympique», «olympien» and «olympienne». Under no circumstances may these signs be reproduced or even imitated by third-party companies. The COJOP has also published a guide to the protection of the Olympic trademark, outlining the protected symbols, trademarks and signs, as well as the protection of the official partners of the Olympic Games.

    Secondly, Law no. 2018-202 of March 26, 2018 on the organization of the 2024 Olympic and Paralympic Games adds even more specific prohibitions, such as the reservation for official sponsors of advertising space located near Olympic venues, or located on the Olympic and Paralympic torch route. This protection is unique in the context of the Olympic Games, but usually unregulated in the context of simple sporting events.

    The following practices, for example, have already been sanctioned on the above-mentioned grounds:

    • Reproduction of a logo imitating the well-known «Olympic» trademark on a clothing collection: The marketing of a collection of clothing, during the 2016 Olympic Games, bearing a logo (five hearts in the colors of the 5 Olympic colors intersecting in the image of the Olympic logo) imitating the Olympic symbol in association with the words «RIO» and «RIO 2016», was punished on the grounds of parasitism (10 K€ damages) and articles L. 141-5 of the French Sports Code (35 K€) and L. 713-1 of the French Intellectual Property Code (10 K€ damages) (Paris Judicial Court, June 7, 2018, Case No16/10605);
    • The organization of a contest on social networks using protected symbols: During the 2018 Olympic Games in PyeongChang, a car rental company organized an online game inviting Internet users to nominate the athletes they wanted to win a clock radio, associated with the hashtags «#JO2018» («#OJ2018”), «#Jeuxolympiques» (“#Olympicsgame”) or «C’est parti pour les jeux Olympiques» (“let’s go for the Olympic Games”) without authorization from the CNOSF, owner of these distinctive signs under the 2018 law and article L.141-5 of the French Sport Code and punished on these grounds with 20 K€ damages and of 10 K€ damages for parasitism (Paris Judicial Court, May 29, 2020, n°18/14115).

    These regulations offer official partners greater protection for their investments against ambush marketing practices from non-official sponsors.

    Some marketing operations might be exempted

    An analysis of case law and promotional practices nonetheless reveals the contours of certain advertising practices that could be authorized (i.e. not sanctioned by the above-mentioned texts), provided they are skillfully prepared and presented. Here are a few exemples :

    • Communication of information for advertising purposes: The use of the results of a rugby match and the announcement of a forthcoming match in a newspaper to promote a motor vehicle and its distinctive features was deemed lawful: «France 13 Angleterre 24 — the Fiat 500 congratulates England on its victory and looks forward to seeing the French team on March 9 for France-Italy» (France 13 Angleterre 24 — la Fiat 500 félicite l’Angleterre pour sa victoire et donne rendez-vous à l’équipe de France le 9 mars pour France-Italie) the judges having considered that this publication «merely reproduces a current sporting result, acquired and made public on the front page of the sports newspaper, and refers to a future match also known as already announced by the newspaper in a news article» (Court of cassation, May 20, 2014, Case No 13-12.102).
    • Sponsorship of athletes, including those taking part in Olympic competitions: Subject to compliance with the applicable regulatory framework, particularly as regards models, any company may enter into partnerships with athletes taking part in the Olympic Games, for example by donating clothing bearing the desired logo or brand, which they could wear during their participation in the various events. Athletes may also, under certain conditions, broadcast acknowledgements from their partner (even if unofficial). Rule 40 of the Olympic Charter governs the use of athletes’, coaches’ and officials’ images for advertising purposes during the Olympic Games.

    The combined legal and marketing approach to the conception and preparation of the message of such a communication operation is essential to avoid legal proceedings, particularly on the grounds of parasitism; one might therefore legitimately contemplate advertising campaigns, particularly clever, or even malicious ones.

    In this first episode of Legalmondo’s Distribution Talks series, I spoke with Ignacio Alonso, a Madrid-based lawyer with extensive experience in international commercial distribution.

    Main discussion points:

    • in Spain, there is no specific law for distribution agreements, which are governed by the general rules of the Commercial Code;
    • therefore, it is essential to draft a clear and comprehensive contract, which will be the primary source of the parties’ rights and obligations;
    • it is also good to be aware of Spanish case law on commercial distribution, which in some cases applies the law on commercial agency by analogy.
    • the most common issues involving foreign producers distributing in Spain arise at the time of termination of the relationship, mainly because case law grants the terminated distributor an indemnity of clientele or goodwill if similar prerequisites to those in the agency regulations apply.
    • another frequent dispute concerns the adequacy of the notice period for terminating the contract, especially if there is no agreement between the parties: the advice is to follow what the agency regulations stipulate and thus establish a minimum notice period of one month for each year of the contract’s duration, up to 6 months for agreements lasting more than five years;
    • regarding dispute resolution tools, mediation is an option that should be carefully considered because it is quick, inexpensive, and allows a shared solution to be sought flexibly without disrupting the business relationship.
    • if mediation fails, the parties can provide for recourse to arbitration or state court. The choice depends on the case’s specific circumstances, and one factor in favor of jurisdiction is the possibility of appeal, which is excluded in the case of arbitration.

    Go deeper

    Summary

    On 1 June 2022, Regulation EU n. 720/2022, i.e.: the new Vertical Block Exemption Regulation (hereinafter: «VBER»), replaced the previous version (Regulation EU n. 330/2010), expired on 31 May 2022.

    The new VBER and the new vertical guidelines (hereinafter: “Guidelines”) have received the main evidence gathered during the lifetime of the previous VBER and contain some relevant provisions affecting the discipline of all B2B agreements among businesses operating at different levels of the supply chain.

    In this article, we will focus on the impact of the new VBER on sales through digital platforms, listing the main novelties impacting distribution chains, including a platform for marketing products/services.

    The general discipline of vertical agreements

    Article 101(1) of the Treaty on the Functioning of the European Union (“TFEU”) prohibits all agreements that prevent, restrict, or distort competition within the EU market, listing the main types, e.g.: price fixing; market partitioning; limitations on production/development/investment; unfair terms, etc.

    However, Article 101(3) TFEU exempts from such restrictions the agreements that contribute to improving the EU market, to be identified in a special category Regulation.

    The VBER establishes the category of vertical agreements (i.e., agreements between businesses operating at different levels of the supply chain), determining which of these agreements are exempted from Article 101(1) TFEU prohibition.

    In short, vertical agreements are presumed to be exempted (and therefore valid) if they do not contain so-called «hardcore restrictions» (i.e., severe restrictions of competition, such as an absolute ban on sales in a territory or the manufacturer’s determination of the distributor’s resale price) and if neither party’s market share exceeds 30%.

    The exempted agreements benefit from what has been termed the “safe harbour” of the VBER. In contrast, the others will be subject to the general prohibition of Article 101(1) TFEU unless they can benefit from an individual exemption under Article 101(3) TFUE.

    The innovations introduced by the new VBER to online platforms

    The first relevant aspect concerns the classification of the platforms, as the European Commission excluded that the online platform generally meets the conditions to be categorized as agency agreements.

    While there have never been doubts concerning platforms that operate by purchasing and reselling products (classic example: Amazon Retail), some have arisen concerning those platforms that merely promote the products of third parties without carrying out the activity of resale (classic example: Amazon Marketplace).

    With this statement, the European Commission wanted to clear the field of doubt, making explicit that intermediation service providers (such as online platforms) qualify as suppliers (as opposed to commercial agents) under the VBER. This reflects the approach of Regulation (EU) 2019/1150 («P2B Regulation»), which has, for the first time, dictated a specific discipline for digital platforms. It provided for a set of rules to create a “fair, transparent, and predictable environment” for smaller businesses and customers” and for the rationale of the Digital Markets Act, banning certain practices used by large platforms acting as “gatekeepers”.

    Therefore, all contracts concluded between manufacturers and platforms (defined as ‘providers of online intermediation services’) are subject to all the restrictions imposed by the VBER. These include the price, the territories to which or the customers to whom the intermediated goods or services may be sold, or the restrictions relating to online advertising and selling.

    Thus, to give an example, the operator of a platform may not impose a fixed or minimum sale price for a transaction promoted through the platform.

    The second most impactful aspect concerns hybrid platforms, i.e., competing in the relevant market to sell intermediated goods or services. Amazon is the most well-known example, as it is a provider of intermediation services (“Amazon Marketplace”), and – at the same time – it distributes the products of those parties (“Amazon Retail”). We have previously explored the distinction between those 2 business models (and the consequences in terms of intellectual property infringement) here.

    The new VBER explicitly does not apply to hybrid platforms. Therefore, the agreements concluded among such platforms and manufacturers are subject to the limitations of the TFEU, as such providers may have the incentive to favour their sales and the ability to influence the outcome of competition between undertakings that use their online intermediation services.

    Those agreements must be assessed individually under Article 101 of the TFEU, as they do not necessarily restrict competition within the meaning of TFEU, or they may fulfil the conditions of an individual exemption under Article 101(3) TFUE.

    The third very relevant aspect concerns the parity obligations (also referred to as Most Favoured Nation Clauses, or MFNs), i.e., the contract provisions in which a seller (directly or indirectly) agrees to give the buyer the best terms it makes available to any other buyer.

    Indeed, platforms’ contractual terms often contain parity obligation clauses to prevent users from offering their products/services at lower prices or on better conditions on their websites or other platforms.

    The new VBER deals explicitly with parity clauses, making a distinction between clauses whose purpose is to prohibit users of a platform from selling goods or services on more favourable terms through competing platforms (so-called “wide parity clauses”), and clauses that prohibit sales on more favourable terms only in respect of channels operated directly by the users (so-called “narrow parity clauses”).

    Wide parity clauses do not benefit from the VBER exemption; therefore, such obligations must be assessed individually under Article 101(3) TFEU.

    On the other hand, narrow parity clauses continue to benefit from the exemption already granted by the old VBER if they do not exceed the threshold of 30% of the relevant market share set out in Article 3 of the new VBER. However, the new Guidelines warn against using overly narrow parity obligations by online platforms covering a significant share of users, stating that if there is no evidence of pro-competitive effects, the benefit of the block exemption is likely to be withdrawn.

    Impact and takeaways

    The new VBER entered into force on 1 June 2022 and is already applicable to agreements signed after that date. Agreements already in force on 31 May 2022 that satisfy the conditions for exemption under the current VBER but do not satisfy the requirements under the new VBER shall benefit from a one-year transitional period.

    The new regime will be the playing field for all platform-driven sales over the next 12 years (the regulation expires on 31 May 2034). Currently, the rather restrictive novelties on hybrid platforms and parity obligations will likely necessitate substantial revisions to existing trade agreements.

    Here, then, are some tips for managing contracts and relationships with online platforms:

    • the new VBER is the right opportunity to review the existing distribution networks. The revision will have to consider not only the new regulatory limits (e.g., the ban on wide parity clauses) but also the new discipline reserved for hybrid platforms and dual distribution to coordinate the different distribution channels as efficiently as possible, by the stakes set by the new VBER and the Guidelines;
    • platforms are likely to play an even greater role during the next decade; it is, therefore, essential to consider these sales channels from the outset, coordinating them with the other existing ones (retail, direct sales, distributors, etc.) to avoid jeopardizing the marketing of products or services;
    • the European legislator’s attention toward platforms is growing. Looking up from the VBER, one should not forget that they are subject to a multitude of other European regulations, which are gradually regulating the sector and which must be considered when concluding contracts with platforms. The reference is not only to the recent Digital Market Act and P2B Regulation but also to the protection of IP rights on platforms, which — as we have already seen — is still an open issue.

    Summary

    To avoid disputes with important suppliers, it is advisable to plan purchases over the medium and long term and not operate solely on the basis of orders and order confirmations. Planning makes it possible to agree on the duration of the ‘supply agreement, minimum volumes of products to be delivered and delivery schedules, prices, and the conditions under which prices can be varied over time.
    The use of a framework purchase agreement can help avoid future uncertainties and allows various options to be used to manage commodity price fluctuations depending on the type of products , such as automatic price indexing or agreement to renegotiate in the event of commodity fluctuations beyond a certain set tolerance period.

    I read in a press release: “These days, the glass industry is sending wine companies new unilateral contract amendments with price changes of 20%…”

    What can one do to avoid the imposition of price increases by suppliers? 

    • Know your rights and act in an informed manner
    • Plan and organise your supply chain

    Does my supplier have the right to increase prices?

    If contracts have already been concluded, e.g., orders have already been confirmed by the supplier, the answer is often no.

    It is not legitimate to request a price change. It is much less legitimate to communicate it unilaterally, with the threat of cancelling the order or not delivering the goods if the request is not granted.

    What if he tells me it is force majeure?

    That’s wrong: increased costs are not a force majeure but rather an unforeseen excessive onerousness, which hardly happens.

    What if the supplier canceled the order, unilaterally increased the price, or did not deliver the goods?

    He would be in breach of contract and liable to pay damages for violating his contractual obligations.

    How can one avoid a tug-of-war with suppliers?

    The tools are there. You have to know them and use them.

    It is necessary to plan purchases in the medium term, agreeing with suppliers on a schedule in which are set out:

    • the quantities of products to be ordered
    • the delivery terms
    • the durationof the agreement
    • the pricesof the products or raw materials
    • the conditions under which prices can be varied

    There is a very effective instrument to do so: a framework purchase agreement.

    Using a framework purchase agreement, the parties negotiate the above elements, which will be valid for the agreed period.

    Once the agreement is concluded, product orders will follow, governed by the framework agreement, without the need to renegotiate the content of individual deliveries each time.

    For an in-depth discussion of this contract, see this article.

    • “Yes, but my suppliers will never sign it!”

    Why not? Ask them to explain the reason.

    This type of agreement is in the interest of both parties. It allows planning future orders and grants certainty as to whether, when, and how much the parties can change the price.

    In contrast, acting without written agreements forces the parties to operate in an environment of uncertainty. Suppliers can request price increases from one day to the next and refuse supply if the changes are not accepted.

    How are price changes for future supplies regulated?

    Depending on the type of products or services and the raw materials or energy relevant in determining the final price, there are several possibilities.

    • The first option is to index the price automatically. E.g., if the cost of a barrel of Brent oil increases/decreases by 10%, the party concerned is entitled to request a corresponding adjustment of the product’s price in all orders placed as of the following week.
    • An alternative is to provide for a price renegotiation in the event of a fluctuation of the reference commodity. E.g., suppose the LME Aluminium index of the London Stock Exchange increases above a certain threshold. In that case, the interested party may request a price renegotiationfor orders in the period following the increase.

    What if the parties do not agree on new prices?

    It is possible to terminate the contract or refer the price determination to a third party, who would act as arbitrator and set the new prices for future orders.

    Summary

    The framework supply contract is an agreement that regulates a series of future sales and purchases between two parties (customer and supplier) that take place over a certain period of time. This agreement determines the main elements of future contracts such as price, product volumes, delivery terms, technical or quality specifications, and the duration of the agreement.

    The framework contract is useful for ensuring continuity of supply from one or more suppliers of a certain product that is essential for planning industrial or commercial activity. While the general terms and conditions of purchase or sale are the rules that apply to all suppliers or customers of the company. The framework contract is advisable to be concluded with essential suppliers for the continuity of business activity, in general or in relation to a particular project.

    What I am talking about in this article:

    • What is the supply framework agreement?
    • What is the function of the supply framework agreement?
    • The difference with the general conditions of sale or purchase
    • When to enter a purchase framework agreement?
    • When is it beneficial to conclude a sales framework agreement?
    • The content of the supply framework agreement
    • Price revision clause and hardship
    • Delivery terms in the supply framework agreement
    • The Force Majeure clause in international sales contracts
    • International sales: applicable law and dispute resolution arrangements

    What is a framework supply agreement?

    It is an agreement that regulates a series of future sales and purchases between two parties (customer and supplier), which will take place over a certain period.

    It is therefore referred to as a «framework agreement» because it is an agreement that establishes the rules of a future series of sales and purchase contracts, determining their primary elements (such as the price, the volumes of products to be sold and purchased, the delivery terms of the products, and the duration of the contract).

    After concluding the framework agreement, the parties will exchange orders and order confirmations, entering a series of autonomous sales contracts without re-discussing the covenants already defined in the framework agreement.

    Depending on one’s point of view, this agreement is also called a sales framework agreement (if the seller/supplier uses it) or a purchasing framework agreement (if the customer proposes it).

    What is the function of the framework supply agreement?

    It is helpful to arrange a framework agreement in all cases where the parties intend to proceed with a series of purchases/sales of products over time and are interested in giving stability to the commercial agreement by determining its main elements.

    In particular, the purchase framework agreement may be helpful to a company that wishes to ensure continuity of supply from one or more suppliers of a specific product that is essential for planning its industrial or commercial activity (raw material, semi-finished product, component).

    By concluding the framework agreement, the company can obtain, for example, a commitment from the supplier to supply a particular minimum volume of products, at a specific price, with agreed terms and technical specifications, for a certain period.

    This agreement is also beneficial, at the same time, to the seller/supplier, which can plan sales for that period and organize, in turn, the supply chain that enables it to procure the raw materials and components necessary to produce the products.

    What is the difference between a purchase or sales framework agreement and the general terms and conditions?

    Whereas the framework agreement is an agreement that is used with one or more suppliers for a specific product and a certain time frame, determining the essential elements of future contracts, the general purchase (or sales) conditions are the rules that apply to all the company’s suppliers (or customers).

    The first agreement, therefore, is negotiated and defined on a case-by-case basis. At the same time, the general conditions are prepared unilaterally by the company, and the customers or suppliers (depending on whether they are sales or purchase conditions) adhere to and accept that the general conditions apply to the individual order and/or future contracts.

    The two agreements might also co-exist: in that case; it is a good idea to specify which contract should prevail in the event of a discrepancy between the different provisions (usually, this hierarchy is envisaged, ranging from the special to the general: order — order confirmation; framework agreement; general terms and conditions of purchase).

    When is it important to conclude a purchase framework agreement?

    It is beneficial to conclude this agreement when dealing with a mono-supplier or a supplier that would be very difficult to replace if it stopped selling products to the purchasing company.

    The risks one aims to avoid or diminish are so-called stock-outs, i.e., supply interruptions due to the supplier’s lack of availability of products or because the products are available, but the parties cannot agree on the delivery time or sales price.

    Another result that can be achieved is to bind a strategic supplier for a certain period by agreeing that it will reserve an agreed share of production for the buyer on predetermined terms and conditions and avoid competition with offers from third parties interested in the products for the duration of the agreement.

    When is it helpful to conclude a sales framework agreement?

    This agreement allows the seller/supplier to plan sales to a particular customer and thus to plan and organize its production and logistical capacity for the agreed period, avoiding extra costs or delays.

    Planning sales also makes it possible to correctly manage financial obligations and cash flows with a medium-term vision, harmonizing commitments and investments with the sales to one’s customers.

    What is the content of the supply framework agreement?

    There is no standard model of this agreement, which originated from business practice to meet the requirements indicated above.

    Generally, the agreement provides for a fixed period (e.g., 12 months) in which the parties undertake to conclude a series of purchases and sales of products, determining the price and terms of supply and the main covenants of future sales contracts.

    The most important clauses are:

    • the identification of products and technical specifications (often identified in an annex)
    • the minimum/maximum volume of supplies
    • the possible obligation to purchase/sell a minimum/maximum volume of products
    • the schedule of supplies
    • the delivery times
    • the determination of the price and the conditions for its possible modification (see also the next paragraph)
    • impediments to performance (Force Majeure)
    • cases of Hardship
    • penalties for delay or non-performance or for failure to achieve the agreed volumes
    • the hierarchy between the framework agreement and the orders and any other contracts between the parties
    • applicable law and dispute resolution (especially in international agreements)

    How to handle price revision in a supply contract?

    A crucial clause, especially in times of strong fluctuations in the prices of raw materials, transport, and energy, is the price revision clause.

    In the absence of an agreement on this issue, the parties bear the risk of a price increase by undertaking to respect the conditions initially agreed upon; except in exceptional cases (where the fluctuation is strong, affects a short period, and is caused by unforeseeable events), it isn’t straightforward to invoke the supervening excessive onerousness, which allows renegotiating the price, or the contract to be terminated.

    To avoid the uncertainty generated by price fluctuations, it is advisable to agree in the contract on the mechanisms for revising the price (e.g., automatic indexing following the quotation of raw materials). The so-called Hardship or Excessive Onerousness clause establishes what price fluctuation limits are accepted by the parties and what happens if the variations go beyond these limits, providing for the obligation to renegotiate the price or the termination of the contract if no agreement is reached within a certain period.

    How to manage delivery terms in a supply agreement?

    Another fundamental pact in a medium to long-term supply relationship concerns delivery terms. In this case, it is necessary to reconcile the purchaser’s interest in respecting the agreed dates with the supplier’s interest in avoiding claims for damages in the event of a delay, especially in the case of sales requiring intercontinental transport.

    The first thing to be clarified in this regard concerns the nature of delivery deadlines: are they essential or indicative? In the first case, the party affected has the right to terminate (i.e., wind up) the agreement in the event of non-compliance with the term; in the second case, due diligence, information, and timely notification of delays may be required, whereas termination is not a remedy that may be automatically invoked in the event of a delay.

    A useful instrument in this regard is the penalty clause: with this covenant, it is established that for each day/week/month of delay, a sum of money is due by way of damages in favor of the party harmed by the delay.

    If quantified correctly and not excessively, the penalty is helpful for both parties because it makes it possible to predict the damages that may be claimed for the delay, quantifying them in a fair and determined sum. Consequently, the seller is not exposed to claims for damages related to factors beyond his control. At the same time, the buyer can easily calculate the compensation for the delay without the need for further proof.

    The same mechanism, among other things, may be adopted to govern the buyer’s delay in accepting delivery of the goods.

    Finally, it is a good idea to specify the limit of the penalty (e.g.,10 percent of the price of the goods) and a maximum period of grace for the delay, beyond which the party concerned is entitled to terminate the contract by retaining the penalty.

    The Force Majeure clause in international sales contracts

    A situation that is often confused with excessive onerousness, but is, in fact, quite different, is that of Force Majeure, i.e., the supervening impossibility of performance of the contractual obligation due to any event beyond the reasonable control of the party affected, which could not have been reasonably foreseen and the effects of which cannot be overcome by reasonable efforts.

    The function of this clause is to set forth clearly when the parties consider that Force Majeure may be invoked, what specific events are included (e.g., a lock-down of the production plant by order of the authority), and what are the consequences for the parties’ obligations (e.g., suspension of the obligation for a certain period, as long as the cause of impossibility of performance lasts, after which the party affected by performance may declare its intention to dissolve the contract).

    If the wording of this clause is general (as is often the case), the risk is that it will be of little use; it is also advisable to check that the regulation of force majeure complies with the law applicable to the contract (here an in-depth analysis indicating the regime provided for by 42 national laws).

    Applicable law and dispute resolution clauses

    Suppose the customer or supplier is based abroad. In that case, several significant differences must be borne in mind: the first is the agreement’s language, which must be intelligible to the foreign party, therefore usually in English or another language familiar to the parties, possibly also in two languages with parallel text.

    The second issue concerns the applicable law, which should be expressly indicated in the agreement. This subject matter is vast, and here we can say that the decision on the applicable law must be made on a case-by-case basis, intentionally: in fact, it is not always convenient to recall the application of the law of one’s own country.

    In most international sales contracts, the 1980 Vienna Convention on the International Sale of Goods («CISG») applies, a uniform law that is balanced, clear, and easy to understand. Therefore, it is not advisable to exclude it.

    Finally, in a supply framework agreement with an international supplier, it is important to identify the method of dispute resolution: no solution fits all. Choosing a country’s jurisdiction is not always the right decision (indeed, it can often prove counterproductive).

    Eventually, after more than 30 years of negotiations, the world is now looking at the first pan-African trade agreement, which entered into force in 2019: the African Continental Free Trade Area, or AfCFTA.

    Africa, with its 55 countries and around 1.3 billion inhabitants, is the second largest continent in the world after Asia. The continent’s potential is huge: more than 50% of Africa’s population is under 20 years old and the population is growing at the fastest rate in the world. By 2050, one in four new-born babies is expected to be African. In addition, the continent is rich in fertile soil and raw materials.

    For Western investors, Africa has become considerably more important in recent years. As a result, a considerable amount of international trade has emerged, not least promoted by the “Compact with Africa” initiative adopted by the G20 countries in 2017, also known as the “Marshall Plan with Africa”. Its focus is on expanding Africa’s economic cooperation with the G20 countries by strengthening private investment.

    At the same time, however, intra-African trade has stagnated so far: partly still existing high intra-African tariffs, non-tariff barriers (NTBs), weak infrastructure, corruption, cumbersome bureaucracy, as well as non-transparent and inconsistent regulations, ensured that interregional exports could hardly develop and most recently accounted for only 17 % of the pan-African trade and only 0.36 % of world trade. It’s already been a long time since the African Union (AU) had put the creation of a common trade area on its agenda.

    What is behind AfCFTA?

    The establishment of a pan-African trade area was preceded by decades of negotiations, which finally resulted in the entry into force of the AfCFTA on 30 May 2019.

    AfCFTA is a free trade area established by its members, which — with the exception of Eritrea — covers the entire African continent and is thus the largest free trade area in the world by number of member states after the World Trade Organisation (WTO).

    How the common market was to be structured in detail was the subject of several individual negotiations, which were discussed in Phases I and II.

    Phase I comprises the negotiations on three protocols and is almost completed.

    The Protocol on Trade in Goods

    This protocol provides for the elimination of 90 % of all intra-African tariffs in all product categories within five years of entry into force. Of these, up to 7 % of products can be classified as sensitive goods, which are subject to a tariff elimination period of ten years. For the least developed countries (LDCs), the preparation period is extended from five to ten years and for sensitive products from ten to thirteen years, provided they demonstrate their need. The remaining 3 % of tariffs are fully exempted from tariff dismantling.

    A prerequisite for tariff dismantling is the clear delimitation of rules of origin. Otherwise, imports from third countries could benefit from the negotiated tariff advantages. Agreement has already been reached on most of the rules of origin.

    The Protocol on Trade in Services

    The AU General Assembly has so far agreed on five priority areas (transport, communications, tourism, financial and business services) and guidelines for the commitments applicable to them.  47 AU member states have so far submitted their offers for specific commitments and the review of 28 has been completed. In addition, negotiations, for example, on the recognition of professional qualifications, are still ongoing.

    The Protocol on Dispute Settlement

    With the Protocol on Rules and Procedures Governing the Dispute Settlement, the AfCFTA creates a dispute settlement system modelled on the WTO Dispute Settlement Understanding. Under this, the Dispute Settlement Body (DSB) administers the AfCFTA Dispute Settlement Protocol and establishes an Adjudicating Panel (Panel) and an Appellate Body (AB). The DSB is composed of a representative of each member state and intervenes as soon as there are differences of opinion between the contracting states on the interpretation and/or application of the agreement with regard to their rights and obligations.

    For the remaining Phase II, negotiations are planned on investment and competition policy, intellectual property issues, online trade and women and youth in trade, the results of which will be reflected in further protocols.

    The implementation of the AfCFTA

    In principle, the implementation of trade under a trade agreement can only begin once the legal framework has been finally clarified. However, AU Heads of State and Government agreed in December 2020 that trade can begin for goods for which negotiations have been finalised. Under this «transitional arrangement«, after a pandemic-related postponement, the first AfCFTA trade settlement from Ghana to South Africa took place on 4 January 2021.

    Building blocks of the AfCFTA

    All 55 members of the AU were involved in the AfCFTA negotiations. Of these, 47 belong to at least one — and some to more than one — recognised Regional Economic Communities (RECs), which, according to the preamble of the AfCFTA agreement, are to continue as building blocks of the trade agreement. It was therefore they who acted as the voice of their respective members in the AfCFTA negotiations. The AfCFTA provides for RECs to retain their legal instruments, institutions and dispute settlement mechanisms.

    Within the AU, there are eight recognised RECs, overlapping in some countries, which are either preferential trade agreements (Free Trade Agreements — FTAs) or customs unions.

    Under the AfCFTA, the RECs have various responsibilities. These are in particular:

    • coordinating negotiating positions and assisting member states in the implementation of the agreement.
    • solution-oriented mediation in the event of disagreements between member states
    • supporting member states in the harmonisation of tariffs and other border protection regulations
    • promoting the use of the AfCFTA notification procedure to reduce NTBs

    Outlook of the AfCFTA

    The AfCFTA has the potential to facilitate Africa’s integration into the global economy and creates the real possibility of a realignment of international integration and cooperation patterns.

    A trade agreement alone is no guarantee of economic success. For the agreement to achieve the predicted breakthrough, member states must have the political will to implement the new rules consistently and create the necessary capacity to do so. In particular, the short-term removal of trade barriers and the creation of a sustainable physical and digital infrastructure are likely to be crucial.

    If you are interested in the AfCFTA, you can read an extended version of this article here.

    The Legalmondo Africa Desk

    We help companies invest and do business in Africa with our experts in Algeria, Tunisia, Morocco, Senegal, Sudan, Egypt, Ghana, Lybia, Côte d’Ivoire, Cameroon, and Malawi.

    We can also assist foreign entities in African countries where we are not directly present with an office through our network of local partners.

    How it works

    • We set up a meeting (in person or online) with one of our experts to understand the client’s needs.
    • Once we start working together, we follow the client with a dedicated counsel for all its legal needs (single cases, or ongoing legal assistance)

    Get in touch to know more.

    Summary

    Political, environmental or health crises (like the Covid-19 outbreak and the attack of Ukraine by the Russian army) can cause an increase in the price of raw materials and components and generalized inflation. Both suppliers and distributors find themselves faced with problems related to the often sudden and very substantial increase in the price of their own supplies. French law lays down specific rules in that regard.

    Two main situations can be distinguished: where the parties have just established a simple flow of orders and where the parties have concluded a framework agreement fixing firm prices for a fixed term.

    Price increase in a business relationship

    The situation is as follows: the parties have not concluded a framework agreement, each sales contract concluded (each order) is governed by the General T&Cs of the supplier; the latter has not undertaken to maintain the prices for a minimum period and applies the prices of the current tariff.

    In principle, the supplier can modify its prices at any time by sending a new tariff. However, it must give written and reasonable notice in accordance with the provisions of Article L. 442-1.II of the Commercial Code, before the price increase comes into effect. Failure to respect sufficient notice, it could be accused of a sudden «partial» termination of commercial relations (and subject to damages).

    A sudden termination following a price increase would be characterized when the following conditions are met:

    • the commercial relationship must be established: broader concept than the simple contract, taking into account the duration but also the importance and the regularity of the exchanges between the parties;
    • the price increase must be assimilated to a rupture: it is mainly the size of the price increase (+1%, 10% or 25%?) that will lead a judge to determine whether the increase constitutes a «partial» termination (in the event of a substantial modification of the relationship which is nevertheless maintained) or a total termination (if the increase is such that it involves a termination of the relationship) or if it does not constitute a termination (if the increase is minimal);
    • the notice granted is insufficient by comparing the duration of the notice actually granted with that of the notice in accordance with Article L. 442-1.II, taking into account in particular the duration of the commercial relationship and the possible dependence of the victim of the termination with respect to the other party.

    Article L. 442-1.II must be respected as soon as French law applies to the relation. In international business relations, to know how to deal with Article L.442-1.II and conflicts of laws and jurisdiction of competent courts, please see our previous article published on Legalmondo blog.

    Price increase in a framework contract

    If the parties have concluded a framework contract (such as supply, manufacturing, …) for several years and the supplier has committed to fixed prices, how, in this case, can it change these prices?

    In addition to any indexation clause or renegotiation (hardship) clause which would be stipulated in the contract (and besides specific legal provisions applicable to special agreements as to their nature or economic sector), the supplier may seek to avail himself of the legal mechanism of «unforeseeability» provided for by article 1195 of the civil code.

    Three prerequisites must be cumulatively met:

    • an unforeseeable change in circumstances at the time of the conclusion of the contract (i.e.: the parties could not reasonably anticipate this upheaval);
    • a performance of the contract that has become excessively onerous (i.e.: beyond the simple difficulty, the upheaval must cause a disproportionate imbalance);
    • the absence of acceptance of these risks by the debtor of the obligation when concluding the contract.

    The implementation of this mechanism must stick to the following steps:

    • first, the party in difficulty must request the renegotiation of the contract from its co-contracting party;
    • then, in the event of failure of the negotiation or refusal to negotiate by the other party, the parties can (i) agree together on the termination of the contract, on the date and under the conditions that they determine, or (ii) ask together the competent judge to adapt it;
    • finally, in the absence of agreement between the parties on one of the two aforementioned options, within a reasonable time, the judge, seized by one of the parties, may revise the contract or terminate it, on the date and under the conditions that he will set.

    The party wishing to implement this legal mechanism must also anticipate the following points:

    • article 1195 of the Civil Code only applies to contracts concluded on or after October 1, 2016 (or renewed after this date). Judges do not have the power to adapt or rebalance contracts concluded before this date;
    • this provision is not of public order. Therefore, the parties can exclude it or modify its conditions of application and/or implementation (the most common being the framework of the powers of the judge);
    • during the renegotiation, the supplier must continue to sell at the initial price because, unlike force majeure, unforeseen circumstances do not lead to the suspension of compliance with the obligations.

    Key takeaways:

    • analyse carefully the framework of the commercial relationship before deciding to notify a price increase, in order to identify whether the prices are firm for a minimum period and the contractual levers for renegotiation;
    • correctly anticipate the length of notice that must be given to the partner before the entry into force of the new pricing conditions, depending on the length of the relationship and the degree of dependence;
    • document the causes of the price increase;
    • check if and how the legal mechanism of unforeseeability has been amended or excluded by the framework contract or the General T&Cs;
    • consider alternatives strategies, possibly based on stopping production/delivery justified by a force majeure event or on the significant imbalance of the contractual provisions.

    Roberto Luzi Crivellini

    Области практики

    • Арбитраж
    • Распространение
    • Международная торговля
    • Судебная практика
    • Недвижимость
    Связаться Roberto
    Franchising Spain - Legalmondo

    Spain | Franchising, Theory Of Risk and Guarantees By Franchisee
    • Распространение
    • Судебная практика
    • Испания
    Vietnam - Legalmondo

    Vietnam on the EU Tax Blacklist: A Guide for EU Buyers
    • Корпоративный
    • Распространение
    • Вьетнам
    Brazil - Legalmondo

    Brazil’s New Digital Child Protection Law: Practical Implications for Foreign Tech Companies
    • Конфиденциальность - Защита данных
    • Бразилия
    France - Legalmondo

    France | Pre-contractual disclosure in distribution and franchise agreements
    • Распространение
    • Франчайзинг
    • Франция
    International distribution agreements - Key Clauses and Lessons learned from the history of Nike - Legalmondo

    International distribution agreements | Key Clauses and Lessons learned from the history of Nike
    • Контракты
    • Распространение
    • Италия
    Saudi Arabia - Legalmondo

    How to Joint Venture in Saudi Arabia
    • Контракты
    • Корпоративный
    • Саудовская Аравия
    Contracts Responsibility - Legalmondo

    Corporate Sustainability in Practice – How Contracts Shape Responsibility
    • Контракты
    • Распространение
    • Finland
    Legalmondo - Oil prices

    Rising Oil Prices and International Contracts: How to Manage Hardship in Global Supply Chains
    • Контракты
    • Распространение
    • Италия
    African Continental Free Trade-Agreement - Legalmondo

    Why the African Continental Free Trade Agreement has not yet turned into Reality — and What That Means for Egypt
    • Распространение
    • Иностранные инвестиции
    • Египет
    Spain lawyer-coach - Legalmondo

    The lawyer-coach: a new way of practising
    • Альтернативное разрешение споров
    • Контракты
    • Испания
    Spain - Legalmondo

    Agency and distribution agreements. Phrases to avoid when ending a business relationship without a written contract
    • Без категории
    • Контракты
    • Испания
    Business people Legalmondo

    Spain | Appropriate Means of Dispute Resolution (ADR) as a prerequisite for litigation
    • Альтернативное разрешение споров
    • Судебная практика
    • Испания
    Spain Influencer-Legalmondo

    Spain – Can an influencer be considered a «commercial agent»?
    • Без категории
    • Распространение
    • Испания
    Spain advance payment - Legalmondo

    Spain — Is it possible to advance payment of customer indemnity in agency contracts?
    • Без категории
    • Испания
    Companies in Spain - Legalmondo

    Spain — Powers of Representation of Companies
    • Корпоративный
    • Испания
    Spain - Legalmondo

    Spain | Clientele Compensation for Agents and Distributors
    • Без категории
    • Контракты
    • Испания
    Debt - Legalmondo

    International debt recovery: risk prevention and best practices
    • Распространение
    • Судебная практика
    • Испания
    mediation - legalmondo

    The importance of Mediation in Distribution Contracts
    • Альтернативное разрешение споров
    • Распространение
    • Испания

    Scrivi a Roberto





      Read the privacy policy of Legalmondo.
      This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

      The Supply Framework Agreement

      20.03.2023

      • Контракты
      • Распространение
      • Международная торговля

      The commercial agent has the right to obtain certain information about the sales of the principal. The Spanish Law on Agency Contracts provides (15.2 LCA) that the agent has the right to demand to see the accounts of the principal in order to verify all matters relating to the commissions due to him. And also, to be provided with the information available to the principal and necessary to verify the amount of such commissions.

      This article is in line with the 1986 Commercial Agents Directive, according to which (12.3) the agent is entitled to demand to be provided with all information at the disposal of the principal, particularly an extract from the books of account, which is necessary to verify the amount of commission due to the agent. This may not be altered to the detriment of the commercial agent by agreement.

      The question is, does this right remain even after the termination of the agency contract? In other words: once the agency contract is terminated, can the agent request the information and documentation mentioned in these articles and is the Principal obliged to provide it?

      In our opinion, the rule does not say anything that limits this right, rather the opposite is to be expected. Therefore, to the extent that there is still any possible commission that may arise from such verification, the answer must be yes. Let us see.

      The right to demand the production of accounts exists so that the agent can verify the amount of commissions. And the agent is entitled to commissions for acts and operations concluded during the term of the contract (art. 12 LCA), but also for acts or operations concluded after the termination of the contract (art. 13 LCA), and for operations not carried out due to circumstances attributable to the principal (art. 17 LCA). In addition, the agent is entitled to have the commission accrued at the time when the act or transaction should have been executed (art. 14 LCA).

      All these transactions can take place after the conclusion of the contract. Consider the usual situation where orders are placed during the contract but are accepted or executed afterwards. To reduce the agent’s right to be informed only during the term of the contract would be to limit his entitlement to the corresponding commission unduly. And it should be borne in mind that the amount of the commissions during the last five years may also influence the calculation of the client (goodwill) indemnity (art. 28 LCA), so that the agent’s interest in knowing them is twofold: what he would receive as commission, and what could increase the basis for future indemnity.

      This has been confirmed, for example, by the Provincial Court (Audiencia Provincial) of Madrid (AAP 227/2017, of 29 June [ECLI:ES:APM:2017:2873A]) which textually states:

      […] art. 15.2 of the Agency Contract Act provides for the right of the agent to demand the exhibition of the Principal’s accounts in the particulars necessary to verify everything relating to the commissions corresponding to him, as well as to be provided with the information available to the Principal and necessary to verify the amount. This does not prevent, […], the agency contract having already been terminated, as this does not imply that commissions would cease to accrue for policies, contracted with the mediation of the agent, which remain in force.

      The question then arises as to whether this right to information is unlimited in time. And here the answer would be in the negative. The limitation of the right to receive information would be linked to the statute of limitations of the right to claim the corresponding commission. If the right to receive the commission were undoubtedly time-barred, it could be argued that it would not be possible to receive information about it. But for such an exception, the statute of limitations must be clear, therefore, taking into account possible interruptions due to claims, even extrajudicial ones. In case of doubt, it will be necessary to recognise the right to demand the information, without prejudice to later invoking and recognising the impossibility of claiming the commission if the right is time-barred. And for this we must consider the limitation period for claiming commissions (in general, three years) and that of the right to claim compensation for clientele (one year).

      In short: it does not seem that the right to receive information and to examine the principal’s documentation is limited by the term of the agency contract; although, on the other hand, it would be appropriate to analyse the possible limitation period for claiming commissions. In the absence of a clear answer to this question, the right to information should, in our opinion, prevail, without prejudice to the fact that the result may not entitle the claim because it is time-barred.

      SUMMARY: In large-scale events such as the Paris Olympics certain companies will attempt to «wildly» associate their brand with the event through a practice called «ambush marketing», defined by caselaw as «an advertising strategy implemented by a company in order to associate its commercial image with that of an event, and thus to benefit from the media impact of said event, without paying the related rights and without first obtaining the event organizer’s authorization» (Paris Court of Appeal, June 8, 2018, Case No 17/12912). A risky and punishable practice, that might sometimes yet be an option yet.

      Key takeaways

      • Ambush marketing might be a punished practice but is not prohibited as such;
      • As a counterpart of their investment, sponsors and official partners benefit from an extensive legal protection against all forms of ambush marketing in the event concerned, through various general texts (counterfeiting, parasitism, intellectual property) or more specific ones (e.g. sport law);
      • The Olympics Games are subject to specific regulations that further strengthen this protection, particularly in terms of intellectual property.
      • But these rights are not absolute, and they are still thin opportunities for astute ambush marketing.

      The protection offered to sponsors and official partners of sporting and cultural events from ambush marketing

      With a budget of over 4 billion euros, the 2024 Olympic and Paralympic Games are financed mostly by various official partners and sponsors, who in return benefit from a right to use Olympic and Paralympic properties to be able to associate their own brand image and distinctive signs with these events.

      Ambush marketing is not punishable as such under French law, but several scattered texts provide extensive protection against ambush marketing for sponsors and partners of sporting or cultural continental-wide or world-wide events. Indeed, sponsors are legitimately entitled to peacefully enjoy the rights offered to them in return for large-scale investments in events such as the FIFA or rugby World Cups, or the Olympic Games.

      In particular, official sponsors and organizers of such events may invoke:

      • the «classic» protections offered by intellectual property law (trademark law and copyright) in the context of infringement actions based on the French Intellectual Property Code,
      • tort law (parasitism and unfair competition based on article 1240 of the French Civil Code);
      • consumer law (misleading commercial practices) based on the French Consumer Code,
      • but also more specific texts such as the protection of the exploitation rights of sports federations and sports event organizers derived from the events or competitions they organize, as set out in article L.333-1 of the French Sports Code, which gives sports event organizers an exploitation monopoly.

      The following ambush marketing practices were sanctioned on the abovementioned grounds:

      • The use of a tennis competition name and of the trademark associated with it during the sporting event: The organization of online bets, by an online betting operator, on the Roland Garros tournament, using the protected sign and trademark Roland Garros to target the matches on which the bets were organized. The unlawful exploitation of the sporting event, was punished and 400 K€ were allowed as damages, based on article L. 333-1 of the French Sports Code, since only the French Tennis Federation (F.F.T.) owns the right to exploit Roland Garros. The use of the trademark was also punished as counterfeiting (with 300 K€ damages) and parasitism (with 500 K€ damages) (Paris Court of Appeal, Oct. 14, 2009, Case No 08/19179);
      • An advertising campaign taking place during a film festival and reproducing the event’s trademark: The organization, during the Cannes Film Festival, of a digital advertising campaign by a cosmetics brand through the publication on its social networks of videos showing the beauty makeovers of the brand’s muses, in some of which the official poster of the Cannes Film Festival was visible, one of which reproduced the registered trademark of the “Palme d’Or”, was punished on the grounds of copyright infringement and parasitism with a 50 K€ indemnity (Paris Judicial Court, Dec. 11, 2020, Case No19/08543);
      • An advertising campaign aimed at falsely claiming to be an official partner of an event: The use, during the Cannes Film Festival, of the slogan «official hairdresser for women» together with the expressions «Cannes» and «Cannes Festival», and other publications falsely leading the public to believe that the hairdresser was an official partner, to the detriment of the only official hairdresser of the Cannes festival, was punished on the grounds of unfair competition and parasitism with a 50 K€ indemnity (Paris Court of Appeal, June 8, 2018, Case No 17/12912).

      These financial penalties may be combined with injunctions to cease these behaviors, and/or publication in the press under penalty.

      An even greater protection for the Paris 2024 Olympic Games

      The Paris 2024 Olympic Games are also subject to specific regulations.

      Firstly, Article L.141-5 of the French Sports Code, enacted for the benefit of the «Comité national olympique et sportif français” (CNOSF) and the “Comité de l’organisation des Jeux Olympiques et Paralympiques de Paris 2024” (COJOP), protects Olympic signs such as the national Olympic emblems, but also the emblems, the flag, motto and Olympic symbol, Olympic anthem, logo, mascot, slogan and posters of the Olympic Games, the year of the Olympic Games «city + year», the terms «Jeux Olympiques», «Olympisme», «Olympiade», «JO», «olympique», «olympien» and «olympienne». Under no circumstances may these signs be reproduced or even imitated by third-party companies. The COJOP has also published a guide to the protection of the Olympic trademark, outlining the protected symbols, trademarks and signs, as well as the protection of the official partners of the Olympic Games.

      Secondly, Law no. 2018-202 of March 26, 2018 on the organization of the 2024 Olympic and Paralympic Games adds even more specific prohibitions, such as the reservation for official sponsors of advertising space located near Olympic venues, or located on the Olympic and Paralympic torch route. This protection is unique in the context of the Olympic Games, but usually unregulated in the context of simple sporting events.

      The following practices, for example, have already been sanctioned on the above-mentioned grounds:

      • Reproduction of a logo imitating the well-known «Olympic» trademark on a clothing collection: The marketing of a collection of clothing, during the 2016 Olympic Games, bearing a logo (five hearts in the colors of the 5 Olympic colors intersecting in the image of the Olympic logo) imitating the Olympic symbol in association with the words «RIO» and «RIO 2016», was punished on the grounds of parasitism (10 K€ damages) and articles L. 141-5 of the French Sports Code (35 K€) and L. 713-1 of the French Intellectual Property Code (10 K€ damages) (Paris Judicial Court, June 7, 2018, Case No16/10605);
      • The organization of a contest on social networks using protected symbols: During the 2018 Olympic Games in PyeongChang, a car rental company organized an online game inviting Internet users to nominate the athletes they wanted to win a clock radio, associated with the hashtags «#JO2018» («#OJ2018”), «#Jeuxolympiques» (“#Olympicsgame”) or «C’est parti pour les jeux Olympiques» (“let’s go for the Olympic Games”) without authorization from the CNOSF, owner of these distinctive signs under the 2018 law and article L.141-5 of the French Sport Code and punished on these grounds with 20 K€ damages and of 10 K€ damages for parasitism (Paris Judicial Court, May 29, 2020, n°18/14115).

      These regulations offer official partners greater protection for their investments against ambush marketing practices from non-official sponsors.

      Some marketing operations might be exempted

      An analysis of case law and promotional practices nonetheless reveals the contours of certain advertising practices that could be authorized (i.e. not sanctioned by the above-mentioned texts), provided they are skillfully prepared and presented. Here are a few exemples :

      • Communication of information for advertising purposes: The use of the results of a rugby match and the announcement of a forthcoming match in a newspaper to promote a motor vehicle and its distinctive features was deemed lawful: «France 13 Angleterre 24 — the Fiat 500 congratulates England on its victory and looks forward to seeing the French team on March 9 for France-Italy» (France 13 Angleterre 24 — la Fiat 500 félicite l’Angleterre pour sa victoire et donne rendez-vous à l’équipe de France le 9 mars pour France-Italie) the judges having considered that this publication «merely reproduces a current sporting result, acquired and made public on the front page of the sports newspaper, and refers to a future match also known as already announced by the newspaper in a news article» (Court of cassation, May 20, 2014, Case No 13-12.102).
      • Sponsorship of athletes, including those taking part in Olympic competitions: Subject to compliance with the applicable regulatory framework, particularly as regards models, any company may enter into partnerships with athletes taking part in the Olympic Games, for example by donating clothing bearing the desired logo or brand, which they could wear during their participation in the various events. Athletes may also, under certain conditions, broadcast acknowledgements from their partner (even if unofficial). Rule 40 of the Olympic Charter governs the use of athletes’, coaches’ and officials’ images for advertising purposes during the Olympic Games.

      The combined legal and marketing approach to the conception and preparation of the message of such a communication operation is essential to avoid legal proceedings, particularly on the grounds of parasitism; one might therefore legitimately contemplate advertising campaigns, particularly clever, or even malicious ones.

      In this first episode of Legalmondo’s Distribution Talks series, I spoke with Ignacio Alonso, a Madrid-based lawyer with extensive experience in international commercial distribution.

      Main discussion points:

      • in Spain, there is no specific law for distribution agreements, which are governed by the general rules of the Commercial Code;
      • therefore, it is essential to draft a clear and comprehensive contract, which will be the primary source of the parties’ rights and obligations;
      • it is also good to be aware of Spanish case law on commercial distribution, which in some cases applies the law on commercial agency by analogy.
      • the most common issues involving foreign producers distributing in Spain arise at the time of termination of the relationship, mainly because case law grants the terminated distributor an indemnity of clientele or goodwill if similar prerequisites to those in the agency regulations apply.
      • another frequent dispute concerns the adequacy of the notice period for terminating the contract, especially if there is no agreement between the parties: the advice is to follow what the agency regulations stipulate and thus establish a minimum notice period of one month for each year of the contract’s duration, up to 6 months for agreements lasting more than five years;
      • regarding dispute resolution tools, mediation is an option that should be carefully considered because it is quick, inexpensive, and allows a shared solution to be sought flexibly without disrupting the business relationship.
      • if mediation fails, the parties can provide for recourse to arbitration or state court. The choice depends on the case’s specific circumstances, and one factor in favor of jurisdiction is the possibility of appeal, which is excluded in the case of arbitration.

      Go deeper

      Summary

      On 1 June 2022, Regulation EU n. 720/2022, i.e.: the new Vertical Block Exemption Regulation (hereinafter: «VBER»), replaced the previous version (Regulation EU n. 330/2010), expired on 31 May 2022.

      The new VBER and the new vertical guidelines (hereinafter: “Guidelines”) have received the main evidence gathered during the lifetime of the previous VBER and contain some relevant provisions affecting the discipline of all B2B agreements among businesses operating at different levels of the supply chain.

      In this article, we will focus on the impact of the new VBER on sales through digital platforms, listing the main novelties impacting distribution chains, including a platform for marketing products/services.

      The general discipline of vertical agreements

      Article 101(1) of the Treaty on the Functioning of the European Union (“TFEU”) prohibits all agreements that prevent, restrict, or distort competition within the EU market, listing the main types, e.g.: price fixing; market partitioning; limitations on production/development/investment; unfair terms, etc.

      However, Article 101(3) TFEU exempts from such restrictions the agreements that contribute to improving the EU market, to be identified in a special category Regulation.

      The VBER establishes the category of vertical agreements (i.e., agreements between businesses operating at different levels of the supply chain), determining which of these agreements are exempted from Article 101(1) TFEU prohibition.

      In short, vertical agreements are presumed to be exempted (and therefore valid) if they do not contain so-called «hardcore restrictions» (i.e., severe restrictions of competition, such as an absolute ban on sales in a territory or the manufacturer’s determination of the distributor’s resale price) and if neither party’s market share exceeds 30%.

      The exempted agreements benefit from what has been termed the “safe harbour” of the VBER. In contrast, the others will be subject to the general prohibition of Article 101(1) TFEU unless they can benefit from an individual exemption under Article 101(3) TFUE.

      The innovations introduced by the new VBER to online platforms

      The first relevant aspect concerns the classification of the platforms, as the European Commission excluded that the online platform generally meets the conditions to be categorized as agency agreements.

      While there have never been doubts concerning platforms that operate by purchasing and reselling products (classic example: Amazon Retail), some have arisen concerning those platforms that merely promote the products of third parties without carrying out the activity of resale (classic example: Amazon Marketplace).

      With this statement, the European Commission wanted to clear the field of doubt, making explicit that intermediation service providers (such as online platforms) qualify as suppliers (as opposed to commercial agents) under the VBER. This reflects the approach of Regulation (EU) 2019/1150 («P2B Regulation»), which has, for the first time, dictated a specific discipline for digital platforms. It provided for a set of rules to create a “fair, transparent, and predictable environment” for smaller businesses and customers” and for the rationale of the Digital Markets Act, banning certain practices used by large platforms acting as “gatekeepers”.

      Therefore, all contracts concluded between manufacturers and platforms (defined as ‘providers of online intermediation services’) are subject to all the restrictions imposed by the VBER. These include the price, the territories to which or the customers to whom the intermediated goods or services may be sold, or the restrictions relating to online advertising and selling.

      Thus, to give an example, the operator of a platform may not impose a fixed or minimum sale price for a transaction promoted through the platform.

      The second most impactful aspect concerns hybrid platforms, i.e., competing in the relevant market to sell intermediated goods or services. Amazon is the most well-known example, as it is a provider of intermediation services (“Amazon Marketplace”), and – at the same time – it distributes the products of those parties (“Amazon Retail”). We have previously explored the distinction between those 2 business models (and the consequences in terms of intellectual property infringement) here.

      The new VBER explicitly does not apply to hybrid platforms. Therefore, the agreements concluded among such platforms and manufacturers are subject to the limitations of the TFEU, as such providers may have the incentive to favour their sales and the ability to influence the outcome of competition between undertakings that use their online intermediation services.

      Those agreements must be assessed individually under Article 101 of the TFEU, as they do not necessarily restrict competition within the meaning of TFEU, or they may fulfil the conditions of an individual exemption under Article 101(3) TFUE.

      The third very relevant aspect concerns the parity obligations (also referred to as Most Favoured Nation Clauses, or MFNs), i.e., the contract provisions in which a seller (directly or indirectly) agrees to give the buyer the best terms it makes available to any other buyer.

      Indeed, platforms’ contractual terms often contain parity obligation clauses to prevent users from offering their products/services at lower prices or on better conditions on their websites or other platforms.

      The new VBER deals explicitly with parity clauses, making a distinction between clauses whose purpose is to prohibit users of a platform from selling goods or services on more favourable terms through competing platforms (so-called “wide parity clauses”), and clauses that prohibit sales on more favourable terms only in respect of channels operated directly by the users (so-called “narrow parity clauses”).

      Wide parity clauses do not benefit from the VBER exemption; therefore, such obligations must be assessed individually under Article 101(3) TFEU.

      On the other hand, narrow parity clauses continue to benefit from the exemption already granted by the old VBER if they do not exceed the threshold of 30% of the relevant market share set out in Article 3 of the new VBER. However, the new Guidelines warn against using overly narrow parity obligations by online platforms covering a significant share of users, stating that if there is no evidence of pro-competitive effects, the benefit of the block exemption is likely to be withdrawn.

      Impact and takeaways

      The new VBER entered into force on 1 June 2022 and is already applicable to agreements signed after that date. Agreements already in force on 31 May 2022 that satisfy the conditions for exemption under the current VBER but do not satisfy the requirements under the new VBER shall benefit from a one-year transitional period.

      The new regime will be the playing field for all platform-driven sales over the next 12 years (the regulation expires on 31 May 2034). Currently, the rather restrictive novelties on hybrid platforms and parity obligations will likely necessitate substantial revisions to existing trade agreements.

      Here, then, are some tips for managing contracts and relationships with online platforms:

      • the new VBER is the right opportunity to review the existing distribution networks. The revision will have to consider not only the new regulatory limits (e.g., the ban on wide parity clauses) but also the new discipline reserved for hybrid platforms and dual distribution to coordinate the different distribution channels as efficiently as possible, by the stakes set by the new VBER and the Guidelines;
      • platforms are likely to play an even greater role during the next decade; it is, therefore, essential to consider these sales channels from the outset, coordinating them with the other existing ones (retail, direct sales, distributors, etc.) to avoid jeopardizing the marketing of products or services;
      • the European legislator’s attention toward platforms is growing. Looking up from the VBER, one should not forget that they are subject to a multitude of other European regulations, which are gradually regulating the sector and which must be considered when concluding contracts with platforms. The reference is not only to the recent Digital Market Act and P2B Regulation but also to the protection of IP rights on platforms, which — as we have already seen — is still an open issue.

      Summary

      To avoid disputes with important suppliers, it is advisable to plan purchases over the medium and long term and not operate solely on the basis of orders and order confirmations. Planning makes it possible to agree on the duration of the ‘supply agreement, minimum volumes of products to be delivered and delivery schedules, prices, and the conditions under which prices can be varied over time.
      The use of a framework purchase agreement can help avoid future uncertainties and allows various options to be used to manage commodity price fluctuations depending on the type of products , such as automatic price indexing or agreement to renegotiate in the event of commodity fluctuations beyond a certain set tolerance period.

      I read in a press release: “These days, the glass industry is sending wine companies new unilateral contract amendments with price changes of 20%…”

      What can one do to avoid the imposition of price increases by suppliers? 

      • Know your rights and act in an informed manner
      • Plan and organise your supply chain

      Does my supplier have the right to increase prices?

      If contracts have already been concluded, e.g., orders have already been confirmed by the supplier, the answer is often no.

      It is not legitimate to request a price change. It is much less legitimate to communicate it unilaterally, with the threat of cancelling the order or not delivering the goods if the request is not granted.

      What if he tells me it is force majeure?

      That’s wrong: increased costs are not a force majeure but rather an unforeseen excessive onerousness, which hardly happens.

      What if the supplier canceled the order, unilaterally increased the price, or did not deliver the goods?

      He would be in breach of contract and liable to pay damages for violating his contractual obligations.

      How can one avoid a tug-of-war with suppliers?

      The tools are there. You have to know them and use them.

      It is necessary to plan purchases in the medium term, agreeing with suppliers on a schedule in which are set out:

      • the quantities of products to be ordered
      • the delivery terms
      • the durationof the agreement
      • the pricesof the products or raw materials
      • the conditions under which prices can be varied

      There is a very effective instrument to do so: a framework purchase agreement.

      Using a framework purchase agreement, the parties negotiate the above elements, which will be valid for the agreed period.

      Once the agreement is concluded, product orders will follow, governed by the framework agreement, without the need to renegotiate the content of individual deliveries each time.

      For an in-depth discussion of this contract, see this article.

      • “Yes, but my suppliers will never sign it!”

      Why not? Ask them to explain the reason.

      This type of agreement is in the interest of both parties. It allows planning future orders and grants certainty as to whether, when, and how much the parties can change the price.

      In contrast, acting without written agreements forces the parties to operate in an environment of uncertainty. Suppliers can request price increases from one day to the next and refuse supply if the changes are not accepted.

      How are price changes for future supplies regulated?

      Depending on the type of products or services and the raw materials or energy relevant in determining the final price, there are several possibilities.

      • The first option is to index the price automatically. E.g., if the cost of a barrel of Brent oil increases/decreases by 10%, the party concerned is entitled to request a corresponding adjustment of the product’s price in all orders placed as of the following week.
      • An alternative is to provide for a price renegotiation in the event of a fluctuation of the reference commodity. E.g., suppose the LME Aluminium index of the London Stock Exchange increases above a certain threshold. In that case, the interested party may request a price renegotiationfor orders in the period following the increase.

      What if the parties do not agree on new prices?

      It is possible to terminate the contract or refer the price determination to a third party, who would act as arbitrator and set the new prices for future orders.

      Summary

      The framework supply contract is an agreement that regulates a series of future sales and purchases between two parties (customer and supplier) that take place over a certain period of time. This agreement determines the main elements of future contracts such as price, product volumes, delivery terms, technical or quality specifications, and the duration of the agreement.

      The framework contract is useful for ensuring continuity of supply from one or more suppliers of a certain product that is essential for planning industrial or commercial activity. While the general terms and conditions of purchase or sale are the rules that apply to all suppliers or customers of the company. The framework contract is advisable to be concluded with essential suppliers for the continuity of business activity, in general or in relation to a particular project.

      What I am talking about in this article:

      • What is the supply framework agreement?
      • What is the function of the supply framework agreement?
      • The difference with the general conditions of sale or purchase
      • When to enter a purchase framework agreement?
      • When is it beneficial to conclude a sales framework agreement?
      • The content of the supply framework agreement
      • Price revision clause and hardship
      • Delivery terms in the supply framework agreement
      • The Force Majeure clause in international sales contracts
      • International sales: applicable law and dispute resolution arrangements

      What is a framework supply agreement?

      It is an agreement that regulates a series of future sales and purchases between two parties (customer and supplier), which will take place over a certain period.

      It is therefore referred to as a «framework agreement» because it is an agreement that establishes the rules of a future series of sales and purchase contracts, determining their primary elements (such as the price, the volumes of products to be sold and purchased, the delivery terms of the products, and the duration of the contract).

      After concluding the framework agreement, the parties will exchange orders and order confirmations, entering a series of autonomous sales contracts without re-discussing the covenants already defined in the framework agreement.

      Depending on one’s point of view, this agreement is also called a sales framework agreement (if the seller/supplier uses it) or a purchasing framework agreement (if the customer proposes it).

      What is the function of the framework supply agreement?

      It is helpful to arrange a framework agreement in all cases where the parties intend to proceed with a series of purchases/sales of products over time and are interested in giving stability to the commercial agreement by determining its main elements.

      In particular, the purchase framework agreement may be helpful to a company that wishes to ensure continuity of supply from one or more suppliers of a specific product that is essential for planning its industrial or commercial activity (raw material, semi-finished product, component).

      By concluding the framework agreement, the company can obtain, for example, a commitment from the supplier to supply a particular minimum volume of products, at a specific price, with agreed terms and technical specifications, for a certain period.

      This agreement is also beneficial, at the same time, to the seller/supplier, which can plan sales for that period and organize, in turn, the supply chain that enables it to procure the raw materials and components necessary to produce the products.

      What is the difference between a purchase or sales framework agreement and the general terms and conditions?

      Whereas the framework agreement is an agreement that is used with one or more suppliers for a specific product and a certain time frame, determining the essential elements of future contracts, the general purchase (or sales) conditions are the rules that apply to all the company’s suppliers (or customers).

      The first agreement, therefore, is negotiated and defined on a case-by-case basis. At the same time, the general conditions are prepared unilaterally by the company, and the customers or suppliers (depending on whether they are sales or purchase conditions) adhere to and accept that the general conditions apply to the individual order and/or future contracts.

      The two agreements might also co-exist: in that case; it is a good idea to specify which contract should prevail in the event of a discrepancy between the different provisions (usually, this hierarchy is envisaged, ranging from the special to the general: order — order confirmation; framework agreement; general terms and conditions of purchase).

      When is it important to conclude a purchase framework agreement?

      It is beneficial to conclude this agreement when dealing with a mono-supplier or a supplier that would be very difficult to replace if it stopped selling products to the purchasing company.

      The risks one aims to avoid or diminish are so-called stock-outs, i.e., supply interruptions due to the supplier’s lack of availability of products or because the products are available, but the parties cannot agree on the delivery time or sales price.

      Another result that can be achieved is to bind a strategic supplier for a certain period by agreeing that it will reserve an agreed share of production for the buyer on predetermined terms and conditions and avoid competition with offers from third parties interested in the products for the duration of the agreement.

      When is it helpful to conclude a sales framework agreement?

      This agreement allows the seller/supplier to plan sales to a particular customer and thus to plan and organize its production and logistical capacity for the agreed period, avoiding extra costs or delays.

      Planning sales also makes it possible to correctly manage financial obligations and cash flows with a medium-term vision, harmonizing commitments and investments with the sales to one’s customers.

      What is the content of the supply framework agreement?

      There is no standard model of this agreement, which originated from business practice to meet the requirements indicated above.

      Generally, the agreement provides for a fixed period (e.g., 12 months) in which the parties undertake to conclude a series of purchases and sales of products, determining the price and terms of supply and the main covenants of future sales contracts.

      The most important clauses are:

      • the identification of products and technical specifications (often identified in an annex)
      • the minimum/maximum volume of supplies
      • the possible obligation to purchase/sell a minimum/maximum volume of products
      • the schedule of supplies
      • the delivery times
      • the determination of the price and the conditions for its possible modification (see also the next paragraph)
      • impediments to performance (Force Majeure)
      • cases of Hardship
      • penalties for delay or non-performance or for failure to achieve the agreed volumes
      • the hierarchy between the framework agreement and the orders and any other contracts between the parties
      • applicable law and dispute resolution (especially in international agreements)

      How to handle price revision in a supply contract?

      A crucial clause, especially in times of strong fluctuations in the prices of raw materials, transport, and energy, is the price revision clause.

      In the absence of an agreement on this issue, the parties bear the risk of a price increase by undertaking to respect the conditions initially agreed upon; except in exceptional cases (where the fluctuation is strong, affects a short period, and is caused by unforeseeable events), it isn’t straightforward to invoke the supervening excessive onerousness, which allows renegotiating the price, or the contract to be terminated.

      To avoid the uncertainty generated by price fluctuations, it is advisable to agree in the contract on the mechanisms for revising the price (e.g., automatic indexing following the quotation of raw materials). The so-called Hardship or Excessive Onerousness clause establishes what price fluctuation limits are accepted by the parties and what happens if the variations go beyond these limits, providing for the obligation to renegotiate the price or the termination of the contract if no agreement is reached within a certain period.

      How to manage delivery terms in a supply agreement?

      Another fundamental pact in a medium to long-term supply relationship concerns delivery terms. In this case, it is necessary to reconcile the purchaser’s interest in respecting the agreed dates with the supplier’s interest in avoiding claims for damages in the event of a delay, especially in the case of sales requiring intercontinental transport.

      The first thing to be clarified in this regard concerns the nature of delivery deadlines: are they essential or indicative? In the first case, the party affected has the right to terminate (i.e., wind up) the agreement in the event of non-compliance with the term; in the second case, due diligence, information, and timely notification of delays may be required, whereas termination is not a remedy that may be automatically invoked in the event of a delay.

      A useful instrument in this regard is the penalty clause: with this covenant, it is established that for each day/week/month of delay, a sum of money is due by way of damages in favor of the party harmed by the delay.

      If quantified correctly and not excessively, the penalty is helpful for both parties because it makes it possible to predict the damages that may be claimed for the delay, quantifying them in a fair and determined sum. Consequently, the seller is not exposed to claims for damages related to factors beyond his control. At the same time, the buyer can easily calculate the compensation for the delay without the need for further proof.

      The same mechanism, among other things, may be adopted to govern the buyer’s delay in accepting delivery of the goods.

      Finally, it is a good idea to specify the limit of the penalty (e.g.,10 percent of the price of the goods) and a maximum period of grace for the delay, beyond which the party concerned is entitled to terminate the contract by retaining the penalty.

      The Force Majeure clause in international sales contracts

      A situation that is often confused with excessive onerousness, but is, in fact, quite different, is that of Force Majeure, i.e., the supervening impossibility of performance of the contractual obligation due to any event beyond the reasonable control of the party affected, which could not have been reasonably foreseen and the effects of which cannot be overcome by reasonable efforts.

      The function of this clause is to set forth clearly when the parties consider that Force Majeure may be invoked, what specific events are included (e.g., a lock-down of the production plant by order of the authority), and what are the consequences for the parties’ obligations (e.g., suspension of the obligation for a certain period, as long as the cause of impossibility of performance lasts, after which the party affected by performance may declare its intention to dissolve the contract).

      If the wording of this clause is general (as is often the case), the risk is that it will be of little use; it is also advisable to check that the regulation of force majeure complies with the law applicable to the contract (here an in-depth analysis indicating the regime provided for by 42 national laws).

      Applicable law and dispute resolution clauses

      Suppose the customer or supplier is based abroad. In that case, several significant differences must be borne in mind: the first is the agreement’s language, which must be intelligible to the foreign party, therefore usually in English or another language familiar to the parties, possibly also in two languages with parallel text.

      The second issue concerns the applicable law, which should be expressly indicated in the agreement. This subject matter is vast, and here we can say that the decision on the applicable law must be made on a case-by-case basis, intentionally: in fact, it is not always convenient to recall the application of the law of one’s own country.

      In most international sales contracts, the 1980 Vienna Convention on the International Sale of Goods («CISG») applies, a uniform law that is balanced, clear, and easy to understand. Therefore, it is not advisable to exclude it.

      Finally, in a supply framework agreement with an international supplier, it is important to identify the method of dispute resolution: no solution fits all. Choosing a country’s jurisdiction is not always the right decision (indeed, it can often prove counterproductive).

      Eventually, after more than 30 years of negotiations, the world is now looking at the first pan-African trade agreement, which entered into force in 2019: the African Continental Free Trade Area, or AfCFTA.

      Africa, with its 55 countries and around 1.3 billion inhabitants, is the second largest continent in the world after Asia. The continent’s potential is huge: more than 50% of Africa’s population is under 20 years old and the population is growing at the fastest rate in the world. By 2050, one in four new-born babies is expected to be African. In addition, the continent is rich in fertile soil and raw materials.

      For Western investors, Africa has become considerably more important in recent years. As a result, a considerable amount of international trade has emerged, not least promoted by the “Compact with Africa” initiative adopted by the G20 countries in 2017, also known as the “Marshall Plan with Africa”. Its focus is on expanding Africa’s economic cooperation with the G20 countries by strengthening private investment.

      At the same time, however, intra-African trade has stagnated so far: partly still existing high intra-African tariffs, non-tariff barriers (NTBs), weak infrastructure, corruption, cumbersome bureaucracy, as well as non-transparent and inconsistent regulations, ensured that interregional exports could hardly develop and most recently accounted for only 17 % of the pan-African trade and only 0.36 % of world trade. It’s already been a long time since the African Union (AU) had put the creation of a common trade area on its agenda.

      What is behind AfCFTA?

      The establishment of a pan-African trade area was preceded by decades of negotiations, which finally resulted in the entry into force of the AfCFTA on 30 May 2019.

      AfCFTA is a free trade area established by its members, which — with the exception of Eritrea — covers the entire African continent and is thus the largest free trade area in the world by number of member states after the World Trade Organisation (WTO).

      How the common market was to be structured in detail was the subject of several individual negotiations, which were discussed in Phases I and II.

      Phase I comprises the negotiations on three protocols and is almost completed.

      The Protocol on Trade in Goods

      This protocol provides for the elimination of 90 % of all intra-African tariffs in all product categories within five years of entry into force. Of these, up to 7 % of products can be classified as sensitive goods, which are subject to a tariff elimination period of ten years. For the least developed countries (LDCs), the preparation period is extended from five to ten years and for sensitive products from ten to thirteen years, provided they demonstrate their need. The remaining 3 % of tariffs are fully exempted from tariff dismantling.

      A prerequisite for tariff dismantling is the clear delimitation of rules of origin. Otherwise, imports from third countries could benefit from the negotiated tariff advantages. Agreement has already been reached on most of the rules of origin.

      The Protocol on Trade in Services

      The AU General Assembly has so far agreed on five priority areas (transport, communications, tourism, financial and business services) and guidelines for the commitments applicable to them.  47 AU member states have so far submitted their offers for specific commitments and the review of 28 has been completed. In addition, negotiations, for example, on the recognition of professional qualifications, are still ongoing.

      The Protocol on Dispute Settlement

      With the Protocol on Rules and Procedures Governing the Dispute Settlement, the AfCFTA creates a dispute settlement system modelled on the WTO Dispute Settlement Understanding. Under this, the Dispute Settlement Body (DSB) administers the AfCFTA Dispute Settlement Protocol and establishes an Adjudicating Panel (Panel) and an Appellate Body (AB). The DSB is composed of a representative of each member state and intervenes as soon as there are differences of opinion between the contracting states on the interpretation and/or application of the agreement with regard to their rights and obligations.

      For the remaining Phase II, negotiations are planned on investment and competition policy, intellectual property issues, online trade and women and youth in trade, the results of which will be reflected in further protocols.

      The implementation of the AfCFTA

      In principle, the implementation of trade under a trade agreement can only begin once the legal framework has been finally clarified. However, AU Heads of State and Government agreed in December 2020 that trade can begin for goods for which negotiations have been finalised. Under this «transitional arrangement«, after a pandemic-related postponement, the first AfCFTA trade settlement from Ghana to South Africa took place on 4 January 2021.

      Building blocks of the AfCFTA

      All 55 members of the AU were involved in the AfCFTA negotiations. Of these, 47 belong to at least one — and some to more than one — recognised Regional Economic Communities (RECs), which, according to the preamble of the AfCFTA agreement, are to continue as building blocks of the trade agreement. It was therefore they who acted as the voice of their respective members in the AfCFTA negotiations. The AfCFTA provides for RECs to retain their legal instruments, institutions and dispute settlement mechanisms.

      Within the AU, there are eight recognised RECs, overlapping in some countries, which are either preferential trade agreements (Free Trade Agreements — FTAs) or customs unions.

      Under the AfCFTA, the RECs have various responsibilities. These are in particular:

      • coordinating negotiating positions and assisting member states in the implementation of the agreement.
      • solution-oriented mediation in the event of disagreements between member states
      • supporting member states in the harmonisation of tariffs and other border protection regulations
      • promoting the use of the AfCFTA notification procedure to reduce NTBs

      Outlook of the AfCFTA

      The AfCFTA has the potential to facilitate Africa’s integration into the global economy and creates the real possibility of a realignment of international integration and cooperation patterns.

      A trade agreement alone is no guarantee of economic success. For the agreement to achieve the predicted breakthrough, member states must have the political will to implement the new rules consistently and create the necessary capacity to do so. In particular, the short-term removal of trade barriers and the creation of a sustainable physical and digital infrastructure are likely to be crucial.

      If you are interested in the AfCFTA, you can read an extended version of this article here.

      The Legalmondo Africa Desk

      We help companies invest and do business in Africa with our experts in Algeria, Tunisia, Morocco, Senegal, Sudan, Egypt, Ghana, Lybia, Côte d’Ivoire, Cameroon, and Malawi.

      We can also assist foreign entities in African countries where we are not directly present with an office through our network of local partners.

      How it works

      • We set up a meeting (in person or online) with one of our experts to understand the client’s needs.
      • Once we start working together, we follow the client with a dedicated counsel for all its legal needs (single cases, or ongoing legal assistance)

      Get in touch to know more.

      Summary

      Political, environmental or health crises (like the Covid-19 outbreak and the attack of Ukraine by the Russian army) can cause an increase in the price of raw materials and components and generalized inflation. Both suppliers and distributors find themselves faced with problems related to the often sudden and very substantial increase in the price of their own supplies. French law lays down specific rules in that regard.

      Two main situations can be distinguished: where the parties have just established a simple flow of orders and where the parties have concluded a framework agreement fixing firm prices for a fixed term.

      Price increase in a business relationship

      The situation is as follows: the parties have not concluded a framework agreement, each sales contract concluded (each order) is governed by the General T&Cs of the supplier; the latter has not undertaken to maintain the prices for a minimum period and applies the prices of the current tariff.

      In principle, the supplier can modify its prices at any time by sending a new tariff. However, it must give written and reasonable notice in accordance with the provisions of Article L. 442-1.II of the Commercial Code, before the price increase comes into effect. Failure to respect sufficient notice, it could be accused of a sudden «partial» termination of commercial relations (and subject to damages).

      A sudden termination following a price increase would be characterized when the following conditions are met:

      • the commercial relationship must be established: broader concept than the simple contract, taking into account the duration but also the importance and the regularity of the exchanges between the parties;
      • the price increase must be assimilated to a rupture: it is mainly the size of the price increase (+1%, 10% or 25%?) that will lead a judge to determine whether the increase constitutes a «partial» termination (in the event of a substantial modification of the relationship which is nevertheless maintained) or a total termination (if the increase is such that it involves a termination of the relationship) or if it does not constitute a termination (if the increase is minimal);
      • the notice granted is insufficient by comparing the duration of the notice actually granted with that of the notice in accordance with Article L. 442-1.II, taking into account in particular the duration of the commercial relationship and the possible dependence of the victim of the termination with respect to the other party.

      Article L. 442-1.II must be respected as soon as French law applies to the relation. In international business relations, to know how to deal with Article L.442-1.II and conflicts of laws and jurisdiction of competent courts, please see our previous article published on Legalmondo blog.

      Price increase in a framework contract

      If the parties have concluded a framework contract (such as supply, manufacturing, …) for several years and the supplier has committed to fixed prices, how, in this case, can it change these prices?

      In addition to any indexation clause or renegotiation (hardship) clause which would be stipulated in the contract (and besides specific legal provisions applicable to special agreements as to their nature or economic sector), the supplier may seek to avail himself of the legal mechanism of «unforeseeability» provided for by article 1195 of the civil code.

      Three prerequisites must be cumulatively met:

      • an unforeseeable change in circumstances at the time of the conclusion of the contract (i.e.: the parties could not reasonably anticipate this upheaval);
      • a performance of the contract that has become excessively onerous (i.e.: beyond the simple difficulty, the upheaval must cause a disproportionate imbalance);
      • the absence of acceptance of these risks by the debtor of the obligation when concluding the contract.

      The implementation of this mechanism must stick to the following steps:

      • first, the party in difficulty must request the renegotiation of the contract from its co-contracting party;
      • then, in the event of failure of the negotiation or refusal to negotiate by the other party, the parties can (i) agree together on the termination of the contract, on the date and under the conditions that they determine, or (ii) ask together the competent judge to adapt it;
      • finally, in the absence of agreement between the parties on one of the two aforementioned options, within a reasonable time, the judge, seized by one of the parties, may revise the contract or terminate it, on the date and under the conditions that he will set.

      The party wishing to implement this legal mechanism must also anticipate the following points:

      • article 1195 of the Civil Code only applies to contracts concluded on or after October 1, 2016 (or renewed after this date). Judges do not have the power to adapt or rebalance contracts concluded before this date;
      • this provision is not of public order. Therefore, the parties can exclude it or modify its conditions of application and/or implementation (the most common being the framework of the powers of the judge);
      • during the renegotiation, the supplier must continue to sell at the initial price because, unlike force majeure, unforeseen circumstances do not lead to the suspension of compliance with the obligations.

      Key takeaways:

      • analyse carefully the framework of the commercial relationship before deciding to notify a price increase, in order to identify whether the prices are firm for a minimum period and the contractual levers for renegotiation;
      • correctly anticipate the length of notice that must be given to the partner before the entry into force of the new pricing conditions, depending on the length of the relationship and the degree of dependence;
      • document the causes of the price increase;
      • check if and how the legal mechanism of unforeseeability has been amended or excluded by the framework contract or the General T&Cs;
      • consider alternatives strategies, possibly based on stopping production/delivery justified by a force majeure event or on the significant imbalance of the contractual provisions.

      Roberto Luzi Crivellini

      Области практики

      • Арбитраж
      • Распространение
      • Международная торговля
      • Судебная практика
      • Недвижимость
      Связаться Roberto
      Franchising Spain - Legalmondo

      Spain | Franchising, Theory Of Risk and Guarantees By Franchisee
      • Распространение
      • Судебная практика
      • Испания
      Vietnam - Legalmondo

      Vietnam on the EU Tax Blacklist: A Guide for EU Buyers
      • Корпоративный
      • Распространение
      • Вьетнам
      Brazil - Legalmondo

      Brazil’s New Digital Child Protection Law: Practical Implications for Foreign Tech Companies
      • Конфиденциальность - Защита данных
      • Бразилия
      France - Legalmondo

      France | Pre-contractual disclosure in distribution and franchise agreements
      • Распространение
      • Франчайзинг
      • Франция
      International distribution agreements - Key Clauses and Lessons learned from the history of Nike - Legalmondo

      International distribution agreements | Key Clauses and Lessons learned from the history of Nike
      • Контракты
      • Распространение
      • Италия
      Saudi Arabia - Legalmondo

      How to Joint Venture in Saudi Arabia
      • Контракты
      • Корпоративный
      • Саудовская Аравия
      Contracts Responsibility - Legalmondo

      Corporate Sustainability in Practice – How Contracts Shape Responsibility
      • Контракты
      • Распространение
      • Finland
      Legalmondo - Oil prices

      Rising Oil Prices and International Contracts: How to Manage Hardship in Global Supply Chains
      • Контракты
      • Распространение
      • Италия
      African Continental Free Trade-Agreement - Legalmondo

      Why the African Continental Free Trade Agreement has not yet turned into Reality — and What That Means for Egypt
      • Распространение
      • Иностранные инвестиции
      • Египет
      Spain lawyer-coach - Legalmondo

      The lawyer-coach: a new way of practising
      • Альтернативное разрешение споров
      • Контракты
      • Испания
      Spain - Legalmondo

      Agency and distribution agreements. Phrases to avoid when ending a business relationship without a written contract
      • Без категории
      • Контракты
      • Испания
      Business people Legalmondo

      Spain | Appropriate Means of Dispute Resolution (ADR) as a prerequisite for litigation
      • Альтернативное разрешение споров
      • Судебная практика
      • Испания
      Spain Influencer-Legalmondo

      Spain – Can an influencer be considered a «commercial agent»?
      • Без категории
      • Распространение
      • Испания
      Spain advance payment - Legalmondo

      Spain — Is it possible to advance payment of customer indemnity in agency contracts?
      • Без категории
      • Испания
      Companies in Spain - Legalmondo

      Spain — Powers of Representation of Companies
      • Корпоративный
      • Испания
      Spain - Legalmondo

      Spain | Clientele Compensation for Agents and Distributors
      • Без категории
      • Контракты
      • Испания
      Debt - Legalmondo

      International debt recovery: risk prevention and best practices
      • Распространение
      • Судебная практика
      • Испания
      mediation - legalmondo

      The importance of Mediation in Distribution Contracts
      • Альтернативное разрешение споров
      • Распространение
      • Испания

      Scrivi a Roberto





        Read the privacy policy of Legalmondo.
        This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

        The African Continental Free Trade Area (AfCFTA)

        05.01.2023

        • Африка
        • Контракты
        • Распространение

        The commercial agent has the right to obtain certain information about the sales of the principal. The Spanish Law on Agency Contracts provides (15.2 LCA) that the agent has the right to demand to see the accounts of the principal in order to verify all matters relating to the commissions due to him. And also, to be provided with the information available to the principal and necessary to verify the amount of such commissions.

        This article is in line with the 1986 Commercial Agents Directive, according to which (12.3) the agent is entitled to demand to be provided with all information at the disposal of the principal, particularly an extract from the books of account, which is necessary to verify the amount of commission due to the agent. This may not be altered to the detriment of the commercial agent by agreement.

        The question is, does this right remain even after the termination of the agency contract? In other words: once the agency contract is terminated, can the agent request the information and documentation mentioned in these articles and is the Principal obliged to provide it?

        In our opinion, the rule does not say anything that limits this right, rather the opposite is to be expected. Therefore, to the extent that there is still any possible commission that may arise from such verification, the answer must be yes. Let us see.

        The right to demand the production of accounts exists so that the agent can verify the amount of commissions. And the agent is entitled to commissions for acts and operations concluded during the term of the contract (art. 12 LCA), but also for acts or operations concluded after the termination of the contract (art. 13 LCA), and for operations not carried out due to circumstances attributable to the principal (art. 17 LCA). In addition, the agent is entitled to have the commission accrued at the time when the act or transaction should have been executed (art. 14 LCA).

        All these transactions can take place after the conclusion of the contract. Consider the usual situation where orders are placed during the contract but are accepted or executed afterwards. To reduce the agent’s right to be informed only during the term of the contract would be to limit his entitlement to the corresponding commission unduly. And it should be borne in mind that the amount of the commissions during the last five years may also influence the calculation of the client (goodwill) indemnity (art. 28 LCA), so that the agent’s interest in knowing them is twofold: what he would receive as commission, and what could increase the basis for future indemnity.

        This has been confirmed, for example, by the Provincial Court (Audiencia Provincial) of Madrid (AAP 227/2017, of 29 June [ECLI:ES:APM:2017:2873A]) which textually states:

        […] art. 15.2 of the Agency Contract Act provides for the right of the agent to demand the exhibition of the Principal’s accounts in the particulars necessary to verify everything relating to the commissions corresponding to him, as well as to be provided with the information available to the Principal and necessary to verify the amount. This does not prevent, […], the agency contract having already been terminated, as this does not imply that commissions would cease to accrue for policies, contracted with the mediation of the agent, which remain in force.

        The question then arises as to whether this right to information is unlimited in time. And here the answer would be in the negative. The limitation of the right to receive information would be linked to the statute of limitations of the right to claim the corresponding commission. If the right to receive the commission were undoubtedly time-barred, it could be argued that it would not be possible to receive information about it. But for such an exception, the statute of limitations must be clear, therefore, taking into account possible interruptions due to claims, even extrajudicial ones. In case of doubt, it will be necessary to recognise the right to demand the information, without prejudice to later invoking and recognising the impossibility of claiming the commission if the right is time-barred. And for this we must consider the limitation period for claiming commissions (in general, three years) and that of the right to claim compensation for clientele (one year).

        In short: it does not seem that the right to receive information and to examine the principal’s documentation is limited by the term of the agency contract; although, on the other hand, it would be appropriate to analyse the possible limitation period for claiming commissions. In the absence of a clear answer to this question, the right to information should, in our opinion, prevail, without prejudice to the fact that the result may not entitle the claim because it is time-barred.

        SUMMARY: In large-scale events such as the Paris Olympics certain companies will attempt to «wildly» associate their brand with the event through a practice called «ambush marketing», defined by caselaw as «an advertising strategy implemented by a company in order to associate its commercial image with that of an event, and thus to benefit from the media impact of said event, without paying the related rights and without first obtaining the event organizer’s authorization» (Paris Court of Appeal, June 8, 2018, Case No 17/12912). A risky and punishable practice, that might sometimes yet be an option yet.

        Key takeaways

        • Ambush marketing might be a punished practice but is not prohibited as such;
        • As a counterpart of their investment, sponsors and official partners benefit from an extensive legal protection against all forms of ambush marketing in the event concerned, through various general texts (counterfeiting, parasitism, intellectual property) or more specific ones (e.g. sport law);
        • The Olympics Games are subject to specific regulations that further strengthen this protection, particularly in terms of intellectual property.
        • But these rights are not absolute, and they are still thin opportunities for astute ambush marketing.

        The protection offered to sponsors and official partners of sporting and cultural events from ambush marketing

        With a budget of over 4 billion euros, the 2024 Olympic and Paralympic Games are financed mostly by various official partners and sponsors, who in return benefit from a right to use Olympic and Paralympic properties to be able to associate their own brand image and distinctive signs with these events.

        Ambush marketing is not punishable as such under French law, but several scattered texts provide extensive protection against ambush marketing for sponsors and partners of sporting or cultural continental-wide or world-wide events. Indeed, sponsors are legitimately entitled to peacefully enjoy the rights offered to them in return for large-scale investments in events such as the FIFA or rugby World Cups, or the Olympic Games.

        In particular, official sponsors and organizers of such events may invoke:

        • the «classic» protections offered by intellectual property law (trademark law and copyright) in the context of infringement actions based on the French Intellectual Property Code,
        • tort law (parasitism and unfair competition based on article 1240 of the French Civil Code);
        • consumer law (misleading commercial practices) based on the French Consumer Code,
        • but also more specific texts such as the protection of the exploitation rights of sports federations and sports event organizers derived from the events or competitions they organize, as set out in article L.333-1 of the French Sports Code, which gives sports event organizers an exploitation monopoly.

        The following ambush marketing practices were sanctioned on the abovementioned grounds:

        • The use of a tennis competition name and of the trademark associated with it during the sporting event: The organization of online bets, by an online betting operator, on the Roland Garros tournament, using the protected sign and trademark Roland Garros to target the matches on which the bets were organized. The unlawful exploitation of the sporting event, was punished and 400 K€ were allowed as damages, based on article L. 333-1 of the French Sports Code, since only the French Tennis Federation (F.F.T.) owns the right to exploit Roland Garros. The use of the trademark was also punished as counterfeiting (with 300 K€ damages) and parasitism (with 500 K€ damages) (Paris Court of Appeal, Oct. 14, 2009, Case No 08/19179);
        • An advertising campaign taking place during a film festival and reproducing the event’s trademark: The organization, during the Cannes Film Festival, of a digital advertising campaign by a cosmetics brand through the publication on its social networks of videos showing the beauty makeovers of the brand’s muses, in some of which the official poster of the Cannes Film Festival was visible, one of which reproduced the registered trademark of the “Palme d’Or”, was punished on the grounds of copyright infringement and parasitism with a 50 K€ indemnity (Paris Judicial Court, Dec. 11, 2020, Case No19/08543);
        • An advertising campaign aimed at falsely claiming to be an official partner of an event: The use, during the Cannes Film Festival, of the slogan «official hairdresser for women» together with the expressions «Cannes» and «Cannes Festival», and other publications falsely leading the public to believe that the hairdresser was an official partner, to the detriment of the only official hairdresser of the Cannes festival, was punished on the grounds of unfair competition and parasitism with a 50 K€ indemnity (Paris Court of Appeal, June 8, 2018, Case No 17/12912).

        These financial penalties may be combined with injunctions to cease these behaviors, and/or publication in the press under penalty.

        An even greater protection for the Paris 2024 Olympic Games

        The Paris 2024 Olympic Games are also subject to specific regulations.

        Firstly, Article L.141-5 of the French Sports Code, enacted for the benefit of the «Comité national olympique et sportif français” (CNOSF) and the “Comité de l’organisation des Jeux Olympiques et Paralympiques de Paris 2024” (COJOP), protects Olympic signs such as the national Olympic emblems, but also the emblems, the flag, motto and Olympic symbol, Olympic anthem, logo, mascot, slogan and posters of the Olympic Games, the year of the Olympic Games «city + year», the terms «Jeux Olympiques», «Olympisme», «Olympiade», «JO», «olympique», «olympien» and «olympienne». Under no circumstances may these signs be reproduced or even imitated by third-party companies. The COJOP has also published a guide to the protection of the Olympic trademark, outlining the protected symbols, trademarks and signs, as well as the protection of the official partners of the Olympic Games.

        Secondly, Law no. 2018-202 of March 26, 2018 on the organization of the 2024 Olympic and Paralympic Games adds even more specific prohibitions, such as the reservation for official sponsors of advertising space located near Olympic venues, or located on the Olympic and Paralympic torch route. This protection is unique in the context of the Olympic Games, but usually unregulated in the context of simple sporting events.

        The following practices, for example, have already been sanctioned on the above-mentioned grounds:

        • Reproduction of a logo imitating the well-known «Olympic» trademark on a clothing collection: The marketing of a collection of clothing, during the 2016 Olympic Games, bearing a logo (five hearts in the colors of the 5 Olympic colors intersecting in the image of the Olympic logo) imitating the Olympic symbol in association with the words «RIO» and «RIO 2016», was punished on the grounds of parasitism (10 K€ damages) and articles L. 141-5 of the French Sports Code (35 K€) and L. 713-1 of the French Intellectual Property Code (10 K€ damages) (Paris Judicial Court, June 7, 2018, Case No16/10605);
        • The organization of a contest on social networks using protected symbols: During the 2018 Olympic Games in PyeongChang, a car rental company organized an online game inviting Internet users to nominate the athletes they wanted to win a clock radio, associated with the hashtags «#JO2018» («#OJ2018”), «#Jeuxolympiques» (“#Olympicsgame”) or «C’est parti pour les jeux Olympiques» (“let’s go for the Olympic Games”) without authorization from the CNOSF, owner of these distinctive signs under the 2018 law and article L.141-5 of the French Sport Code and punished on these grounds with 20 K€ damages and of 10 K€ damages for parasitism (Paris Judicial Court, May 29, 2020, n°18/14115).

        These regulations offer official partners greater protection for their investments against ambush marketing practices from non-official sponsors.

        Some marketing operations might be exempted

        An analysis of case law and promotional practices nonetheless reveals the contours of certain advertising practices that could be authorized (i.e. not sanctioned by the above-mentioned texts), provided they are skillfully prepared and presented. Here are a few exemples :

        • Communication of information for advertising purposes: The use of the results of a rugby match and the announcement of a forthcoming match in a newspaper to promote a motor vehicle and its distinctive features was deemed lawful: «France 13 Angleterre 24 — the Fiat 500 congratulates England on its victory and looks forward to seeing the French team on March 9 for France-Italy» (France 13 Angleterre 24 — la Fiat 500 félicite l’Angleterre pour sa victoire et donne rendez-vous à l’équipe de France le 9 mars pour France-Italie) the judges having considered that this publication «merely reproduces a current sporting result, acquired and made public on the front page of the sports newspaper, and refers to a future match also known as already announced by the newspaper in a news article» (Court of cassation, May 20, 2014, Case No 13-12.102).
        • Sponsorship of athletes, including those taking part in Olympic competitions: Subject to compliance with the applicable regulatory framework, particularly as regards models, any company may enter into partnerships with athletes taking part in the Olympic Games, for example by donating clothing bearing the desired logo or brand, which they could wear during their participation in the various events. Athletes may also, under certain conditions, broadcast acknowledgements from their partner (even if unofficial). Rule 40 of the Olympic Charter governs the use of athletes’, coaches’ and officials’ images for advertising purposes during the Olympic Games.

        The combined legal and marketing approach to the conception and preparation of the message of such a communication operation is essential to avoid legal proceedings, particularly on the grounds of parasitism; one might therefore legitimately contemplate advertising campaigns, particularly clever, or even malicious ones.

        In this first episode of Legalmondo’s Distribution Talks series, I spoke with Ignacio Alonso, a Madrid-based lawyer with extensive experience in international commercial distribution.

        Main discussion points:

        • in Spain, there is no specific law for distribution agreements, which are governed by the general rules of the Commercial Code;
        • therefore, it is essential to draft a clear and comprehensive contract, which will be the primary source of the parties’ rights and obligations;
        • it is also good to be aware of Spanish case law on commercial distribution, which in some cases applies the law on commercial agency by analogy.
        • the most common issues involving foreign producers distributing in Spain arise at the time of termination of the relationship, mainly because case law grants the terminated distributor an indemnity of clientele or goodwill if similar prerequisites to those in the agency regulations apply.
        • another frequent dispute concerns the adequacy of the notice period for terminating the contract, especially if there is no agreement between the parties: the advice is to follow what the agency regulations stipulate and thus establish a minimum notice period of one month for each year of the contract’s duration, up to 6 months for agreements lasting more than five years;
        • regarding dispute resolution tools, mediation is an option that should be carefully considered because it is quick, inexpensive, and allows a shared solution to be sought flexibly without disrupting the business relationship.
        • if mediation fails, the parties can provide for recourse to arbitration or state court. The choice depends on the case’s specific circumstances, and one factor in favor of jurisdiction is the possibility of appeal, which is excluded in the case of arbitration.

        Go deeper

        Summary

        On 1 June 2022, Regulation EU n. 720/2022, i.e.: the new Vertical Block Exemption Regulation (hereinafter: «VBER»), replaced the previous version (Regulation EU n. 330/2010), expired on 31 May 2022.

        The new VBER and the new vertical guidelines (hereinafter: “Guidelines”) have received the main evidence gathered during the lifetime of the previous VBER and contain some relevant provisions affecting the discipline of all B2B agreements among businesses operating at different levels of the supply chain.

        In this article, we will focus on the impact of the new VBER on sales through digital platforms, listing the main novelties impacting distribution chains, including a platform for marketing products/services.

        The general discipline of vertical agreements

        Article 101(1) of the Treaty on the Functioning of the European Union (“TFEU”) prohibits all agreements that prevent, restrict, or distort competition within the EU market, listing the main types, e.g.: price fixing; market partitioning; limitations on production/development/investment; unfair terms, etc.

        However, Article 101(3) TFEU exempts from such restrictions the agreements that contribute to improving the EU market, to be identified in a special category Regulation.

        The VBER establishes the category of vertical agreements (i.e., agreements between businesses operating at different levels of the supply chain), determining which of these agreements are exempted from Article 101(1) TFEU prohibition.

        In short, vertical agreements are presumed to be exempted (and therefore valid) if they do not contain so-called «hardcore restrictions» (i.e., severe restrictions of competition, such as an absolute ban on sales in a territory or the manufacturer’s determination of the distributor’s resale price) and if neither party’s market share exceeds 30%.

        The exempted agreements benefit from what has been termed the “safe harbour” of the VBER. In contrast, the others will be subject to the general prohibition of Article 101(1) TFEU unless they can benefit from an individual exemption under Article 101(3) TFUE.

        The innovations introduced by the new VBER to online platforms

        The first relevant aspect concerns the classification of the platforms, as the European Commission excluded that the online platform generally meets the conditions to be categorized as agency agreements.

        While there have never been doubts concerning platforms that operate by purchasing and reselling products (classic example: Amazon Retail), some have arisen concerning those platforms that merely promote the products of third parties without carrying out the activity of resale (classic example: Amazon Marketplace).

        With this statement, the European Commission wanted to clear the field of doubt, making explicit that intermediation service providers (such as online platforms) qualify as suppliers (as opposed to commercial agents) under the VBER. This reflects the approach of Regulation (EU) 2019/1150 («P2B Regulation»), which has, for the first time, dictated a specific discipline for digital platforms. It provided for a set of rules to create a “fair, transparent, and predictable environment” for smaller businesses and customers” and for the rationale of the Digital Markets Act, banning certain practices used by large platforms acting as “gatekeepers”.

        Therefore, all contracts concluded between manufacturers and platforms (defined as ‘providers of online intermediation services’) are subject to all the restrictions imposed by the VBER. These include the price, the territories to which or the customers to whom the intermediated goods or services may be sold, or the restrictions relating to online advertising and selling.

        Thus, to give an example, the operator of a platform may not impose a fixed or minimum sale price for a transaction promoted through the platform.

        The second most impactful aspect concerns hybrid platforms, i.e., competing in the relevant market to sell intermediated goods or services. Amazon is the most well-known example, as it is a provider of intermediation services (“Amazon Marketplace”), and – at the same time – it distributes the products of those parties (“Amazon Retail”). We have previously explored the distinction between those 2 business models (and the consequences in terms of intellectual property infringement) here.

        The new VBER explicitly does not apply to hybrid platforms. Therefore, the agreements concluded among such platforms and manufacturers are subject to the limitations of the TFEU, as such providers may have the incentive to favour their sales and the ability to influence the outcome of competition between undertakings that use their online intermediation services.

        Those agreements must be assessed individually under Article 101 of the TFEU, as they do not necessarily restrict competition within the meaning of TFEU, or they may fulfil the conditions of an individual exemption under Article 101(3) TFUE.

        The third very relevant aspect concerns the parity obligations (also referred to as Most Favoured Nation Clauses, or MFNs), i.e., the contract provisions in which a seller (directly or indirectly) agrees to give the buyer the best terms it makes available to any other buyer.

        Indeed, platforms’ contractual terms often contain parity obligation clauses to prevent users from offering their products/services at lower prices or on better conditions on their websites or other platforms.

        The new VBER deals explicitly with parity clauses, making a distinction between clauses whose purpose is to prohibit users of a platform from selling goods or services on more favourable terms through competing platforms (so-called “wide parity clauses”), and clauses that prohibit sales on more favourable terms only in respect of channels operated directly by the users (so-called “narrow parity clauses”).

        Wide parity clauses do not benefit from the VBER exemption; therefore, such obligations must be assessed individually under Article 101(3) TFEU.

        On the other hand, narrow parity clauses continue to benefit from the exemption already granted by the old VBER if they do not exceed the threshold of 30% of the relevant market share set out in Article 3 of the new VBER. However, the new Guidelines warn against using overly narrow parity obligations by online platforms covering a significant share of users, stating that if there is no evidence of pro-competitive effects, the benefit of the block exemption is likely to be withdrawn.

        Impact and takeaways

        The new VBER entered into force on 1 June 2022 and is already applicable to agreements signed after that date. Agreements already in force on 31 May 2022 that satisfy the conditions for exemption under the current VBER but do not satisfy the requirements under the new VBER shall benefit from a one-year transitional period.

        The new regime will be the playing field for all platform-driven sales over the next 12 years (the regulation expires on 31 May 2034). Currently, the rather restrictive novelties on hybrid platforms and parity obligations will likely necessitate substantial revisions to existing trade agreements.

        Here, then, are some tips for managing contracts and relationships with online platforms:

        • the new VBER is the right opportunity to review the existing distribution networks. The revision will have to consider not only the new regulatory limits (e.g., the ban on wide parity clauses) but also the new discipline reserved for hybrid platforms and dual distribution to coordinate the different distribution channels as efficiently as possible, by the stakes set by the new VBER and the Guidelines;
        • platforms are likely to play an even greater role during the next decade; it is, therefore, essential to consider these sales channels from the outset, coordinating them with the other existing ones (retail, direct sales, distributors, etc.) to avoid jeopardizing the marketing of products or services;
        • the European legislator’s attention toward platforms is growing. Looking up from the VBER, one should not forget that they are subject to a multitude of other European regulations, which are gradually regulating the sector and which must be considered when concluding contracts with platforms. The reference is not only to the recent Digital Market Act and P2B Regulation but also to the protection of IP rights on platforms, which — as we have already seen — is still an open issue.

        Summary

        To avoid disputes with important suppliers, it is advisable to plan purchases over the medium and long term and not operate solely on the basis of orders and order confirmations. Planning makes it possible to agree on the duration of the ‘supply agreement, minimum volumes of products to be delivered and delivery schedules, prices, and the conditions under which prices can be varied over time.
        The use of a framework purchase agreement can help avoid future uncertainties and allows various options to be used to manage commodity price fluctuations depending on the type of products , such as automatic price indexing or agreement to renegotiate in the event of commodity fluctuations beyond a certain set tolerance period.

        I read in a press release: “These days, the glass industry is sending wine companies new unilateral contract amendments with price changes of 20%…”

        What can one do to avoid the imposition of price increases by suppliers? 

        • Know your rights and act in an informed manner
        • Plan and organise your supply chain

        Does my supplier have the right to increase prices?

        If contracts have already been concluded, e.g., orders have already been confirmed by the supplier, the answer is often no.

        It is not legitimate to request a price change. It is much less legitimate to communicate it unilaterally, with the threat of cancelling the order or not delivering the goods if the request is not granted.

        What if he tells me it is force majeure?

        That’s wrong: increased costs are not a force majeure but rather an unforeseen excessive onerousness, which hardly happens.

        What if the supplier canceled the order, unilaterally increased the price, or did not deliver the goods?

        He would be in breach of contract and liable to pay damages for violating his contractual obligations.

        How can one avoid a tug-of-war with suppliers?

        The tools are there. You have to know them and use them.

        It is necessary to plan purchases in the medium term, agreeing with suppliers on a schedule in which are set out:

        • the quantities of products to be ordered
        • the delivery terms
        • the durationof the agreement
        • the pricesof the products or raw materials
        • the conditions under which prices can be varied

        There is a very effective instrument to do so: a framework purchase agreement.

        Using a framework purchase agreement, the parties negotiate the above elements, which will be valid for the agreed period.

        Once the agreement is concluded, product orders will follow, governed by the framework agreement, without the need to renegotiate the content of individual deliveries each time.

        For an in-depth discussion of this contract, see this article.

        • “Yes, but my suppliers will never sign it!”

        Why not? Ask them to explain the reason.

        This type of agreement is in the interest of both parties. It allows planning future orders and grants certainty as to whether, when, and how much the parties can change the price.

        In contrast, acting without written agreements forces the parties to operate in an environment of uncertainty. Suppliers can request price increases from one day to the next and refuse supply if the changes are not accepted.

        How are price changes for future supplies regulated?

        Depending on the type of products or services and the raw materials or energy relevant in determining the final price, there are several possibilities.

        • The first option is to index the price automatically. E.g., if the cost of a barrel of Brent oil increases/decreases by 10%, the party concerned is entitled to request a corresponding adjustment of the product’s price in all orders placed as of the following week.
        • An alternative is to provide for a price renegotiation in the event of a fluctuation of the reference commodity. E.g., suppose the LME Aluminium index of the London Stock Exchange increases above a certain threshold. In that case, the interested party may request a price renegotiationfor orders in the period following the increase.

        What if the parties do not agree on new prices?

        It is possible to terminate the contract or refer the price determination to a third party, who would act as arbitrator and set the new prices for future orders.

        Summary

        The framework supply contract is an agreement that regulates a series of future sales and purchases between two parties (customer and supplier) that take place over a certain period of time. This agreement determines the main elements of future contracts such as price, product volumes, delivery terms, technical or quality specifications, and the duration of the agreement.

        The framework contract is useful for ensuring continuity of supply from one or more suppliers of a certain product that is essential for planning industrial or commercial activity. While the general terms and conditions of purchase or sale are the rules that apply to all suppliers or customers of the company. The framework contract is advisable to be concluded with essential suppliers for the continuity of business activity, in general or in relation to a particular project.

        What I am talking about in this article:

        • What is the supply framework agreement?
        • What is the function of the supply framework agreement?
        • The difference with the general conditions of sale or purchase
        • When to enter a purchase framework agreement?
        • When is it beneficial to conclude a sales framework agreement?
        • The content of the supply framework agreement
        • Price revision clause and hardship
        • Delivery terms in the supply framework agreement
        • The Force Majeure clause in international sales contracts
        • International sales: applicable law and dispute resolution arrangements

        What is a framework supply agreement?

        It is an agreement that regulates a series of future sales and purchases between two parties (customer and supplier), which will take place over a certain period.

        It is therefore referred to as a «framework agreement» because it is an agreement that establishes the rules of a future series of sales and purchase contracts, determining their primary elements (such as the price, the volumes of products to be sold and purchased, the delivery terms of the products, and the duration of the contract).

        After concluding the framework agreement, the parties will exchange orders and order confirmations, entering a series of autonomous sales contracts without re-discussing the covenants already defined in the framework agreement.

        Depending on one’s point of view, this agreement is also called a sales framework agreement (if the seller/supplier uses it) or a purchasing framework agreement (if the customer proposes it).

        What is the function of the framework supply agreement?

        It is helpful to arrange a framework agreement in all cases where the parties intend to proceed with a series of purchases/sales of products over time and are interested in giving stability to the commercial agreement by determining its main elements.

        In particular, the purchase framework agreement may be helpful to a company that wishes to ensure continuity of supply from one or more suppliers of a specific product that is essential for planning its industrial or commercial activity (raw material, semi-finished product, component).

        By concluding the framework agreement, the company can obtain, for example, a commitment from the supplier to supply a particular minimum volume of products, at a specific price, with agreed terms and technical specifications, for a certain period.

        This agreement is also beneficial, at the same time, to the seller/supplier, which can plan sales for that period and organize, in turn, the supply chain that enables it to procure the raw materials and components necessary to produce the products.

        What is the difference between a purchase or sales framework agreement and the general terms and conditions?

        Whereas the framework agreement is an agreement that is used with one or more suppliers for a specific product and a certain time frame, determining the essential elements of future contracts, the general purchase (or sales) conditions are the rules that apply to all the company’s suppliers (or customers).

        The first agreement, therefore, is negotiated and defined on a case-by-case basis. At the same time, the general conditions are prepared unilaterally by the company, and the customers or suppliers (depending on whether they are sales or purchase conditions) adhere to and accept that the general conditions apply to the individual order and/or future contracts.

        The two agreements might also co-exist: in that case; it is a good idea to specify which contract should prevail in the event of a discrepancy between the different provisions (usually, this hierarchy is envisaged, ranging from the special to the general: order — order confirmation; framework agreement; general terms and conditions of purchase).

        When is it important to conclude a purchase framework agreement?

        It is beneficial to conclude this agreement when dealing with a mono-supplier or a supplier that would be very difficult to replace if it stopped selling products to the purchasing company.

        The risks one aims to avoid or diminish are so-called stock-outs, i.e., supply interruptions due to the supplier’s lack of availability of products or because the products are available, but the parties cannot agree on the delivery time or sales price.

        Another result that can be achieved is to bind a strategic supplier for a certain period by agreeing that it will reserve an agreed share of production for the buyer on predetermined terms and conditions and avoid competition with offers from third parties interested in the products for the duration of the agreement.

        When is it helpful to conclude a sales framework agreement?

        This agreement allows the seller/supplier to plan sales to a particular customer and thus to plan and organize its production and logistical capacity for the agreed period, avoiding extra costs or delays.

        Planning sales also makes it possible to correctly manage financial obligations and cash flows with a medium-term vision, harmonizing commitments and investments with the sales to one’s customers.

        What is the content of the supply framework agreement?

        There is no standard model of this agreement, which originated from business practice to meet the requirements indicated above.

        Generally, the agreement provides for a fixed period (e.g., 12 months) in which the parties undertake to conclude a series of purchases and sales of products, determining the price and terms of supply and the main covenants of future sales contracts.

        The most important clauses are:

        • the identification of products and technical specifications (often identified in an annex)
        • the minimum/maximum volume of supplies
        • the possible obligation to purchase/sell a minimum/maximum volume of products
        • the schedule of supplies
        • the delivery times
        • the determination of the price and the conditions for its possible modification (see also the next paragraph)
        • impediments to performance (Force Majeure)
        • cases of Hardship
        • penalties for delay or non-performance or for failure to achieve the agreed volumes
        • the hierarchy between the framework agreement and the orders and any other contracts between the parties
        • applicable law and dispute resolution (especially in international agreements)

        How to handle price revision in a supply contract?

        A crucial clause, especially in times of strong fluctuations in the prices of raw materials, transport, and energy, is the price revision clause.

        In the absence of an agreement on this issue, the parties bear the risk of a price increase by undertaking to respect the conditions initially agreed upon; except in exceptional cases (where the fluctuation is strong, affects a short period, and is caused by unforeseeable events), it isn’t straightforward to invoke the supervening excessive onerousness, which allows renegotiating the price, or the contract to be terminated.

        To avoid the uncertainty generated by price fluctuations, it is advisable to agree in the contract on the mechanisms for revising the price (e.g., automatic indexing following the quotation of raw materials). The so-called Hardship or Excessive Onerousness clause establishes what price fluctuation limits are accepted by the parties and what happens if the variations go beyond these limits, providing for the obligation to renegotiate the price or the termination of the contract if no agreement is reached within a certain period.

        How to manage delivery terms in a supply agreement?

        Another fundamental pact in a medium to long-term supply relationship concerns delivery terms. In this case, it is necessary to reconcile the purchaser’s interest in respecting the agreed dates with the supplier’s interest in avoiding claims for damages in the event of a delay, especially in the case of sales requiring intercontinental transport.

        The first thing to be clarified in this regard concerns the nature of delivery deadlines: are they essential or indicative? In the first case, the party affected has the right to terminate (i.e., wind up) the agreement in the event of non-compliance with the term; in the second case, due diligence, information, and timely notification of delays may be required, whereas termination is not a remedy that may be automatically invoked in the event of a delay.

        A useful instrument in this regard is the penalty clause: with this covenant, it is established that for each day/week/month of delay, a sum of money is due by way of damages in favor of the party harmed by the delay.

        If quantified correctly and not excessively, the penalty is helpful for both parties because it makes it possible to predict the damages that may be claimed for the delay, quantifying them in a fair and determined sum. Consequently, the seller is not exposed to claims for damages related to factors beyond his control. At the same time, the buyer can easily calculate the compensation for the delay without the need for further proof.

        The same mechanism, among other things, may be adopted to govern the buyer’s delay in accepting delivery of the goods.

        Finally, it is a good idea to specify the limit of the penalty (e.g.,10 percent of the price of the goods) and a maximum period of grace for the delay, beyond which the party concerned is entitled to terminate the contract by retaining the penalty.

        The Force Majeure clause in international sales contracts

        A situation that is often confused with excessive onerousness, but is, in fact, quite different, is that of Force Majeure, i.e., the supervening impossibility of performance of the contractual obligation due to any event beyond the reasonable control of the party affected, which could not have been reasonably foreseen and the effects of which cannot be overcome by reasonable efforts.

        The function of this clause is to set forth clearly when the parties consider that Force Majeure may be invoked, what specific events are included (e.g., a lock-down of the production plant by order of the authority), and what are the consequences for the parties’ obligations (e.g., suspension of the obligation for a certain period, as long as the cause of impossibility of performance lasts, after which the party affected by performance may declare its intention to dissolve the contract).

        If the wording of this clause is general (as is often the case), the risk is that it will be of little use; it is also advisable to check that the regulation of force majeure complies with the law applicable to the contract (here an in-depth analysis indicating the regime provided for by 42 national laws).

        Applicable law and dispute resolution clauses

        Suppose the customer or supplier is based abroad. In that case, several significant differences must be borne in mind: the first is the agreement’s language, which must be intelligible to the foreign party, therefore usually in English or another language familiar to the parties, possibly also in two languages with parallel text.

        The second issue concerns the applicable law, which should be expressly indicated in the agreement. This subject matter is vast, and here we can say that the decision on the applicable law must be made on a case-by-case basis, intentionally: in fact, it is not always convenient to recall the application of the law of one’s own country.

        In most international sales contracts, the 1980 Vienna Convention on the International Sale of Goods («CISG») applies, a uniform law that is balanced, clear, and easy to understand. Therefore, it is not advisable to exclude it.

        Finally, in a supply framework agreement with an international supplier, it is important to identify the method of dispute resolution: no solution fits all. Choosing a country’s jurisdiction is not always the right decision (indeed, it can often prove counterproductive).

        Eventually, after more than 30 years of negotiations, the world is now looking at the first pan-African trade agreement, which entered into force in 2019: the African Continental Free Trade Area, or AfCFTA.

        Africa, with its 55 countries and around 1.3 billion inhabitants, is the second largest continent in the world after Asia. The continent’s potential is huge: more than 50% of Africa’s population is under 20 years old and the population is growing at the fastest rate in the world. By 2050, one in four new-born babies is expected to be African. In addition, the continent is rich in fertile soil and raw materials.

        For Western investors, Africa has become considerably more important in recent years. As a result, a considerable amount of international trade has emerged, not least promoted by the “Compact with Africa” initiative adopted by the G20 countries in 2017, also known as the “Marshall Plan with Africa”. Its focus is on expanding Africa’s economic cooperation with the G20 countries by strengthening private investment.

        At the same time, however, intra-African trade has stagnated so far: partly still existing high intra-African tariffs, non-tariff barriers (NTBs), weak infrastructure, corruption, cumbersome bureaucracy, as well as non-transparent and inconsistent regulations, ensured that interregional exports could hardly develop and most recently accounted for only 17 % of the pan-African trade and only 0.36 % of world trade. It’s already been a long time since the African Union (AU) had put the creation of a common trade area on its agenda.

        What is behind AfCFTA?

        The establishment of a pan-African trade area was preceded by decades of negotiations, which finally resulted in the entry into force of the AfCFTA on 30 May 2019.

        AfCFTA is a free trade area established by its members, which — with the exception of Eritrea — covers the entire African continent and is thus the largest free trade area in the world by number of member states after the World Trade Organisation (WTO).

        How the common market was to be structured in detail was the subject of several individual negotiations, which were discussed in Phases I and II.

        Phase I comprises the negotiations on three protocols and is almost completed.

        The Protocol on Trade in Goods

        This protocol provides for the elimination of 90 % of all intra-African tariffs in all product categories within five years of entry into force. Of these, up to 7 % of products can be classified as sensitive goods, which are subject to a tariff elimination period of ten years. For the least developed countries (LDCs), the preparation period is extended from five to ten years and for sensitive products from ten to thirteen years, provided they demonstrate their need. The remaining 3 % of tariffs are fully exempted from tariff dismantling.

        A prerequisite for tariff dismantling is the clear delimitation of rules of origin. Otherwise, imports from third countries could benefit from the negotiated tariff advantages. Agreement has already been reached on most of the rules of origin.

        The Protocol on Trade in Services

        The AU General Assembly has so far agreed on five priority areas (transport, communications, tourism, financial and business services) and guidelines for the commitments applicable to them.  47 AU member states have so far submitted their offers for specific commitments and the review of 28 has been completed. In addition, negotiations, for example, on the recognition of professional qualifications, are still ongoing.

        The Protocol on Dispute Settlement

        With the Protocol on Rules and Procedures Governing the Dispute Settlement, the AfCFTA creates a dispute settlement system modelled on the WTO Dispute Settlement Understanding. Under this, the Dispute Settlement Body (DSB) administers the AfCFTA Dispute Settlement Protocol and establishes an Adjudicating Panel (Panel) and an Appellate Body (AB). The DSB is composed of a representative of each member state and intervenes as soon as there are differences of opinion between the contracting states on the interpretation and/or application of the agreement with regard to their rights and obligations.

        For the remaining Phase II, negotiations are planned on investment and competition policy, intellectual property issues, online trade and women and youth in trade, the results of which will be reflected in further protocols.

        The implementation of the AfCFTA

        In principle, the implementation of trade under a trade agreement can only begin once the legal framework has been finally clarified. However, AU Heads of State and Government agreed in December 2020 that trade can begin for goods for which negotiations have been finalised. Under this «transitional arrangement«, after a pandemic-related postponement, the first AfCFTA trade settlement from Ghana to South Africa took place on 4 January 2021.

        Building blocks of the AfCFTA

        All 55 members of the AU were involved in the AfCFTA negotiations. Of these, 47 belong to at least one — and some to more than one — recognised Regional Economic Communities (RECs), which, according to the preamble of the AfCFTA agreement, are to continue as building blocks of the trade agreement. It was therefore they who acted as the voice of their respective members in the AfCFTA negotiations. The AfCFTA provides for RECs to retain their legal instruments, institutions and dispute settlement mechanisms.

        Within the AU, there are eight recognised RECs, overlapping in some countries, which are either preferential trade agreements (Free Trade Agreements — FTAs) or customs unions.

        Under the AfCFTA, the RECs have various responsibilities. These are in particular:

        • coordinating negotiating positions and assisting member states in the implementation of the agreement.
        • solution-oriented mediation in the event of disagreements between member states
        • supporting member states in the harmonisation of tariffs and other border protection regulations
        • promoting the use of the AfCFTA notification procedure to reduce NTBs

        Outlook of the AfCFTA

        The AfCFTA has the potential to facilitate Africa’s integration into the global economy and creates the real possibility of a realignment of international integration and cooperation patterns.

        A trade agreement alone is no guarantee of economic success. For the agreement to achieve the predicted breakthrough, member states must have the political will to implement the new rules consistently and create the necessary capacity to do so. In particular, the short-term removal of trade barriers and the creation of a sustainable physical and digital infrastructure are likely to be crucial.

        If you are interested in the AfCFTA, you can read an extended version of this article here.

        The Legalmondo Africa Desk

        We help companies invest and do business in Africa with our experts in Algeria, Tunisia, Morocco, Senegal, Sudan, Egypt, Ghana, Lybia, Côte d’Ivoire, Cameroon, and Malawi.

        We can also assist foreign entities in African countries where we are not directly present with an office through our network of local partners.

        How it works

        • We set up a meeting (in person or online) with one of our experts to understand the client’s needs.
        • Once we start working together, we follow the client with a dedicated counsel for all its legal needs (single cases, or ongoing legal assistance)

        Get in touch to know more.

        Summary

        Political, environmental or health crises (like the Covid-19 outbreak and the attack of Ukraine by the Russian army) can cause an increase in the price of raw materials and components and generalized inflation. Both suppliers and distributors find themselves faced with problems related to the often sudden and very substantial increase in the price of their own supplies. French law lays down specific rules in that regard.

        Two main situations can be distinguished: where the parties have just established a simple flow of orders and where the parties have concluded a framework agreement fixing firm prices for a fixed term.

        Price increase in a business relationship

        The situation is as follows: the parties have not concluded a framework agreement, each sales contract concluded (each order) is governed by the General T&Cs of the supplier; the latter has not undertaken to maintain the prices for a minimum period and applies the prices of the current tariff.

        In principle, the supplier can modify its prices at any time by sending a new tariff. However, it must give written and reasonable notice in accordance with the provisions of Article L. 442-1.II of the Commercial Code, before the price increase comes into effect. Failure to respect sufficient notice, it could be accused of a sudden «partial» termination of commercial relations (and subject to damages).

        A sudden termination following a price increase would be characterized when the following conditions are met:

        • the commercial relationship must be established: broader concept than the simple contract, taking into account the duration but also the importance and the regularity of the exchanges between the parties;
        • the price increase must be assimilated to a rupture: it is mainly the size of the price increase (+1%, 10% or 25%?) that will lead a judge to determine whether the increase constitutes a «partial» termination (in the event of a substantial modification of the relationship which is nevertheless maintained) or a total termination (if the increase is such that it involves a termination of the relationship) or if it does not constitute a termination (if the increase is minimal);
        • the notice granted is insufficient by comparing the duration of the notice actually granted with that of the notice in accordance with Article L. 442-1.II, taking into account in particular the duration of the commercial relationship and the possible dependence of the victim of the termination with respect to the other party.

        Article L. 442-1.II must be respected as soon as French law applies to the relation. In international business relations, to know how to deal with Article L.442-1.II and conflicts of laws and jurisdiction of competent courts, please see our previous article published on Legalmondo blog.

        Price increase in a framework contract

        If the parties have concluded a framework contract (such as supply, manufacturing, …) for several years and the supplier has committed to fixed prices, how, in this case, can it change these prices?

        In addition to any indexation clause or renegotiation (hardship) clause which would be stipulated in the contract (and besides specific legal provisions applicable to special agreements as to their nature or economic sector), the supplier may seek to avail himself of the legal mechanism of «unforeseeability» provided for by article 1195 of the civil code.

        Three prerequisites must be cumulatively met:

        • an unforeseeable change in circumstances at the time of the conclusion of the contract (i.e.: the parties could not reasonably anticipate this upheaval);
        • a performance of the contract that has become excessively onerous (i.e.: beyond the simple difficulty, the upheaval must cause a disproportionate imbalance);
        • the absence of acceptance of these risks by the debtor of the obligation when concluding the contract.

        The implementation of this mechanism must stick to the following steps:

        • first, the party in difficulty must request the renegotiation of the contract from its co-contracting party;
        • then, in the event of failure of the negotiation or refusal to negotiate by the other party, the parties can (i) agree together on the termination of the contract, on the date and under the conditions that they determine, or (ii) ask together the competent judge to adapt it;
        • finally, in the absence of agreement between the parties on one of the two aforementioned options, within a reasonable time, the judge, seized by one of the parties, may revise the contract or terminate it, on the date and under the conditions that he will set.

        The party wishing to implement this legal mechanism must also anticipate the following points:

        • article 1195 of the Civil Code only applies to contracts concluded on or after October 1, 2016 (or renewed after this date). Judges do not have the power to adapt or rebalance contracts concluded before this date;
        • this provision is not of public order. Therefore, the parties can exclude it or modify its conditions of application and/or implementation (the most common being the framework of the powers of the judge);
        • during the renegotiation, the supplier must continue to sell at the initial price because, unlike force majeure, unforeseen circumstances do not lead to the suspension of compliance with the obligations.

        Key takeaways:

        • analyse carefully the framework of the commercial relationship before deciding to notify a price increase, in order to identify whether the prices are firm for a minimum period and the contractual levers for renegotiation;
        • correctly anticipate the length of notice that must be given to the partner before the entry into force of the new pricing conditions, depending on the length of the relationship and the degree of dependence;
        • document the causes of the price increase;
        • check if and how the legal mechanism of unforeseeability has been amended or excluded by the framework contract or the General T&Cs;
        • consider alternatives strategies, possibly based on stopping production/delivery justified by a force majeure event or on the significant imbalance of the contractual provisions.

        Christian Ule

        Области практики

        • Арбитраж
        • Контракты
        • Корпоративный
        • Распространение
        • Международная торговля
        Связаться Christian
        Franchising Spain - Legalmondo

        Spain | Franchising, Theory Of Risk and Guarantees By Franchisee
        • Распространение
        • Судебная практика
        • Испания
        Vietnam - Legalmondo

        Vietnam on the EU Tax Blacklist: A Guide for EU Buyers
        • Корпоративный
        • Распространение
        • Вьетнам
        Brazil - Legalmondo

        Brazil’s New Digital Child Protection Law: Practical Implications for Foreign Tech Companies
        • Конфиденциальность - Защита данных
        • Бразилия
        France - Legalmondo

        France | Pre-contractual disclosure in distribution and franchise agreements
        • Распространение
        • Франчайзинг
        • Франция
        International distribution agreements - Key Clauses and Lessons learned from the history of Nike - Legalmondo

        International distribution agreements | Key Clauses and Lessons learned from the history of Nike
        • Контракты
        • Распространение
        • Италия
        Saudi Arabia - Legalmondo

        How to Joint Venture in Saudi Arabia
        • Контракты
        • Корпоративный
        • Саудовская Аравия
        Contracts Responsibility - Legalmondo

        Corporate Sustainability in Practice – How Contracts Shape Responsibility
        • Контракты
        • Распространение
        • Finland
        Legalmondo - Oil prices

        Rising Oil Prices and International Contracts: How to Manage Hardship in Global Supply Chains
        • Контракты
        • Распространение
        • Италия
        African Continental Free Trade-Agreement - Legalmondo

        Why the African Continental Free Trade Agreement has not yet turned into Reality — and What That Means for Egypt
        • Распространение
        • Иностранные инвестиции
        • Египет
        Spain lawyer-coach - Legalmondo

        The lawyer-coach: a new way of practising
        • Альтернативное разрешение споров
        • Контракты
        • Испания
        Spain - Legalmondo

        Agency and distribution agreements. Phrases to avoid when ending a business relationship without a written contract
        • Без категории
        • Контракты
        • Испания
        Business people Legalmondo

        Spain | Appropriate Means of Dispute Resolution (ADR) as a prerequisite for litigation
        • Альтернативное разрешение споров
        • Судебная практика
        • Испания
        Spain Influencer-Legalmondo

        Spain – Can an influencer be considered a «commercial agent»?
        • Без категории
        • Распространение
        • Испания
        Spain advance payment - Legalmondo

        Spain — Is it possible to advance payment of customer indemnity in agency contracts?
        • Без категории
        • Испания
        Companies in Spain - Legalmondo

        Spain — Powers of Representation of Companies
        • Корпоративный
        • Испания
        Spain - Legalmondo

        Spain | Clientele Compensation for Agents and Distributors
        • Без категории
        • Контракты
        • Испания
        Debt - Legalmondo

        International debt recovery: risk prevention and best practices
        • Распространение
        • Судебная практика
        • Испания
        mediation - legalmondo

        The importance of Mediation in Distribution Contracts
        • Альтернативное разрешение споров
        • Распространение
        • Испания

        Scrivi a Christian





          Read the privacy policy of Legalmondo.
          This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

          France: Review and renegotiation of price in case of costs increase

          05.05.2022

          • Франция
          • Контракты
          • Распространение

          The commercial agent has the right to obtain certain information about the sales of the principal. The Spanish Law on Agency Contracts provides (15.2 LCA) that the agent has the right to demand to see the accounts of the principal in order to verify all matters relating to the commissions due to him. And also, to be provided with the information available to the principal and necessary to verify the amount of such commissions.

          This article is in line with the 1986 Commercial Agents Directive, according to which (12.3) the agent is entitled to demand to be provided with all information at the disposal of the principal, particularly an extract from the books of account, which is necessary to verify the amount of commission due to the agent. This may not be altered to the detriment of the commercial agent by agreement.

          The question is, does this right remain even after the termination of the agency contract? In other words: once the agency contract is terminated, can the agent request the information and documentation mentioned in these articles and is the Principal obliged to provide it?

          In our opinion, the rule does not say anything that limits this right, rather the opposite is to be expected. Therefore, to the extent that there is still any possible commission that may arise from such verification, the answer must be yes. Let us see.

          The right to demand the production of accounts exists so that the agent can verify the amount of commissions. And the agent is entitled to commissions for acts and operations concluded during the term of the contract (art. 12 LCA), but also for acts or operations concluded after the termination of the contract (art. 13 LCA), and for operations not carried out due to circumstances attributable to the principal (art. 17 LCA). In addition, the agent is entitled to have the commission accrued at the time when the act or transaction should have been executed (art. 14 LCA).

          All these transactions can take place after the conclusion of the contract. Consider the usual situation where orders are placed during the contract but are accepted or executed afterwards. To reduce the agent’s right to be informed only during the term of the contract would be to limit his entitlement to the corresponding commission unduly. And it should be borne in mind that the amount of the commissions during the last five years may also influence the calculation of the client (goodwill) indemnity (art. 28 LCA), so that the agent’s interest in knowing them is twofold: what he would receive as commission, and what could increase the basis for future indemnity.

          This has been confirmed, for example, by the Provincial Court (Audiencia Provincial) of Madrid (AAP 227/2017, of 29 June [ECLI:ES:APM:2017:2873A]) which textually states:

          […] art. 15.2 of the Agency Contract Act provides for the right of the agent to demand the exhibition of the Principal’s accounts in the particulars necessary to verify everything relating to the commissions corresponding to him, as well as to be provided with the information available to the Principal and necessary to verify the amount. This does not prevent, […], the agency contract having already been terminated, as this does not imply that commissions would cease to accrue for policies, contracted with the mediation of the agent, which remain in force.

          The question then arises as to whether this right to information is unlimited in time. And here the answer would be in the negative. The limitation of the right to receive information would be linked to the statute of limitations of the right to claim the corresponding commission. If the right to receive the commission were undoubtedly time-barred, it could be argued that it would not be possible to receive information about it. But for such an exception, the statute of limitations must be clear, therefore, taking into account possible interruptions due to claims, even extrajudicial ones. In case of doubt, it will be necessary to recognise the right to demand the information, without prejudice to later invoking and recognising the impossibility of claiming the commission if the right is time-barred. And for this we must consider the limitation period for claiming commissions (in general, three years) and that of the right to claim compensation for clientele (one year).

          In short: it does not seem that the right to receive information and to examine the principal’s documentation is limited by the term of the agency contract; although, on the other hand, it would be appropriate to analyse the possible limitation period for claiming commissions. In the absence of a clear answer to this question, the right to information should, in our opinion, prevail, without prejudice to the fact that the result may not entitle the claim because it is time-barred.

          SUMMARY: In large-scale events such as the Paris Olympics certain companies will attempt to «wildly» associate their brand with the event through a practice called «ambush marketing», defined by caselaw as «an advertising strategy implemented by a company in order to associate its commercial image with that of an event, and thus to benefit from the media impact of said event, without paying the related rights and without first obtaining the event organizer’s authorization» (Paris Court of Appeal, June 8, 2018, Case No 17/12912). A risky and punishable practice, that might sometimes yet be an option yet.

          Key takeaways

          • Ambush marketing might be a punished practice but is not prohibited as such;
          • As a counterpart of their investment, sponsors and official partners benefit from an extensive legal protection against all forms of ambush marketing in the event concerned, through various general texts (counterfeiting, parasitism, intellectual property) or more specific ones (e.g. sport law);
          • The Olympics Games are subject to specific regulations that further strengthen this protection, particularly in terms of intellectual property.
          • But these rights are not absolute, and they are still thin opportunities for astute ambush marketing.

          The protection offered to sponsors and official partners of sporting and cultural events from ambush marketing

          With a budget of over 4 billion euros, the 2024 Olympic and Paralympic Games are financed mostly by various official partners and sponsors, who in return benefit from a right to use Olympic and Paralympic properties to be able to associate their own brand image and distinctive signs with these events.

          Ambush marketing is not punishable as such under French law, but several scattered texts provide extensive protection against ambush marketing for sponsors and partners of sporting or cultural continental-wide or world-wide events. Indeed, sponsors are legitimately entitled to peacefully enjoy the rights offered to them in return for large-scale investments in events such as the FIFA or rugby World Cups, or the Olympic Games.

          In particular, official sponsors and organizers of such events may invoke:

          • the «classic» protections offered by intellectual property law (trademark law and copyright) in the context of infringement actions based on the French Intellectual Property Code,
          • tort law (parasitism and unfair competition based on article 1240 of the French Civil Code);
          • consumer law (misleading commercial practices) based on the French Consumer Code,
          • but also more specific texts such as the protection of the exploitation rights of sports federations and sports event organizers derived from the events or competitions they organize, as set out in article L.333-1 of the French Sports Code, which gives sports event organizers an exploitation monopoly.

          The following ambush marketing practices were sanctioned on the abovementioned grounds:

          • The use of a tennis competition name and of the trademark associated with it during the sporting event: The organization of online bets, by an online betting operator, on the Roland Garros tournament, using the protected sign and trademark Roland Garros to target the matches on which the bets were organized. The unlawful exploitation of the sporting event, was punished and 400 K€ were allowed as damages, based on article L. 333-1 of the French Sports Code, since only the French Tennis Federation (F.F.T.) owns the right to exploit Roland Garros. The use of the trademark was also punished as counterfeiting (with 300 K€ damages) and parasitism (with 500 K€ damages) (Paris Court of Appeal, Oct. 14, 2009, Case No 08/19179);
          • An advertising campaign taking place during a film festival and reproducing the event’s trademark: The organization, during the Cannes Film Festival, of a digital advertising campaign by a cosmetics brand through the publication on its social networks of videos showing the beauty makeovers of the brand’s muses, in some of which the official poster of the Cannes Film Festival was visible, one of which reproduced the registered trademark of the “Palme d’Or”, was punished on the grounds of copyright infringement and parasitism with a 50 K€ indemnity (Paris Judicial Court, Dec. 11, 2020, Case No19/08543);
          • An advertising campaign aimed at falsely claiming to be an official partner of an event: The use, during the Cannes Film Festival, of the slogan «official hairdresser for women» together with the expressions «Cannes» and «Cannes Festival», and other publications falsely leading the public to believe that the hairdresser was an official partner, to the detriment of the only official hairdresser of the Cannes festival, was punished on the grounds of unfair competition and parasitism with a 50 K€ indemnity (Paris Court of Appeal, June 8, 2018, Case No 17/12912).

          These financial penalties may be combined with injunctions to cease these behaviors, and/or publication in the press under penalty.

          An even greater protection for the Paris 2024 Olympic Games

          The Paris 2024 Olympic Games are also subject to specific regulations.

          Firstly, Article L.141-5 of the French Sports Code, enacted for the benefit of the «Comité national olympique et sportif français” (CNOSF) and the “Comité de l’organisation des Jeux Olympiques et Paralympiques de Paris 2024” (COJOP), protects Olympic signs such as the national Olympic emblems, but also the emblems, the flag, motto and Olympic symbol, Olympic anthem, logo, mascot, slogan and posters of the Olympic Games, the year of the Olympic Games «city + year», the terms «Jeux Olympiques», «Olympisme», «Olympiade», «JO», «olympique», «olympien» and «olympienne». Under no circumstances may these signs be reproduced or even imitated by third-party companies. The COJOP has also published a guide to the protection of the Olympic trademark, outlining the protected symbols, trademarks and signs, as well as the protection of the official partners of the Olympic Games.

          Secondly, Law no. 2018-202 of March 26, 2018 on the organization of the 2024 Olympic and Paralympic Games adds even more specific prohibitions, such as the reservation for official sponsors of advertising space located near Olympic venues, or located on the Olympic and Paralympic torch route. This protection is unique in the context of the Olympic Games, but usually unregulated in the context of simple sporting events.

          The following practices, for example, have already been sanctioned on the above-mentioned grounds:

          • Reproduction of a logo imitating the well-known «Olympic» trademark on a clothing collection: The marketing of a collection of clothing, during the 2016 Olympic Games, bearing a logo (five hearts in the colors of the 5 Olympic colors intersecting in the image of the Olympic logo) imitating the Olympic symbol in association with the words «RIO» and «RIO 2016», was punished on the grounds of parasitism (10 K€ damages) and articles L. 141-5 of the French Sports Code (35 K€) and L. 713-1 of the French Intellectual Property Code (10 K€ damages) (Paris Judicial Court, June 7, 2018, Case No16/10605);
          • The organization of a contest on social networks using protected symbols: During the 2018 Olympic Games in PyeongChang, a car rental company organized an online game inviting Internet users to nominate the athletes they wanted to win a clock radio, associated with the hashtags «#JO2018» («#OJ2018”), «#Jeuxolympiques» (“#Olympicsgame”) or «C’est parti pour les jeux Olympiques» (“let’s go for the Olympic Games”) without authorization from the CNOSF, owner of these distinctive signs under the 2018 law and article L.141-5 of the French Sport Code and punished on these grounds with 20 K€ damages and of 10 K€ damages for parasitism (Paris Judicial Court, May 29, 2020, n°18/14115).

          These regulations offer official partners greater protection for their investments against ambush marketing practices from non-official sponsors.

          Some marketing operations might be exempted

          An analysis of case law and promotional practices nonetheless reveals the contours of certain advertising practices that could be authorized (i.e. not sanctioned by the above-mentioned texts), provided they are skillfully prepared and presented. Here are a few exemples :

          • Communication of information for advertising purposes: The use of the results of a rugby match and the announcement of a forthcoming match in a newspaper to promote a motor vehicle and its distinctive features was deemed lawful: «France 13 Angleterre 24 — the Fiat 500 congratulates England on its victory and looks forward to seeing the French team on March 9 for France-Italy» (France 13 Angleterre 24 — la Fiat 500 félicite l’Angleterre pour sa victoire et donne rendez-vous à l’équipe de France le 9 mars pour France-Italie) the judges having considered that this publication «merely reproduces a current sporting result, acquired and made public on the front page of the sports newspaper, and refers to a future match also known as already announced by the newspaper in a news article» (Court of cassation, May 20, 2014, Case No 13-12.102).
          • Sponsorship of athletes, including those taking part in Olympic competitions: Subject to compliance with the applicable regulatory framework, particularly as regards models, any company may enter into partnerships with athletes taking part in the Olympic Games, for example by donating clothing bearing the desired logo or brand, which they could wear during their participation in the various events. Athletes may also, under certain conditions, broadcast acknowledgements from their partner (even if unofficial). Rule 40 of the Olympic Charter governs the use of athletes’, coaches’ and officials’ images for advertising purposes during the Olympic Games.

          The combined legal and marketing approach to the conception and preparation of the message of such a communication operation is essential to avoid legal proceedings, particularly on the grounds of parasitism; one might therefore legitimately contemplate advertising campaigns, particularly clever, or even malicious ones.

          In this first episode of Legalmondo’s Distribution Talks series, I spoke with Ignacio Alonso, a Madrid-based lawyer with extensive experience in international commercial distribution.

          Main discussion points:

          • in Spain, there is no specific law for distribution agreements, which are governed by the general rules of the Commercial Code;
          • therefore, it is essential to draft a clear and comprehensive contract, which will be the primary source of the parties’ rights and obligations;
          • it is also good to be aware of Spanish case law on commercial distribution, which in some cases applies the law on commercial agency by analogy.
          • the most common issues involving foreign producers distributing in Spain arise at the time of termination of the relationship, mainly because case law grants the terminated distributor an indemnity of clientele or goodwill if similar prerequisites to those in the agency regulations apply.
          • another frequent dispute concerns the adequacy of the notice period for terminating the contract, especially if there is no agreement between the parties: the advice is to follow what the agency regulations stipulate and thus establish a minimum notice period of one month for each year of the contract’s duration, up to 6 months for agreements lasting more than five years;
          • regarding dispute resolution tools, mediation is an option that should be carefully considered because it is quick, inexpensive, and allows a shared solution to be sought flexibly without disrupting the business relationship.
          • if mediation fails, the parties can provide for recourse to arbitration or state court. The choice depends on the case’s specific circumstances, and one factor in favor of jurisdiction is the possibility of appeal, which is excluded in the case of arbitration.

          Go deeper

          Summary

          On 1 June 2022, Regulation EU n. 720/2022, i.e.: the new Vertical Block Exemption Regulation (hereinafter: «VBER»), replaced the previous version (Regulation EU n. 330/2010), expired on 31 May 2022.

          The new VBER and the new vertical guidelines (hereinafter: “Guidelines”) have received the main evidence gathered during the lifetime of the previous VBER and contain some relevant provisions affecting the discipline of all B2B agreements among businesses operating at different levels of the supply chain.

          In this article, we will focus on the impact of the new VBER on sales through digital platforms, listing the main novelties impacting distribution chains, including a platform for marketing products/services.

          The general discipline of vertical agreements

          Article 101(1) of the Treaty on the Functioning of the European Union (“TFEU”) prohibits all agreements that prevent, restrict, or distort competition within the EU market, listing the main types, e.g.: price fixing; market partitioning; limitations on production/development/investment; unfair terms, etc.

          However, Article 101(3) TFEU exempts from such restrictions the agreements that contribute to improving the EU market, to be identified in a special category Regulation.

          The VBER establishes the category of vertical agreements (i.e., agreements between businesses operating at different levels of the supply chain), determining which of these agreements are exempted from Article 101(1) TFEU prohibition.

          In short, vertical agreements are presumed to be exempted (and therefore valid) if they do not contain so-called «hardcore restrictions» (i.e., severe restrictions of competition, such as an absolute ban on sales in a territory or the manufacturer’s determination of the distributor’s resale price) and if neither party’s market share exceeds 30%.

          The exempted agreements benefit from what has been termed the “safe harbour” of the VBER. In contrast, the others will be subject to the general prohibition of Article 101(1) TFEU unless they can benefit from an individual exemption under Article 101(3) TFUE.

          The innovations introduced by the new VBER to online platforms

          The first relevant aspect concerns the classification of the platforms, as the European Commission excluded that the online platform generally meets the conditions to be categorized as agency agreements.

          While there have never been doubts concerning platforms that operate by purchasing and reselling products (classic example: Amazon Retail), some have arisen concerning those platforms that merely promote the products of third parties without carrying out the activity of resale (classic example: Amazon Marketplace).

          With this statement, the European Commission wanted to clear the field of doubt, making explicit that intermediation service providers (such as online platforms) qualify as suppliers (as opposed to commercial agents) under the VBER. This reflects the approach of Regulation (EU) 2019/1150 («P2B Regulation»), which has, for the first time, dictated a specific discipline for digital platforms. It provided for a set of rules to create a “fair, transparent, and predictable environment” for smaller businesses and customers” and for the rationale of the Digital Markets Act, banning certain practices used by large platforms acting as “gatekeepers”.

          Therefore, all contracts concluded between manufacturers and platforms (defined as ‘providers of online intermediation services’) are subject to all the restrictions imposed by the VBER. These include the price, the territories to which or the customers to whom the intermediated goods or services may be sold, or the restrictions relating to online advertising and selling.

          Thus, to give an example, the operator of a platform may not impose a fixed or minimum sale price for a transaction promoted through the platform.

          The second most impactful aspect concerns hybrid platforms, i.e., competing in the relevant market to sell intermediated goods or services. Amazon is the most well-known example, as it is a provider of intermediation services (“Amazon Marketplace”), and – at the same time – it distributes the products of those parties (“Amazon Retail”). We have previously explored the distinction between those 2 business models (and the consequences in terms of intellectual property infringement) here.

          The new VBER explicitly does not apply to hybrid platforms. Therefore, the agreements concluded among such platforms and manufacturers are subject to the limitations of the TFEU, as such providers may have the incentive to favour their sales and the ability to influence the outcome of competition between undertakings that use their online intermediation services.

          Those agreements must be assessed individually under Article 101 of the TFEU, as they do not necessarily restrict competition within the meaning of TFEU, or they may fulfil the conditions of an individual exemption under Article 101(3) TFUE.

          The third very relevant aspect concerns the parity obligations (also referred to as Most Favoured Nation Clauses, or MFNs), i.e., the contract provisions in which a seller (directly or indirectly) agrees to give the buyer the best terms it makes available to any other buyer.

          Indeed, platforms’ contractual terms often contain parity obligation clauses to prevent users from offering their products/services at lower prices or on better conditions on their websites or other platforms.

          The new VBER deals explicitly with parity clauses, making a distinction between clauses whose purpose is to prohibit users of a platform from selling goods or services on more favourable terms through competing platforms (so-called “wide parity clauses”), and clauses that prohibit sales on more favourable terms only in respect of channels operated directly by the users (so-called “narrow parity clauses”).

          Wide parity clauses do not benefit from the VBER exemption; therefore, such obligations must be assessed individually under Article 101(3) TFEU.

          On the other hand, narrow parity clauses continue to benefit from the exemption already granted by the old VBER if they do not exceed the threshold of 30% of the relevant market share set out in Article 3 of the new VBER. However, the new Guidelines warn against using overly narrow parity obligations by online platforms covering a significant share of users, stating that if there is no evidence of pro-competitive effects, the benefit of the block exemption is likely to be withdrawn.

          Impact and takeaways

          The new VBER entered into force on 1 June 2022 and is already applicable to agreements signed after that date. Agreements already in force on 31 May 2022 that satisfy the conditions for exemption under the current VBER but do not satisfy the requirements under the new VBER shall benefit from a one-year transitional period.

          The new regime will be the playing field for all platform-driven sales over the next 12 years (the regulation expires on 31 May 2034). Currently, the rather restrictive novelties on hybrid platforms and parity obligations will likely necessitate substantial revisions to existing trade agreements.

          Here, then, are some tips for managing contracts and relationships with online platforms:

          • the new VBER is the right opportunity to review the existing distribution networks. The revision will have to consider not only the new regulatory limits (e.g., the ban on wide parity clauses) but also the new discipline reserved for hybrid platforms and dual distribution to coordinate the different distribution channels as efficiently as possible, by the stakes set by the new VBER and the Guidelines;
          • platforms are likely to play an even greater role during the next decade; it is, therefore, essential to consider these sales channels from the outset, coordinating them with the other existing ones (retail, direct sales, distributors, etc.) to avoid jeopardizing the marketing of products or services;
          • the European legislator’s attention toward platforms is growing. Looking up from the VBER, one should not forget that they are subject to a multitude of other European regulations, which are gradually regulating the sector and which must be considered when concluding contracts with platforms. The reference is not only to the recent Digital Market Act and P2B Regulation but also to the protection of IP rights on platforms, which — as we have already seen — is still an open issue.

          Summary

          To avoid disputes with important suppliers, it is advisable to plan purchases over the medium and long term and not operate solely on the basis of orders and order confirmations. Planning makes it possible to agree on the duration of the ‘supply agreement, minimum volumes of products to be delivered and delivery schedules, prices, and the conditions under which prices can be varied over time.
          The use of a framework purchase agreement can help avoid future uncertainties and allows various options to be used to manage commodity price fluctuations depending on the type of products , such as automatic price indexing or agreement to renegotiate in the event of commodity fluctuations beyond a certain set tolerance period.

          I read in a press release: “These days, the glass industry is sending wine companies new unilateral contract amendments with price changes of 20%…”

          What can one do to avoid the imposition of price increases by suppliers? 

          • Know your rights and act in an informed manner
          • Plan and organise your supply chain

          Does my supplier have the right to increase prices?

          If contracts have already been concluded, e.g., orders have already been confirmed by the supplier, the answer is often no.

          It is not legitimate to request a price change. It is much less legitimate to communicate it unilaterally, with the threat of cancelling the order or not delivering the goods if the request is not granted.

          What if he tells me it is force majeure?

          That’s wrong: increased costs are not a force majeure but rather an unforeseen excessive onerousness, which hardly happens.

          What if the supplier canceled the order, unilaterally increased the price, or did not deliver the goods?

          He would be in breach of contract and liable to pay damages for violating his contractual obligations.

          How can one avoid a tug-of-war with suppliers?

          The tools are there. You have to know them and use them.

          It is necessary to plan purchases in the medium term, agreeing with suppliers on a schedule in which are set out:

          • the quantities of products to be ordered
          • the delivery terms
          • the durationof the agreement
          • the pricesof the products or raw materials
          • the conditions under which prices can be varied

          There is a very effective instrument to do so: a framework purchase agreement.

          Using a framework purchase agreement, the parties negotiate the above elements, which will be valid for the agreed period.

          Once the agreement is concluded, product orders will follow, governed by the framework agreement, without the need to renegotiate the content of individual deliveries each time.

          For an in-depth discussion of this contract, see this article.

          • “Yes, but my suppliers will never sign it!”

          Why not? Ask them to explain the reason.

          This type of agreement is in the interest of both parties. It allows planning future orders and grants certainty as to whether, when, and how much the parties can change the price.

          In contrast, acting without written agreements forces the parties to operate in an environment of uncertainty. Suppliers can request price increases from one day to the next and refuse supply if the changes are not accepted.

          How are price changes for future supplies regulated?

          Depending on the type of products or services and the raw materials or energy relevant in determining the final price, there are several possibilities.

          • The first option is to index the price automatically. E.g., if the cost of a barrel of Brent oil increases/decreases by 10%, the party concerned is entitled to request a corresponding adjustment of the product’s price in all orders placed as of the following week.
          • An alternative is to provide for a price renegotiation in the event of a fluctuation of the reference commodity. E.g., suppose the LME Aluminium index of the London Stock Exchange increases above a certain threshold. In that case, the interested party may request a price renegotiationfor orders in the period following the increase.

          What if the parties do not agree on new prices?

          It is possible to terminate the contract or refer the price determination to a third party, who would act as arbitrator and set the new prices for future orders.

          Summary

          The framework supply contract is an agreement that regulates a series of future sales and purchases between two parties (customer and supplier) that take place over a certain period of time. This agreement determines the main elements of future contracts such as price, product volumes, delivery terms, technical or quality specifications, and the duration of the agreement.

          The framework contract is useful for ensuring continuity of supply from one or more suppliers of a certain product that is essential for planning industrial or commercial activity. While the general terms and conditions of purchase or sale are the rules that apply to all suppliers or customers of the company. The framework contract is advisable to be concluded with essential suppliers for the continuity of business activity, in general or in relation to a particular project.

          What I am talking about in this article:

          • What is the supply framework agreement?
          • What is the function of the supply framework agreement?
          • The difference with the general conditions of sale or purchase
          • When to enter a purchase framework agreement?
          • When is it beneficial to conclude a sales framework agreement?
          • The content of the supply framework agreement
          • Price revision clause and hardship
          • Delivery terms in the supply framework agreement
          • The Force Majeure clause in international sales contracts
          • International sales: applicable law and dispute resolution arrangements

          What is a framework supply agreement?

          It is an agreement that regulates a series of future sales and purchases between two parties (customer and supplier), which will take place over a certain period.

          It is therefore referred to as a «framework agreement» because it is an agreement that establishes the rules of a future series of sales and purchase contracts, determining their primary elements (such as the price, the volumes of products to be sold and purchased, the delivery terms of the products, and the duration of the contract).

          After concluding the framework agreement, the parties will exchange orders and order confirmations, entering a series of autonomous sales contracts without re-discussing the covenants already defined in the framework agreement.

          Depending on one’s point of view, this agreement is also called a sales framework agreement (if the seller/supplier uses it) or a purchasing framework agreement (if the customer proposes it).

          What is the function of the framework supply agreement?

          It is helpful to arrange a framework agreement in all cases where the parties intend to proceed with a series of purchases/sales of products over time and are interested in giving stability to the commercial agreement by determining its main elements.

          In particular, the purchase framework agreement may be helpful to a company that wishes to ensure continuity of supply from one or more suppliers of a specific product that is essential for planning its industrial or commercial activity (raw material, semi-finished product, component).

          By concluding the framework agreement, the company can obtain, for example, a commitment from the supplier to supply a particular minimum volume of products, at a specific price, with agreed terms and technical specifications, for a certain period.

          This agreement is also beneficial, at the same time, to the seller/supplier, which can plan sales for that period and organize, in turn, the supply chain that enables it to procure the raw materials and components necessary to produce the products.

          What is the difference between a purchase or sales framework agreement and the general terms and conditions?

          Whereas the framework agreement is an agreement that is used with one or more suppliers for a specific product and a certain time frame, determining the essential elements of future contracts, the general purchase (or sales) conditions are the rules that apply to all the company’s suppliers (or customers).

          The first agreement, therefore, is negotiated and defined on a case-by-case basis. At the same time, the general conditions are prepared unilaterally by the company, and the customers or suppliers (depending on whether they are sales or purchase conditions) adhere to and accept that the general conditions apply to the individual order and/or future contracts.

          The two agreements might also co-exist: in that case; it is a good idea to specify which contract should prevail in the event of a discrepancy between the different provisions (usually, this hierarchy is envisaged, ranging from the special to the general: order — order confirmation; framework agreement; general terms and conditions of purchase).

          When is it important to conclude a purchase framework agreement?

          It is beneficial to conclude this agreement when dealing with a mono-supplier or a supplier that would be very difficult to replace if it stopped selling products to the purchasing company.

          The risks one aims to avoid or diminish are so-called stock-outs, i.e., supply interruptions due to the supplier’s lack of availability of products or because the products are available, but the parties cannot agree on the delivery time or sales price.

          Another result that can be achieved is to bind a strategic supplier for a certain period by agreeing that it will reserve an agreed share of production for the buyer on predetermined terms and conditions and avoid competition with offers from third parties interested in the products for the duration of the agreement.

          When is it helpful to conclude a sales framework agreement?

          This agreement allows the seller/supplier to plan sales to a particular customer and thus to plan and organize its production and logistical capacity for the agreed period, avoiding extra costs or delays.

          Planning sales also makes it possible to correctly manage financial obligations and cash flows with a medium-term vision, harmonizing commitments and investments with the sales to one’s customers.

          What is the content of the supply framework agreement?

          There is no standard model of this agreement, which originated from business practice to meet the requirements indicated above.

          Generally, the agreement provides for a fixed period (e.g., 12 months) in which the parties undertake to conclude a series of purchases and sales of products, determining the price and terms of supply and the main covenants of future sales contracts.

          The most important clauses are:

          • the identification of products and technical specifications (often identified in an annex)
          • the minimum/maximum volume of supplies
          • the possible obligation to purchase/sell a minimum/maximum volume of products
          • the schedule of supplies
          • the delivery times
          • the determination of the price and the conditions for its possible modification (see also the next paragraph)
          • impediments to performance (Force Majeure)
          • cases of Hardship
          • penalties for delay or non-performance or for failure to achieve the agreed volumes
          • the hierarchy between the framework agreement and the orders and any other contracts between the parties
          • applicable law and dispute resolution (especially in international agreements)

          How to handle price revision in a supply contract?

          A crucial clause, especially in times of strong fluctuations in the prices of raw materials, transport, and energy, is the price revision clause.

          In the absence of an agreement on this issue, the parties bear the risk of a price increase by undertaking to respect the conditions initially agreed upon; except in exceptional cases (where the fluctuation is strong, affects a short period, and is caused by unforeseeable events), it isn’t straightforward to invoke the supervening excessive onerousness, which allows renegotiating the price, or the contract to be terminated.

          To avoid the uncertainty generated by price fluctuations, it is advisable to agree in the contract on the mechanisms for revising the price (e.g., automatic indexing following the quotation of raw materials). The so-called Hardship or Excessive Onerousness clause establishes what price fluctuation limits are accepted by the parties and what happens if the variations go beyond these limits, providing for the obligation to renegotiate the price or the termination of the contract if no agreement is reached within a certain period.

          How to manage delivery terms in a supply agreement?

          Another fundamental pact in a medium to long-term supply relationship concerns delivery terms. In this case, it is necessary to reconcile the purchaser’s interest in respecting the agreed dates with the supplier’s interest in avoiding claims for damages in the event of a delay, especially in the case of sales requiring intercontinental transport.

          The first thing to be clarified in this regard concerns the nature of delivery deadlines: are they essential or indicative? In the first case, the party affected has the right to terminate (i.e., wind up) the agreement in the event of non-compliance with the term; in the second case, due diligence, information, and timely notification of delays may be required, whereas termination is not a remedy that may be automatically invoked in the event of a delay.

          A useful instrument in this regard is the penalty clause: with this covenant, it is established that for each day/week/month of delay, a sum of money is due by way of damages in favor of the party harmed by the delay.

          If quantified correctly and not excessively, the penalty is helpful for both parties because it makes it possible to predict the damages that may be claimed for the delay, quantifying them in a fair and determined sum. Consequently, the seller is not exposed to claims for damages related to factors beyond his control. At the same time, the buyer can easily calculate the compensation for the delay without the need for further proof.

          The same mechanism, among other things, may be adopted to govern the buyer’s delay in accepting delivery of the goods.

          Finally, it is a good idea to specify the limit of the penalty (e.g.,10 percent of the price of the goods) and a maximum period of grace for the delay, beyond which the party concerned is entitled to terminate the contract by retaining the penalty.

          The Force Majeure clause in international sales contracts

          A situation that is often confused with excessive onerousness, but is, in fact, quite different, is that of Force Majeure, i.e., the supervening impossibility of performance of the contractual obligation due to any event beyond the reasonable control of the party affected, which could not have been reasonably foreseen and the effects of which cannot be overcome by reasonable efforts.

          The function of this clause is to set forth clearly when the parties consider that Force Majeure may be invoked, what specific events are included (e.g., a lock-down of the production plant by order of the authority), and what are the consequences for the parties’ obligations (e.g., suspension of the obligation for a certain period, as long as the cause of impossibility of performance lasts, after which the party affected by performance may declare its intention to dissolve the contract).

          If the wording of this clause is general (as is often the case), the risk is that it will be of little use; it is also advisable to check that the regulation of force majeure complies with the law applicable to the contract (here an in-depth analysis indicating the regime provided for by 42 national laws).

          Applicable law and dispute resolution clauses

          Suppose the customer or supplier is based abroad. In that case, several significant differences must be borne in mind: the first is the agreement’s language, which must be intelligible to the foreign party, therefore usually in English or another language familiar to the parties, possibly also in two languages with parallel text.

          The second issue concerns the applicable law, which should be expressly indicated in the agreement. This subject matter is vast, and here we can say that the decision on the applicable law must be made on a case-by-case basis, intentionally: in fact, it is not always convenient to recall the application of the law of one’s own country.

          In most international sales contracts, the 1980 Vienna Convention on the International Sale of Goods («CISG») applies, a uniform law that is balanced, clear, and easy to understand. Therefore, it is not advisable to exclude it.

          Finally, in a supply framework agreement with an international supplier, it is important to identify the method of dispute resolution: no solution fits all. Choosing a country’s jurisdiction is not always the right decision (indeed, it can often prove counterproductive).

          Eventually, after more than 30 years of negotiations, the world is now looking at the first pan-African trade agreement, which entered into force in 2019: the African Continental Free Trade Area, or AfCFTA.

          Africa, with its 55 countries and around 1.3 billion inhabitants, is the second largest continent in the world after Asia. The continent’s potential is huge: more than 50% of Africa’s population is under 20 years old and the population is growing at the fastest rate in the world. By 2050, one in four new-born babies is expected to be African. In addition, the continent is rich in fertile soil and raw materials.

          For Western investors, Africa has become considerably more important in recent years. As a result, a considerable amount of international trade has emerged, not least promoted by the “Compact with Africa” initiative adopted by the G20 countries in 2017, also known as the “Marshall Plan with Africa”. Its focus is on expanding Africa’s economic cooperation with the G20 countries by strengthening private investment.

          At the same time, however, intra-African trade has stagnated so far: partly still existing high intra-African tariffs, non-tariff barriers (NTBs), weak infrastructure, corruption, cumbersome bureaucracy, as well as non-transparent and inconsistent regulations, ensured that interregional exports could hardly develop and most recently accounted for only 17 % of the pan-African trade and only 0.36 % of world trade. It’s already been a long time since the African Union (AU) had put the creation of a common trade area on its agenda.

          What is behind AfCFTA?

          The establishment of a pan-African trade area was preceded by decades of negotiations, which finally resulted in the entry into force of the AfCFTA on 30 May 2019.

          AfCFTA is a free trade area established by its members, which — with the exception of Eritrea — covers the entire African continent and is thus the largest free trade area in the world by number of member states after the World Trade Organisation (WTO).

          How the common market was to be structured in detail was the subject of several individual negotiations, which were discussed in Phases I and II.

          Phase I comprises the negotiations on three protocols and is almost completed.

          The Protocol on Trade in Goods

          This protocol provides for the elimination of 90 % of all intra-African tariffs in all product categories within five years of entry into force. Of these, up to 7 % of products can be classified as sensitive goods, which are subject to a tariff elimination period of ten years. For the least developed countries (LDCs), the preparation period is extended from five to ten years and for sensitive products from ten to thirteen years, provided they demonstrate their need. The remaining 3 % of tariffs are fully exempted from tariff dismantling.

          A prerequisite for tariff dismantling is the clear delimitation of rules of origin. Otherwise, imports from third countries could benefit from the negotiated tariff advantages. Agreement has already been reached on most of the rules of origin.

          The Protocol on Trade in Services

          The AU General Assembly has so far agreed on five priority areas (transport, communications, tourism, financial and business services) and guidelines for the commitments applicable to them.  47 AU member states have so far submitted their offers for specific commitments and the review of 28 has been completed. In addition, negotiations, for example, on the recognition of professional qualifications, are still ongoing.

          The Protocol on Dispute Settlement

          With the Protocol on Rules and Procedures Governing the Dispute Settlement, the AfCFTA creates a dispute settlement system modelled on the WTO Dispute Settlement Understanding. Under this, the Dispute Settlement Body (DSB) administers the AfCFTA Dispute Settlement Protocol and establishes an Adjudicating Panel (Panel) and an Appellate Body (AB). The DSB is composed of a representative of each member state and intervenes as soon as there are differences of opinion between the contracting states on the interpretation and/or application of the agreement with regard to their rights and obligations.

          For the remaining Phase II, negotiations are planned on investment and competition policy, intellectual property issues, online trade and women and youth in trade, the results of which will be reflected in further protocols.

          The implementation of the AfCFTA

          In principle, the implementation of trade under a trade agreement can only begin once the legal framework has been finally clarified. However, AU Heads of State and Government agreed in December 2020 that trade can begin for goods for which negotiations have been finalised. Under this «transitional arrangement«, after a pandemic-related postponement, the first AfCFTA trade settlement from Ghana to South Africa took place on 4 January 2021.

          Building blocks of the AfCFTA

          All 55 members of the AU were involved in the AfCFTA negotiations. Of these, 47 belong to at least one — and some to more than one — recognised Regional Economic Communities (RECs), which, according to the preamble of the AfCFTA agreement, are to continue as building blocks of the trade agreement. It was therefore they who acted as the voice of their respective members in the AfCFTA negotiations. The AfCFTA provides for RECs to retain their legal instruments, institutions and dispute settlement mechanisms.

          Within the AU, there are eight recognised RECs, overlapping in some countries, which are either preferential trade agreements (Free Trade Agreements — FTAs) or customs unions.

          Under the AfCFTA, the RECs have various responsibilities. These are in particular:

          • coordinating negotiating positions and assisting member states in the implementation of the agreement.
          • solution-oriented mediation in the event of disagreements between member states
          • supporting member states in the harmonisation of tariffs and other border protection regulations
          • promoting the use of the AfCFTA notification procedure to reduce NTBs

          Outlook of the AfCFTA

          The AfCFTA has the potential to facilitate Africa’s integration into the global economy and creates the real possibility of a realignment of international integration and cooperation patterns.

          A trade agreement alone is no guarantee of economic success. For the agreement to achieve the predicted breakthrough, member states must have the political will to implement the new rules consistently and create the necessary capacity to do so. In particular, the short-term removal of trade barriers and the creation of a sustainable physical and digital infrastructure are likely to be crucial.

          If you are interested in the AfCFTA, you can read an extended version of this article here.

          The Legalmondo Africa Desk

          We help companies invest and do business in Africa with our experts in Algeria, Tunisia, Morocco, Senegal, Sudan, Egypt, Ghana, Lybia, Côte d’Ivoire, Cameroon, and Malawi.

          We can also assist foreign entities in African countries where we are not directly present with an office through our network of local partners.

          How it works

          • We set up a meeting (in person or online) with one of our experts to understand the client’s needs.
          • Once we start working together, we follow the client with a dedicated counsel for all its legal needs (single cases, or ongoing legal assistance)

          Get in touch to know more.

          Summary

          Political, environmental or health crises (like the Covid-19 outbreak and the attack of Ukraine by the Russian army) can cause an increase in the price of raw materials and components and generalized inflation. Both suppliers and distributors find themselves faced with problems related to the often sudden and very substantial increase in the price of their own supplies. French law lays down specific rules in that regard.

          Two main situations can be distinguished: where the parties have just established a simple flow of orders and where the parties have concluded a framework agreement fixing firm prices for a fixed term.

          Price increase in a business relationship

          The situation is as follows: the parties have not concluded a framework agreement, each sales contract concluded (each order) is governed by the General T&Cs of the supplier; the latter has not undertaken to maintain the prices for a minimum period and applies the prices of the current tariff.

          In principle, the supplier can modify its prices at any time by sending a new tariff. However, it must give written and reasonable notice in accordance with the provisions of Article L. 442-1.II of the Commercial Code, before the price increase comes into effect. Failure to respect sufficient notice, it could be accused of a sudden «partial» termination of commercial relations (and subject to damages).

          A sudden termination following a price increase would be characterized when the following conditions are met:

          • the commercial relationship must be established: broader concept than the simple contract, taking into account the duration but also the importance and the regularity of the exchanges between the parties;
          • the price increase must be assimilated to a rupture: it is mainly the size of the price increase (+1%, 10% or 25%?) that will lead a judge to determine whether the increase constitutes a «partial» termination (in the event of a substantial modification of the relationship which is nevertheless maintained) or a total termination (if the increase is such that it involves a termination of the relationship) or if it does not constitute a termination (if the increase is minimal);
          • the notice granted is insufficient by comparing the duration of the notice actually granted with that of the notice in accordance with Article L. 442-1.II, taking into account in particular the duration of the commercial relationship and the possible dependence of the victim of the termination with respect to the other party.

          Article L. 442-1.II must be respected as soon as French law applies to the relation. In international business relations, to know how to deal with Article L.442-1.II and conflicts of laws and jurisdiction of competent courts, please see our previous article published on Legalmondo blog.

          Price increase in a framework contract

          If the parties have concluded a framework contract (such as supply, manufacturing, …) for several years and the supplier has committed to fixed prices, how, in this case, can it change these prices?

          In addition to any indexation clause or renegotiation (hardship) clause which would be stipulated in the contract (and besides specific legal provisions applicable to special agreements as to their nature or economic sector), the supplier may seek to avail himself of the legal mechanism of «unforeseeability» provided for by article 1195 of the civil code.

          Three prerequisites must be cumulatively met:

          • an unforeseeable change in circumstances at the time of the conclusion of the contract (i.e.: the parties could not reasonably anticipate this upheaval);
          • a performance of the contract that has become excessively onerous (i.e.: beyond the simple difficulty, the upheaval must cause a disproportionate imbalance);
          • the absence of acceptance of these risks by the debtor of the obligation when concluding the contract.

          The implementation of this mechanism must stick to the following steps:

          • first, the party in difficulty must request the renegotiation of the contract from its co-contracting party;
          • then, in the event of failure of the negotiation or refusal to negotiate by the other party, the parties can (i) agree together on the termination of the contract, on the date and under the conditions that they determine, or (ii) ask together the competent judge to adapt it;
          • finally, in the absence of agreement between the parties on one of the two aforementioned options, within a reasonable time, the judge, seized by one of the parties, may revise the contract or terminate it, on the date and under the conditions that he will set.

          The party wishing to implement this legal mechanism must also anticipate the following points:

          • article 1195 of the Civil Code only applies to contracts concluded on or after October 1, 2016 (or renewed after this date). Judges do not have the power to adapt or rebalance contracts concluded before this date;
          • this provision is not of public order. Therefore, the parties can exclude it or modify its conditions of application and/or implementation (the most common being the framework of the powers of the judge);
          • during the renegotiation, the supplier must continue to sell at the initial price because, unlike force majeure, unforeseen circumstances do not lead to the suspension of compliance with the obligations.

          Key takeaways:

          • analyse carefully the framework of the commercial relationship before deciding to notify a price increase, in order to identify whether the prices are firm for a minimum period and the contractual levers for renegotiation;
          • correctly anticipate the length of notice that must be given to the partner before the entry into force of the new pricing conditions, depending on the length of the relationship and the degree of dependence;
          • document the causes of the price increase;
          • check if and how the legal mechanism of unforeseeability has been amended or excluded by the framework contract or the General T&Cs;
          • consider alternatives strategies, possibly based on stopping production/delivery justified by a force majeure event or on the significant imbalance of the contractual provisions.

          Christophe Hery

          Области практики

          • Агентство
          • Антимонопольное законодательство
          • Арбитраж
          • Распространение
          • Электронная коммерция
          Связаться Christophe
          Franchising Spain - Legalmondo

          Spain | Franchising, Theory Of Risk and Guarantees By Franchisee
          • Распространение
          • Судебная практика
          • Испания
          Vietnam - Legalmondo

          Vietnam on the EU Tax Blacklist: A Guide for EU Buyers
          • Корпоративный
          • Распространение
          • Вьетнам
          Brazil - Legalmondo

          Brazil’s New Digital Child Protection Law: Practical Implications for Foreign Tech Companies
          • Конфиденциальность - Защита данных
          • Бразилия
          France - Legalmondo

          France | Pre-contractual disclosure in distribution and franchise agreements
          • Распространение
          • Франчайзинг
          • Франция
          International distribution agreements - Key Clauses and Lessons learned from the history of Nike - Legalmondo

          International distribution agreements | Key Clauses and Lessons learned from the history of Nike
          • Контракты
          • Распространение
          • Италия
          Saudi Arabia - Legalmondo

          How to Joint Venture in Saudi Arabia
          • Контракты
          • Корпоративный
          • Саудовская Аравия
          Contracts Responsibility - Legalmondo

          Corporate Sustainability in Practice – How Contracts Shape Responsibility
          • Контракты
          • Распространение
          • Finland
          Legalmondo - Oil prices

          Rising Oil Prices and International Contracts: How to Manage Hardship in Global Supply Chains
          • Контракты
          • Распространение
          • Италия
          African Continental Free Trade-Agreement - Legalmondo

          Why the African Continental Free Trade Agreement has not yet turned into Reality — and What That Means for Egypt
          • Распространение
          • Иностранные инвестиции
          • Египет
          Spain lawyer-coach - Legalmondo

          The lawyer-coach: a new way of practising
          • Альтернативное разрешение споров
          • Контракты
          • Испания
          Spain - Legalmondo

          Agency and distribution agreements. Phrases to avoid when ending a business relationship without a written contract
          • Без категории
          • Контракты
          • Испания
          Business people Legalmondo

          Spain | Appropriate Means of Dispute Resolution (ADR) as a prerequisite for litigation
          • Альтернативное разрешение споров
          • Судебная практика
          • Испания
          Spain Influencer-Legalmondo

          Spain – Can an influencer be considered a «commercial agent»?
          • Без категории
          • Распространение
          • Испания
          Spain advance payment - Legalmondo

          Spain — Is it possible to advance payment of customer indemnity in agency contracts?
          • Без категории
          • Испания
          Companies in Spain - Legalmondo

          Spain — Powers of Representation of Companies
          • Корпоративный
          • Испания
          Spain - Legalmondo

          Spain | Clientele Compensation for Agents and Distributors
          • Без категории
          • Контракты
          • Испания
          Debt - Legalmondo

          International debt recovery: risk prevention and best practices
          • Распространение
          • Судебная практика
          • Испания
          mediation - legalmondo

          The importance of Mediation in Distribution Contracts
          • Альтернативное разрешение споров
          • Распространение
          • Испания

          Scrivi a Christophe





            Read the privacy policy of Legalmondo.
            This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

            The Distribution of wine in Mexico

            07.03.2021

            • Мексика
            • Распространение

            The commercial agent has the right to obtain certain information about the sales of the principal. The Spanish Law on Agency Contracts provides (15.2 LCA) that the agent has the right to demand to see the accounts of the principal in order to verify all matters relating to the commissions due to him. And also, to be provided with the information available to the principal and necessary to verify the amount of such commissions.

            This article is in line with the 1986 Commercial Agents Directive, according to which (12.3) the agent is entitled to demand to be provided with all information at the disposal of the principal, particularly an extract from the books of account, which is necessary to verify the amount of commission due to the agent. This may not be altered to the detriment of the commercial agent by agreement.

            The question is, does this right remain even after the termination of the agency contract? In other words: once the agency contract is terminated, can the agent request the information and documentation mentioned in these articles and is the Principal obliged to provide it?

            In our opinion, the rule does not say anything that limits this right, rather the opposite is to be expected. Therefore, to the extent that there is still any possible commission that may arise from such verification, the answer must be yes. Let us see.

            The right to demand the production of accounts exists so that the agent can verify the amount of commissions. And the agent is entitled to commissions for acts and operations concluded during the term of the contract (art. 12 LCA), but also for acts or operations concluded after the termination of the contract (art. 13 LCA), and for operations not carried out due to circumstances attributable to the principal (art. 17 LCA). In addition, the agent is entitled to have the commission accrued at the time when the act or transaction should have been executed (art. 14 LCA).

            All these transactions can take place after the conclusion of the contract. Consider the usual situation where orders are placed during the contract but are accepted or executed afterwards. To reduce the agent’s right to be informed only during the term of the contract would be to limit his entitlement to the corresponding commission unduly. And it should be borne in mind that the amount of the commissions during the last five years may also influence the calculation of the client (goodwill) indemnity (art. 28 LCA), so that the agent’s interest in knowing them is twofold: what he would receive as commission, and what could increase the basis for future indemnity.

            This has been confirmed, for example, by the Provincial Court (Audiencia Provincial) of Madrid (AAP 227/2017, of 29 June [ECLI:ES:APM:2017:2873A]) which textually states:

            […] art. 15.2 of the Agency Contract Act provides for the right of the agent to demand the exhibition of the Principal’s accounts in the particulars necessary to verify everything relating to the commissions corresponding to him, as well as to be provided with the information available to the Principal and necessary to verify the amount. This does not prevent, […], the agency contract having already been terminated, as this does not imply that commissions would cease to accrue for policies, contracted with the mediation of the agent, which remain in force.

            The question then arises as to whether this right to information is unlimited in time. And here the answer would be in the negative. The limitation of the right to receive information would be linked to the statute of limitations of the right to claim the corresponding commission. If the right to receive the commission were undoubtedly time-barred, it could be argued that it would not be possible to receive information about it. But for such an exception, the statute of limitations must be clear, therefore, taking into account possible interruptions due to claims, even extrajudicial ones. In case of doubt, it will be necessary to recognise the right to demand the information, without prejudice to later invoking and recognising the impossibility of claiming the commission if the right is time-barred. And for this we must consider the limitation period for claiming commissions (in general, three years) and that of the right to claim compensation for clientele (one year).

            In short: it does not seem that the right to receive information and to examine the principal’s documentation is limited by the term of the agency contract; although, on the other hand, it would be appropriate to analyse the possible limitation period for claiming commissions. In the absence of a clear answer to this question, the right to information should, in our opinion, prevail, without prejudice to the fact that the result may not entitle the claim because it is time-barred.

            SUMMARY: In large-scale events such as the Paris Olympics certain companies will attempt to «wildly» associate their brand with the event through a practice called «ambush marketing», defined by caselaw as «an advertising strategy implemented by a company in order to associate its commercial image with that of an event, and thus to benefit from the media impact of said event, without paying the related rights and without first obtaining the event organizer’s authorization» (Paris Court of Appeal, June 8, 2018, Case No 17/12912). A risky and punishable practice, that might sometimes yet be an option yet.

            Key takeaways

            • Ambush marketing might be a punished practice but is not prohibited as such;
            • As a counterpart of their investment, sponsors and official partners benefit from an extensive legal protection against all forms of ambush marketing in the event concerned, through various general texts (counterfeiting, parasitism, intellectual property) or more specific ones (e.g. sport law);
            • The Olympics Games are subject to specific regulations that further strengthen this protection, particularly in terms of intellectual property.
            • But these rights are not absolute, and they are still thin opportunities for astute ambush marketing.

            The protection offered to sponsors and official partners of sporting and cultural events from ambush marketing

            With a budget of over 4 billion euros, the 2024 Olympic and Paralympic Games are financed mostly by various official partners and sponsors, who in return benefit from a right to use Olympic and Paralympic properties to be able to associate their own brand image and distinctive signs with these events.

            Ambush marketing is not punishable as such under French law, but several scattered texts provide extensive protection against ambush marketing for sponsors and partners of sporting or cultural continental-wide or world-wide events. Indeed, sponsors are legitimately entitled to peacefully enjoy the rights offered to them in return for large-scale investments in events such as the FIFA or rugby World Cups, or the Olympic Games.

            In particular, official sponsors and organizers of such events may invoke:

            • the «classic» protections offered by intellectual property law (trademark law and copyright) in the context of infringement actions based on the French Intellectual Property Code,
            • tort law (parasitism and unfair competition based on article 1240 of the French Civil Code);
            • consumer law (misleading commercial practices) based on the French Consumer Code,
            • but also more specific texts such as the protection of the exploitation rights of sports federations and sports event organizers derived from the events or competitions they organize, as set out in article L.333-1 of the French Sports Code, which gives sports event organizers an exploitation monopoly.

            The following ambush marketing practices were sanctioned on the abovementioned grounds:

            • The use of a tennis competition name and of the trademark associated with it during the sporting event: The organization of online bets, by an online betting operator, on the Roland Garros tournament, using the protected sign and trademark Roland Garros to target the matches on which the bets were organized. The unlawful exploitation of the sporting event, was punished and 400 K€ were allowed as damages, based on article L. 333-1 of the French Sports Code, since only the French Tennis Federation (F.F.T.) owns the right to exploit Roland Garros. The use of the trademark was also punished as counterfeiting (with 300 K€ damages) and parasitism (with 500 K€ damages) (Paris Court of Appeal, Oct. 14, 2009, Case No 08/19179);
            • An advertising campaign taking place during a film festival and reproducing the event’s trademark: The organization, during the Cannes Film Festival, of a digital advertising campaign by a cosmetics brand through the publication on its social networks of videos showing the beauty makeovers of the brand’s muses, in some of which the official poster of the Cannes Film Festival was visible, one of which reproduced the registered trademark of the “Palme d’Or”, was punished on the grounds of copyright infringement and parasitism with a 50 K€ indemnity (Paris Judicial Court, Dec. 11, 2020, Case No19/08543);
            • An advertising campaign aimed at falsely claiming to be an official partner of an event: The use, during the Cannes Film Festival, of the slogan «official hairdresser for women» together with the expressions «Cannes» and «Cannes Festival», and other publications falsely leading the public to believe that the hairdresser was an official partner, to the detriment of the only official hairdresser of the Cannes festival, was punished on the grounds of unfair competition and parasitism with a 50 K€ indemnity (Paris Court of Appeal, June 8, 2018, Case No 17/12912).

            These financial penalties may be combined with injunctions to cease these behaviors, and/or publication in the press under penalty.

            An even greater protection for the Paris 2024 Olympic Games

            The Paris 2024 Olympic Games are also subject to specific regulations.

            Firstly, Article L.141-5 of the French Sports Code, enacted for the benefit of the «Comité national olympique et sportif français” (CNOSF) and the “Comité de l’organisation des Jeux Olympiques et Paralympiques de Paris 2024” (COJOP), protects Olympic signs such as the national Olympic emblems, but also the emblems, the flag, motto and Olympic symbol, Olympic anthem, logo, mascot, slogan and posters of the Olympic Games, the year of the Olympic Games «city + year», the terms «Jeux Olympiques», «Olympisme», «Olympiade», «JO», «olympique», «olympien» and «olympienne». Under no circumstances may these signs be reproduced or even imitated by third-party companies. The COJOP has also published a guide to the protection of the Olympic trademark, outlining the protected symbols, trademarks and signs, as well as the protection of the official partners of the Olympic Games.

            Secondly, Law no. 2018-202 of March 26, 2018 on the organization of the 2024 Olympic and Paralympic Games adds even more specific prohibitions, such as the reservation for official sponsors of advertising space located near Olympic venues, or located on the Olympic and Paralympic torch route. This protection is unique in the context of the Olympic Games, but usually unregulated in the context of simple sporting events.

            The following practices, for example, have already been sanctioned on the above-mentioned grounds:

            • Reproduction of a logo imitating the well-known «Olympic» trademark on a clothing collection: The marketing of a collection of clothing, during the 2016 Olympic Games, bearing a logo (five hearts in the colors of the 5 Olympic colors intersecting in the image of the Olympic logo) imitating the Olympic symbol in association with the words «RIO» and «RIO 2016», was punished on the grounds of parasitism (10 K€ damages) and articles L. 141-5 of the French Sports Code (35 K€) and L. 713-1 of the French Intellectual Property Code (10 K€ damages) (Paris Judicial Court, June 7, 2018, Case No16/10605);
            • The organization of a contest on social networks using protected symbols: During the 2018 Olympic Games in PyeongChang, a car rental company organized an online game inviting Internet users to nominate the athletes they wanted to win a clock radio, associated with the hashtags «#JO2018» («#OJ2018”), «#Jeuxolympiques» (“#Olympicsgame”) or «C’est parti pour les jeux Olympiques» (“let’s go for the Olympic Games”) without authorization from the CNOSF, owner of these distinctive signs under the 2018 law and article L.141-5 of the French Sport Code and punished on these grounds with 20 K€ damages and of 10 K€ damages for parasitism (Paris Judicial Court, May 29, 2020, n°18/14115).

            These regulations offer official partners greater protection for their investments against ambush marketing practices from non-official sponsors.

            Some marketing operations might be exempted

            An analysis of case law and promotional practices nonetheless reveals the contours of certain advertising practices that could be authorized (i.e. not sanctioned by the above-mentioned texts), provided they are skillfully prepared and presented. Here are a few exemples :

            • Communication of information for advertising purposes: The use of the results of a rugby match and the announcement of a forthcoming match in a newspaper to promote a motor vehicle and its distinctive features was deemed lawful: «France 13 Angleterre 24 — the Fiat 500 congratulates England on its victory and looks forward to seeing the French team on March 9 for France-Italy» (France 13 Angleterre 24 — la Fiat 500 félicite l’Angleterre pour sa victoire et donne rendez-vous à l’équipe de France le 9 mars pour France-Italie) the judges having considered that this publication «merely reproduces a current sporting result, acquired and made public on the front page of the sports newspaper, and refers to a future match also known as already announced by the newspaper in a news article» (Court of cassation, May 20, 2014, Case No 13-12.102).
            • Sponsorship of athletes, including those taking part in Olympic competitions: Subject to compliance with the applicable regulatory framework, particularly as regards models, any company may enter into partnerships with athletes taking part in the Olympic Games, for example by donating clothing bearing the desired logo or brand, which they could wear during their participation in the various events. Athletes may also, under certain conditions, broadcast acknowledgements from their partner (even if unofficial). Rule 40 of the Olympic Charter governs the use of athletes’, coaches’ and officials’ images for advertising purposes during the Olympic Games.

            The combined legal and marketing approach to the conception and preparation of the message of such a communication operation is essential to avoid legal proceedings, particularly on the grounds of parasitism; one might therefore legitimately contemplate advertising campaigns, particularly clever, or even malicious ones.

            In this first episode of Legalmondo’s Distribution Talks series, I spoke with Ignacio Alonso, a Madrid-based lawyer with extensive experience in international commercial distribution.

            Main discussion points:

            • in Spain, there is no specific law for distribution agreements, which are governed by the general rules of the Commercial Code;
            • therefore, it is essential to draft a clear and comprehensive contract, which will be the primary source of the parties’ rights and obligations;
            • it is also good to be aware of Spanish case law on commercial distribution, which in some cases applies the law on commercial agency by analogy.
            • the most common issues involving foreign producers distributing in Spain arise at the time of termination of the relationship, mainly because case law grants the terminated distributor an indemnity of clientele or goodwill if similar prerequisites to those in the agency regulations apply.
            • another frequent dispute concerns the adequacy of the notice period for terminating the contract, especially if there is no agreement between the parties: the advice is to follow what the agency regulations stipulate and thus establish a minimum notice period of one month for each year of the contract’s duration, up to 6 months for agreements lasting more than five years;
            • regarding dispute resolution tools, mediation is an option that should be carefully considered because it is quick, inexpensive, and allows a shared solution to be sought flexibly without disrupting the business relationship.
            • if mediation fails, the parties can provide for recourse to arbitration or state court. The choice depends on the case’s specific circumstances, and one factor in favor of jurisdiction is the possibility of appeal, which is excluded in the case of arbitration.

            Go deeper

            Summary

            On 1 June 2022, Regulation EU n. 720/2022, i.e.: the new Vertical Block Exemption Regulation (hereinafter: «VBER»), replaced the previous version (Regulation EU n. 330/2010), expired on 31 May 2022.

            The new VBER and the new vertical guidelines (hereinafter: “Guidelines”) have received the main evidence gathered during the lifetime of the previous VBER and contain some relevant provisions affecting the discipline of all B2B agreements among businesses operating at different levels of the supply chain.

            In this article, we will focus on the impact of the new VBER on sales through digital platforms, listing the main novelties impacting distribution chains, including a platform for marketing products/services.

            The general discipline of vertical agreements

            Article 101(1) of the Treaty on the Functioning of the European Union (“TFEU”) prohibits all agreements that prevent, restrict, or distort competition within the EU market, listing the main types, e.g.: price fixing; market partitioning; limitations on production/development/investment; unfair terms, etc.

            However, Article 101(3) TFEU exempts from such restrictions the agreements that contribute to improving the EU market, to be identified in a special category Regulation.

            The VBER establishes the category of vertical agreements (i.e., agreements between businesses operating at different levels of the supply chain), determining which of these agreements are exempted from Article 101(1) TFEU prohibition.

            In short, vertical agreements are presumed to be exempted (and therefore valid) if they do not contain so-called «hardcore restrictions» (i.e., severe restrictions of competition, such as an absolute ban on sales in a territory or the manufacturer’s determination of the distributor’s resale price) and if neither party’s market share exceeds 30%.

            The exempted agreements benefit from what has been termed the “safe harbour” of the VBER. In contrast, the others will be subject to the general prohibition of Article 101(1) TFEU unless they can benefit from an individual exemption under Article 101(3) TFUE.

            The innovations introduced by the new VBER to online platforms

            The first relevant aspect concerns the classification of the platforms, as the European Commission excluded that the online platform generally meets the conditions to be categorized as agency agreements.

            While there have never been doubts concerning platforms that operate by purchasing and reselling products (classic example: Amazon Retail), some have arisen concerning those platforms that merely promote the products of third parties without carrying out the activity of resale (classic example: Amazon Marketplace).

            With this statement, the European Commission wanted to clear the field of doubt, making explicit that intermediation service providers (such as online platforms) qualify as suppliers (as opposed to commercial agents) under the VBER. This reflects the approach of Regulation (EU) 2019/1150 («P2B Regulation»), which has, for the first time, dictated a specific discipline for digital platforms. It provided for a set of rules to create a “fair, transparent, and predictable environment” for smaller businesses and customers” and for the rationale of the Digital Markets Act, banning certain practices used by large platforms acting as “gatekeepers”.

            Therefore, all contracts concluded between manufacturers and platforms (defined as ‘providers of online intermediation services’) are subject to all the restrictions imposed by the VBER. These include the price, the territories to which or the customers to whom the intermediated goods or services may be sold, or the restrictions relating to online advertising and selling.

            Thus, to give an example, the operator of a platform may not impose a fixed or minimum sale price for a transaction promoted through the platform.

            The second most impactful aspect concerns hybrid platforms, i.e., competing in the relevant market to sell intermediated goods or services. Amazon is the most well-known example, as it is a provider of intermediation services (“Amazon Marketplace”), and – at the same time – it distributes the products of those parties (“Amazon Retail”). We have previously explored the distinction between those 2 business models (and the consequences in terms of intellectual property infringement) here.

            The new VBER explicitly does not apply to hybrid platforms. Therefore, the agreements concluded among such platforms and manufacturers are subject to the limitations of the TFEU, as such providers may have the incentive to favour their sales and the ability to influence the outcome of competition between undertakings that use their online intermediation services.

            Those agreements must be assessed individually under Article 101 of the TFEU, as they do not necessarily restrict competition within the meaning of TFEU, or they may fulfil the conditions of an individual exemption under Article 101(3) TFUE.

            The third very relevant aspect concerns the parity obligations (also referred to as Most Favoured Nation Clauses, or MFNs), i.e., the contract provisions in which a seller (directly or indirectly) agrees to give the buyer the best terms it makes available to any other buyer.

            Indeed, platforms’ contractual terms often contain parity obligation clauses to prevent users from offering their products/services at lower prices or on better conditions on their websites or other platforms.

            The new VBER deals explicitly with parity clauses, making a distinction between clauses whose purpose is to prohibit users of a platform from selling goods or services on more favourable terms through competing platforms (so-called “wide parity clauses”), and clauses that prohibit sales on more favourable terms only in respect of channels operated directly by the users (so-called “narrow parity clauses”).

            Wide parity clauses do not benefit from the VBER exemption; therefore, such obligations must be assessed individually under Article 101(3) TFEU.

            On the other hand, narrow parity clauses continue to benefit from the exemption already granted by the old VBER if they do not exceed the threshold of 30% of the relevant market share set out in Article 3 of the new VBER. However, the new Guidelines warn against using overly narrow parity obligations by online platforms covering a significant share of users, stating that if there is no evidence of pro-competitive effects, the benefit of the block exemption is likely to be withdrawn.

            Impact and takeaways

            The new VBER entered into force on 1 June 2022 and is already applicable to agreements signed after that date. Agreements already in force on 31 May 2022 that satisfy the conditions for exemption under the current VBER but do not satisfy the requirements under the new VBER shall benefit from a one-year transitional period.

            The new regime will be the playing field for all platform-driven sales over the next 12 years (the regulation expires on 31 May 2034). Currently, the rather restrictive novelties on hybrid platforms and parity obligations will likely necessitate substantial revisions to existing trade agreements.

            Here, then, are some tips for managing contracts and relationships with online platforms:

            • the new VBER is the right opportunity to review the existing distribution networks. The revision will have to consider not only the new regulatory limits (e.g., the ban on wide parity clauses) but also the new discipline reserved for hybrid platforms and dual distribution to coordinate the different distribution channels as efficiently as possible, by the stakes set by the new VBER and the Guidelines;
            • platforms are likely to play an even greater role during the next decade; it is, therefore, essential to consider these sales channels from the outset, coordinating them with the other existing ones (retail, direct sales, distributors, etc.) to avoid jeopardizing the marketing of products or services;
            • the European legislator’s attention toward platforms is growing. Looking up from the VBER, one should not forget that they are subject to a multitude of other European regulations, which are gradually regulating the sector and which must be considered when concluding contracts with platforms. The reference is not only to the recent Digital Market Act and P2B Regulation but also to the protection of IP rights on platforms, which — as we have already seen — is still an open issue.

            Summary

            To avoid disputes with important suppliers, it is advisable to plan purchases over the medium and long term and not operate solely on the basis of orders and order confirmations. Planning makes it possible to agree on the duration of the ‘supply agreement, minimum volumes of products to be delivered and delivery schedules, prices, and the conditions under which prices can be varied over time.
            The use of a framework purchase agreement can help avoid future uncertainties and allows various options to be used to manage commodity price fluctuations depending on the type of products , such as automatic price indexing or agreement to renegotiate in the event of commodity fluctuations beyond a certain set tolerance period.

            I read in a press release: “These days, the glass industry is sending wine companies new unilateral contract amendments with price changes of 20%…”

            What can one do to avoid the imposition of price increases by suppliers? 

            • Know your rights and act in an informed manner
            • Plan and organise your supply chain

            Does my supplier have the right to increase prices?

            If contracts have already been concluded, e.g., orders have already been confirmed by the supplier, the answer is often no.

            It is not legitimate to request a price change. It is much less legitimate to communicate it unilaterally, with the threat of cancelling the order or not delivering the goods if the request is not granted.

            What if he tells me it is force majeure?

            That’s wrong: increased costs are not a force majeure but rather an unforeseen excessive onerousness, which hardly happens.

            What if the supplier canceled the order, unilaterally increased the price, or did not deliver the goods?

            He would be in breach of contract and liable to pay damages for violating his contractual obligations.

            How can one avoid a tug-of-war with suppliers?

            The tools are there. You have to know them and use them.

            It is necessary to plan purchases in the medium term, agreeing with suppliers on a schedule in which are set out:

            • the quantities of products to be ordered
            • the delivery terms
            • the durationof the agreement
            • the pricesof the products or raw materials
            • the conditions under which prices can be varied

            There is a very effective instrument to do so: a framework purchase agreement.

            Using a framework purchase agreement, the parties negotiate the above elements, which will be valid for the agreed period.

            Once the agreement is concluded, product orders will follow, governed by the framework agreement, without the need to renegotiate the content of individual deliveries each time.

            For an in-depth discussion of this contract, see this article.

            • “Yes, but my suppliers will never sign it!”

            Why not? Ask them to explain the reason.

            This type of agreement is in the interest of both parties. It allows planning future orders and grants certainty as to whether, when, and how much the parties can change the price.

            In contrast, acting without written agreements forces the parties to operate in an environment of uncertainty. Suppliers can request price increases from one day to the next and refuse supply if the changes are not accepted.

            How are price changes for future supplies regulated?

            Depending on the type of products or services and the raw materials or energy relevant in determining the final price, there are several possibilities.

            • The first option is to index the price automatically. E.g., if the cost of a barrel of Brent oil increases/decreases by 10%, the party concerned is entitled to request a corresponding adjustment of the product’s price in all orders placed as of the following week.
            • An alternative is to provide for a price renegotiation in the event of a fluctuation of the reference commodity. E.g., suppose the LME Aluminium index of the London Stock Exchange increases above a certain threshold. In that case, the interested party may request a price renegotiationfor orders in the period following the increase.

            What if the parties do not agree on new prices?

            It is possible to terminate the contract or refer the price determination to a third party, who would act as arbitrator and set the new prices for future orders.

            Summary

            The framework supply contract is an agreement that regulates a series of future sales and purchases between two parties (customer and supplier) that take place over a certain period of time. This agreement determines the main elements of future contracts such as price, product volumes, delivery terms, technical or quality specifications, and the duration of the agreement.

            The framework contract is useful for ensuring continuity of supply from one or more suppliers of a certain product that is essential for planning industrial or commercial activity. While the general terms and conditions of purchase or sale are the rules that apply to all suppliers or customers of the company. The framework contract is advisable to be concluded with essential suppliers for the continuity of business activity, in general or in relation to a particular project.

            What I am talking about in this article:

            • What is the supply framework agreement?
            • What is the function of the supply framework agreement?
            • The difference with the general conditions of sale or purchase
            • When to enter a purchase framework agreement?
            • When is it beneficial to conclude a sales framework agreement?
            • The content of the supply framework agreement
            • Price revision clause and hardship
            • Delivery terms in the supply framework agreement
            • The Force Majeure clause in international sales contracts
            • International sales: applicable law and dispute resolution arrangements

            What is a framework supply agreement?

            It is an agreement that regulates a series of future sales and purchases between two parties (customer and supplier), which will take place over a certain period.

            It is therefore referred to as a «framework agreement» because it is an agreement that establishes the rules of a future series of sales and purchase contracts, determining their primary elements (such as the price, the volumes of products to be sold and purchased, the delivery terms of the products, and the duration of the contract).

            After concluding the framework agreement, the parties will exchange orders and order confirmations, entering a series of autonomous sales contracts without re-discussing the covenants already defined in the framework agreement.

            Depending on one’s point of view, this agreement is also called a sales framework agreement (if the seller/supplier uses it) or a purchasing framework agreement (if the customer proposes it).

            What is the function of the framework supply agreement?

            It is helpful to arrange a framework agreement in all cases where the parties intend to proceed with a series of purchases/sales of products over time and are interested in giving stability to the commercial agreement by determining its main elements.

            In particular, the purchase framework agreement may be helpful to a company that wishes to ensure continuity of supply from one or more suppliers of a specific product that is essential for planning its industrial or commercial activity (raw material, semi-finished product, component).

            By concluding the framework agreement, the company can obtain, for example, a commitment from the supplier to supply a particular minimum volume of products, at a specific price, with agreed terms and technical specifications, for a certain period.

            This agreement is also beneficial, at the same time, to the seller/supplier, which can plan sales for that period and organize, in turn, the supply chain that enables it to procure the raw materials and components necessary to produce the products.

            What is the difference between a purchase or sales framework agreement and the general terms and conditions?

            Whereas the framework agreement is an agreement that is used with one or more suppliers for a specific product and a certain time frame, determining the essential elements of future contracts, the general purchase (or sales) conditions are the rules that apply to all the company’s suppliers (or customers).

            The first agreement, therefore, is negotiated and defined on a case-by-case basis. At the same time, the general conditions are prepared unilaterally by the company, and the customers or suppliers (depending on whether they are sales or purchase conditions) adhere to and accept that the general conditions apply to the individual order and/or future contracts.

            The two agreements might also co-exist: in that case; it is a good idea to specify which contract should prevail in the event of a discrepancy between the different provisions (usually, this hierarchy is envisaged, ranging from the special to the general: order — order confirmation; framework agreement; general terms and conditions of purchase).

            When is it important to conclude a purchase framework agreement?

            It is beneficial to conclude this agreement when dealing with a mono-supplier or a supplier that would be very difficult to replace if it stopped selling products to the purchasing company.

            The risks one aims to avoid or diminish are so-called stock-outs, i.e., supply interruptions due to the supplier’s lack of availability of products or because the products are available, but the parties cannot agree on the delivery time or sales price.

            Another result that can be achieved is to bind a strategic supplier for a certain period by agreeing that it will reserve an agreed share of production for the buyer on predetermined terms and conditions and avoid competition with offers from third parties interested in the products for the duration of the agreement.

            When is it helpful to conclude a sales framework agreement?

            This agreement allows the seller/supplier to plan sales to a particular customer and thus to plan and organize its production and logistical capacity for the agreed period, avoiding extra costs or delays.

            Planning sales also makes it possible to correctly manage financial obligations and cash flows with a medium-term vision, harmonizing commitments and investments with the sales to one’s customers.

            What is the content of the supply framework agreement?

            There is no standard model of this agreement, which originated from business practice to meet the requirements indicated above.

            Generally, the agreement provides for a fixed period (e.g., 12 months) in which the parties undertake to conclude a series of purchases and sales of products, determining the price and terms of supply and the main covenants of future sales contracts.

            The most important clauses are:

            • the identification of products and technical specifications (often identified in an annex)
            • the minimum/maximum volume of supplies
            • the possible obligation to purchase/sell a minimum/maximum volume of products
            • the schedule of supplies
            • the delivery times
            • the determination of the price and the conditions for its possible modification (see also the next paragraph)
            • impediments to performance (Force Majeure)
            • cases of Hardship
            • penalties for delay or non-performance or for failure to achieve the agreed volumes
            • the hierarchy between the framework agreement and the orders and any other contracts between the parties
            • applicable law and dispute resolution (especially in international agreements)

            How to handle price revision in a supply contract?

            A crucial clause, especially in times of strong fluctuations in the prices of raw materials, transport, and energy, is the price revision clause.

            In the absence of an agreement on this issue, the parties bear the risk of a price increase by undertaking to respect the conditions initially agreed upon; except in exceptional cases (where the fluctuation is strong, affects a short period, and is caused by unforeseeable events), it isn’t straightforward to invoke the supervening excessive onerousness, which allows renegotiating the price, or the contract to be terminated.

            To avoid the uncertainty generated by price fluctuations, it is advisable to agree in the contract on the mechanisms for revising the price (e.g., automatic indexing following the quotation of raw materials). The so-called Hardship or Excessive Onerousness clause establishes what price fluctuation limits are accepted by the parties and what happens if the variations go beyond these limits, providing for the obligation to renegotiate the price or the termination of the contract if no agreement is reached within a certain period.

            How to manage delivery terms in a supply agreement?

            Another fundamental pact in a medium to long-term supply relationship concerns delivery terms. In this case, it is necessary to reconcile the purchaser’s interest in respecting the agreed dates with the supplier’s interest in avoiding claims for damages in the event of a delay, especially in the case of sales requiring intercontinental transport.

            The first thing to be clarified in this regard concerns the nature of delivery deadlines: are they essential or indicative? In the first case, the party affected has the right to terminate (i.e., wind up) the agreement in the event of non-compliance with the term; in the second case, due diligence, information, and timely notification of delays may be required, whereas termination is not a remedy that may be automatically invoked in the event of a delay.

            A useful instrument in this regard is the penalty clause: with this covenant, it is established that for each day/week/month of delay, a sum of money is due by way of damages in favor of the party harmed by the delay.

            If quantified correctly and not excessively, the penalty is helpful for both parties because it makes it possible to predict the damages that may be claimed for the delay, quantifying them in a fair and determined sum. Consequently, the seller is not exposed to claims for damages related to factors beyond his control. At the same time, the buyer can easily calculate the compensation for the delay without the need for further proof.

            The same mechanism, among other things, may be adopted to govern the buyer’s delay in accepting delivery of the goods.

            Finally, it is a good idea to specify the limit of the penalty (e.g.,10 percent of the price of the goods) and a maximum period of grace for the delay, beyond which the party concerned is entitled to terminate the contract by retaining the penalty.

            The Force Majeure clause in international sales contracts

            A situation that is often confused with excessive onerousness, but is, in fact, quite different, is that of Force Majeure, i.e., the supervening impossibility of performance of the contractual obligation due to any event beyond the reasonable control of the party affected, which could not have been reasonably foreseen and the effects of which cannot be overcome by reasonable efforts.

            The function of this clause is to set forth clearly when the parties consider that Force Majeure may be invoked, what specific events are included (e.g., a lock-down of the production plant by order of the authority), and what are the consequences for the parties’ obligations (e.g., suspension of the obligation for a certain period, as long as the cause of impossibility of performance lasts, after which the party affected by performance may declare its intention to dissolve the contract).

            If the wording of this clause is general (as is often the case), the risk is that it will be of little use; it is also advisable to check that the regulation of force majeure complies with the law applicable to the contract (here an in-depth analysis indicating the regime provided for by 42 national laws).

            Applicable law and dispute resolution clauses

            Suppose the customer or supplier is based abroad. In that case, several significant differences must be borne in mind: the first is the agreement’s language, which must be intelligible to the foreign party, therefore usually in English or another language familiar to the parties, possibly also in two languages with parallel text.

            The second issue concerns the applicable law, which should be expressly indicated in the agreement. This subject matter is vast, and here we can say that the decision on the applicable law must be made on a case-by-case basis, intentionally: in fact, it is not always convenient to recall the application of the law of one’s own country.

            In most international sales contracts, the 1980 Vienna Convention on the International Sale of Goods («CISG») applies, a uniform law that is balanced, clear, and easy to understand. Therefore, it is not advisable to exclude it.

            Finally, in a supply framework agreement with an international supplier, it is important to identify the method of dispute resolution: no solution fits all. Choosing a country’s jurisdiction is not always the right decision (indeed, it can often prove counterproductive).

            Eventually, after more than 30 years of negotiations, the world is now looking at the first pan-African trade agreement, which entered into force in 2019: the African Continental Free Trade Area, or AfCFTA.

            Africa, with its 55 countries and around 1.3 billion inhabitants, is the second largest continent in the world after Asia. The continent’s potential is huge: more than 50% of Africa’s population is under 20 years old and the population is growing at the fastest rate in the world. By 2050, one in four new-born babies is expected to be African. In addition, the continent is rich in fertile soil and raw materials.

            For Western investors, Africa has become considerably more important in recent years. As a result, a considerable amount of international trade has emerged, not least promoted by the “Compact with Africa” initiative adopted by the G20 countries in 2017, also known as the “Marshall Plan with Africa”. Its focus is on expanding Africa’s economic cooperation with the G20 countries by strengthening private investment.

            At the same time, however, intra-African trade has stagnated so far: partly still existing high intra-African tariffs, non-tariff barriers (NTBs), weak infrastructure, corruption, cumbersome bureaucracy, as well as non-transparent and inconsistent regulations, ensured that interregional exports could hardly develop and most recently accounted for only 17 % of the pan-African trade and only 0.36 % of world trade. It’s already been a long time since the African Union (AU) had put the creation of a common trade area on its agenda.

            What is behind AfCFTA?

            The establishment of a pan-African trade area was preceded by decades of negotiations, which finally resulted in the entry into force of the AfCFTA on 30 May 2019.

            AfCFTA is a free trade area established by its members, which — with the exception of Eritrea — covers the entire African continent and is thus the largest free trade area in the world by number of member states after the World Trade Organisation (WTO).

            How the common market was to be structured in detail was the subject of several individual negotiations, which were discussed in Phases I and II.

            Phase I comprises the negotiations on three protocols and is almost completed.

            The Protocol on Trade in Goods

            This protocol provides for the elimination of 90 % of all intra-African tariffs in all product categories within five years of entry into force. Of these, up to 7 % of products can be classified as sensitive goods, which are subject to a tariff elimination period of ten years. For the least developed countries (LDCs), the preparation period is extended from five to ten years and for sensitive products from ten to thirteen years, provided they demonstrate their need. The remaining 3 % of tariffs are fully exempted from tariff dismantling.

            A prerequisite for tariff dismantling is the clear delimitation of rules of origin. Otherwise, imports from third countries could benefit from the negotiated tariff advantages. Agreement has already been reached on most of the rules of origin.

            The Protocol on Trade in Services

            The AU General Assembly has so far agreed on five priority areas (transport, communications, tourism, financial and business services) and guidelines for the commitments applicable to them.  47 AU member states have so far submitted their offers for specific commitments and the review of 28 has been completed. In addition, negotiations, for example, on the recognition of professional qualifications, are still ongoing.

            The Protocol on Dispute Settlement

            With the Protocol on Rules and Procedures Governing the Dispute Settlement, the AfCFTA creates a dispute settlement system modelled on the WTO Dispute Settlement Understanding. Under this, the Dispute Settlement Body (DSB) administers the AfCFTA Dispute Settlement Protocol and establishes an Adjudicating Panel (Panel) and an Appellate Body (AB). The DSB is composed of a representative of each member state and intervenes as soon as there are differences of opinion between the contracting states on the interpretation and/or application of the agreement with regard to their rights and obligations.

            For the remaining Phase II, negotiations are planned on investment and competition policy, intellectual property issues, online trade and women and youth in trade, the results of which will be reflected in further protocols.

            The implementation of the AfCFTA

            In principle, the implementation of trade under a trade agreement can only begin once the legal framework has been finally clarified. However, AU Heads of State and Government agreed in December 2020 that trade can begin for goods for which negotiations have been finalised. Under this «transitional arrangement«, after a pandemic-related postponement, the first AfCFTA trade settlement from Ghana to South Africa took place on 4 January 2021.

            Building blocks of the AfCFTA

            All 55 members of the AU were involved in the AfCFTA negotiations. Of these, 47 belong to at least one — and some to more than one — recognised Regional Economic Communities (RECs), which, according to the preamble of the AfCFTA agreement, are to continue as building blocks of the trade agreement. It was therefore they who acted as the voice of their respective members in the AfCFTA negotiations. The AfCFTA provides for RECs to retain their legal instruments, institutions and dispute settlement mechanisms.

            Within the AU, there are eight recognised RECs, overlapping in some countries, which are either preferential trade agreements (Free Trade Agreements — FTAs) or customs unions.

            Under the AfCFTA, the RECs have various responsibilities. These are in particular:

            • coordinating negotiating positions and assisting member states in the implementation of the agreement.
            • solution-oriented mediation in the event of disagreements between member states
            • supporting member states in the harmonisation of tariffs and other border protection regulations
            • promoting the use of the AfCFTA notification procedure to reduce NTBs

            Outlook of the AfCFTA

            The AfCFTA has the potential to facilitate Africa’s integration into the global economy and creates the real possibility of a realignment of international integration and cooperation patterns.

            A trade agreement alone is no guarantee of economic success. For the agreement to achieve the predicted breakthrough, member states must have the political will to implement the new rules consistently and create the necessary capacity to do so. In particular, the short-term removal of trade barriers and the creation of a sustainable physical and digital infrastructure are likely to be crucial.

            If you are interested in the AfCFTA, you can read an extended version of this article here.

            The Legalmondo Africa Desk

            We help companies invest and do business in Africa with our experts in Algeria, Tunisia, Morocco, Senegal, Sudan, Egypt, Ghana, Lybia, Côte d’Ivoire, Cameroon, and Malawi.

            We can also assist foreign entities in African countries where we are not directly present with an office through our network of local partners.

            How it works

            • We set up a meeting (in person or online) with one of our experts to understand the client’s needs.
            • Once we start working together, we follow the client with a dedicated counsel for all its legal needs (single cases, or ongoing legal assistance)

            Get in touch to know more.

            Summary

            Political, environmental or health crises (like the Covid-19 outbreak and the attack of Ukraine by the Russian army) can cause an increase in the price of raw materials and components and generalized inflation. Both suppliers and distributors find themselves faced with problems related to the often sudden and very substantial increase in the price of their own supplies. French law lays down specific rules in that regard.

            Two main situations can be distinguished: where the parties have just established a simple flow of orders and where the parties have concluded a framework agreement fixing firm prices for a fixed term.

            Price increase in a business relationship

            The situation is as follows: the parties have not concluded a framework agreement, each sales contract concluded (each order) is governed by the General T&Cs of the supplier; the latter has not undertaken to maintain the prices for a minimum period and applies the prices of the current tariff.

            In principle, the supplier can modify its prices at any time by sending a new tariff. However, it must give written and reasonable notice in accordance with the provisions of Article L. 442-1.II of the Commercial Code, before the price increase comes into effect. Failure to respect sufficient notice, it could be accused of a sudden «partial» termination of commercial relations (and subject to damages).

            A sudden termination following a price increase would be characterized when the following conditions are met:

            • the commercial relationship must be established: broader concept than the simple contract, taking into account the duration but also the importance and the regularity of the exchanges between the parties;
            • the price increase must be assimilated to a rupture: it is mainly the size of the price increase (+1%, 10% or 25%?) that will lead a judge to determine whether the increase constitutes a «partial» termination (in the event of a substantial modification of the relationship which is nevertheless maintained) or a total termination (if the increase is such that it involves a termination of the relationship) or if it does not constitute a termination (if the increase is minimal);
            • the notice granted is insufficient by comparing the duration of the notice actually granted with that of the notice in accordance with Article L. 442-1.II, taking into account in particular the duration of the commercial relationship and the possible dependence of the victim of the termination with respect to the other party.

            Article L. 442-1.II must be respected as soon as French law applies to the relation. In international business relations, to know how to deal with Article L.442-1.II and conflicts of laws and jurisdiction of competent courts, please see our previous article published on Legalmondo blog.

            Price increase in a framework contract

            If the parties have concluded a framework contract (such as supply, manufacturing, …) for several years and the supplier has committed to fixed prices, how, in this case, can it change these prices?

            In addition to any indexation clause or renegotiation (hardship) clause which would be stipulated in the contract (and besides specific legal provisions applicable to special agreements as to their nature or economic sector), the supplier may seek to avail himself of the legal mechanism of «unforeseeability» provided for by article 1195 of the civil code.

            Three prerequisites must be cumulatively met:

            • an unforeseeable change in circumstances at the time of the conclusion of the contract (i.e.: the parties could not reasonably anticipate this upheaval);
            • a performance of the contract that has become excessively onerous (i.e.: beyond the simple difficulty, the upheaval must cause a disproportionate imbalance);
            • the absence of acceptance of these risks by the debtor of the obligation when concluding the contract.

            The implementation of this mechanism must stick to the following steps:

            • first, the party in difficulty must request the renegotiation of the contract from its co-contracting party;
            • then, in the event of failure of the negotiation or refusal to negotiate by the other party, the parties can (i) agree together on the termination of the contract, on the date and under the conditions that they determine, or (ii) ask together the competent judge to adapt it;
            • finally, in the absence of agreement between the parties on one of the two aforementioned options, within a reasonable time, the judge, seized by one of the parties, may revise the contract or terminate it, on the date and under the conditions that he will set.

            The party wishing to implement this legal mechanism must also anticipate the following points:

            • article 1195 of the Civil Code only applies to contracts concluded on or after October 1, 2016 (or renewed after this date). Judges do not have the power to adapt or rebalance contracts concluded before this date;
            • this provision is not of public order. Therefore, the parties can exclude it or modify its conditions of application and/or implementation (the most common being the framework of the powers of the judge);
            • during the renegotiation, the supplier must continue to sell at the initial price because, unlike force majeure, unforeseen circumstances do not lead to the suspension of compliance with the obligations.

            Key takeaways:

            • analyse carefully the framework of the commercial relationship before deciding to notify a price increase, in order to identify whether the prices are firm for a minimum period and the contractual levers for renegotiation;
            • correctly anticipate the length of notice that must be given to the partner before the entry into force of the new pricing conditions, depending on the length of the relationship and the degree of dependence;
            • document the causes of the price increase;
            • check if and how the legal mechanism of unforeseeability has been amended or excluded by the framework contract or the General T&Cs;
            • consider alternatives strategies, possibly based on stopping production/delivery justified by a force majeure event or on the significant imbalance of the contractual provisions.

            Joaquin Rodriguez

            Области практики

            • Корпоративный
            • Интеллектуальная собственность
            • Международная торговля
            • Инвестиции
            Связаться Joaquin
            Franchising Spain - Legalmondo

            Spain | Franchising, Theory Of Risk and Guarantees By Franchisee
            • Распространение
            • Судебная практика
            • Испания
            Vietnam - Legalmondo

            Vietnam on the EU Tax Blacklist: A Guide for EU Buyers
            • Корпоративный
            • Распространение
            • Вьетнам
            Brazil - Legalmondo

            Brazil’s New Digital Child Protection Law: Practical Implications for Foreign Tech Companies
            • Конфиденциальность - Защита данных
            • Бразилия
            France - Legalmondo

            France | Pre-contractual disclosure in distribution and franchise agreements
            • Распространение
            • Франчайзинг
            • Франция
            International distribution agreements - Key Clauses and Lessons learned from the history of Nike - Legalmondo

            International distribution agreements | Key Clauses and Lessons learned from the history of Nike
            • Контракты
            • Распространение
            • Италия
            Saudi Arabia - Legalmondo

            How to Joint Venture in Saudi Arabia
            • Контракты
            • Корпоративный
            • Саудовская Аравия
            Contracts Responsibility - Legalmondo

            Corporate Sustainability in Practice – How Contracts Shape Responsibility
            • Контракты
            • Распространение
            • Finland
            Legalmondo - Oil prices

            Rising Oil Prices and International Contracts: How to Manage Hardship in Global Supply Chains
            • Контракты
            • Распространение
            • Италия
            African Continental Free Trade-Agreement - Legalmondo

            Why the African Continental Free Trade Agreement has not yet turned into Reality — and What That Means for Egypt
            • Распространение
            • Иностранные инвестиции
            • Египет
            Spain lawyer-coach - Legalmondo

            The lawyer-coach: a new way of practising
            • Альтернативное разрешение споров
            • Контракты
            • Испания
            Spain - Legalmondo

            Agency and distribution agreements. Phrases to avoid when ending a business relationship without a written contract
            • Без категории
            • Контракты
            • Испания
            Business people Legalmondo

            Spain | Appropriate Means of Dispute Resolution (ADR) as a prerequisite for litigation
            • Альтернативное разрешение споров
            • Судебная практика
            • Испания
            Spain Influencer-Legalmondo

            Spain – Can an influencer be considered a «commercial agent»?
            • Без категории
            • Распространение
            • Испания
            Spain advance payment - Legalmondo

            Spain — Is it possible to advance payment of customer indemnity in agency contracts?
            • Без категории
            • Испания
            Companies in Spain - Legalmondo

            Spain — Powers of Representation of Companies
            • Корпоративный
            • Испания
            Spain - Legalmondo

            Spain | Clientele Compensation for Agents and Distributors
            • Без категории
            • Контракты
            • Испания
            Debt - Legalmondo

            International debt recovery: risk prevention and best practices
            • Распространение
            • Судебная практика
            • Испания
            mediation - legalmondo

            The importance of Mediation in Distribution Contracts
            • Альтернативное разрешение споров
            • Распространение
            • Испания

            Scrivi a Joaquin





              Read the privacy policy of Legalmondo.
              This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

              Spain | Clientele Compensation for Agents and Distributors

              02.02.2021

              • Испания
              • Без категории
              • Контракты
              • Распространение

              The commercial agent has the right to obtain certain information about the sales of the principal. The Spanish Law on Agency Contracts provides (15.2 LCA) that the agent has the right to demand to see the accounts of the principal in order to verify all matters relating to the commissions due to him. And also, to be provided with the information available to the principal and necessary to verify the amount of such commissions.

              This article is in line with the 1986 Commercial Agents Directive, according to which (12.3) the agent is entitled to demand to be provided with all information at the disposal of the principal, particularly an extract from the books of account, which is necessary to verify the amount of commission due to the agent. This may not be altered to the detriment of the commercial agent by agreement.

              The question is, does this right remain even after the termination of the agency contract? In other words: once the agency contract is terminated, can the agent request the information and documentation mentioned in these articles and is the Principal obliged to provide it?

              In our opinion, the rule does not say anything that limits this right, rather the opposite is to be expected. Therefore, to the extent that there is still any possible commission that may arise from such verification, the answer must be yes. Let us see.

              The right to demand the production of accounts exists so that the agent can verify the amount of commissions. And the agent is entitled to commissions for acts and operations concluded during the term of the contract (art. 12 LCA), but also for acts or operations concluded after the termination of the contract (art. 13 LCA), and for operations not carried out due to circumstances attributable to the principal (art. 17 LCA). In addition, the agent is entitled to have the commission accrued at the time when the act or transaction should have been executed (art. 14 LCA).

              All these transactions can take place after the conclusion of the contract. Consider the usual situation where orders are placed during the contract but are accepted or executed afterwards. To reduce the agent’s right to be informed only during the term of the contract would be to limit his entitlement to the corresponding commission unduly. And it should be borne in mind that the amount of the commissions during the last five years may also influence the calculation of the client (goodwill) indemnity (art. 28 LCA), so that the agent’s interest in knowing them is twofold: what he would receive as commission, and what could increase the basis for future indemnity.

              This has been confirmed, for example, by the Provincial Court (Audiencia Provincial) of Madrid (AAP 227/2017, of 29 June [ECLI:ES:APM:2017:2873A]) which textually states:

              […] art. 15.2 of the Agency Contract Act provides for the right of the agent to demand the exhibition of the Principal’s accounts in the particulars necessary to verify everything relating to the commissions corresponding to him, as well as to be provided with the information available to the Principal and necessary to verify the amount. This does not prevent, […], the agency contract having already been terminated, as this does not imply that commissions would cease to accrue for policies, contracted with the mediation of the agent, which remain in force.

              The question then arises as to whether this right to information is unlimited in time. And here the answer would be in the negative. The limitation of the right to receive information would be linked to the statute of limitations of the right to claim the corresponding commission. If the right to receive the commission were undoubtedly time-barred, it could be argued that it would not be possible to receive information about it. But for such an exception, the statute of limitations must be clear, therefore, taking into account possible interruptions due to claims, even extrajudicial ones. In case of doubt, it will be necessary to recognise the right to demand the information, without prejudice to later invoking and recognising the impossibility of claiming the commission if the right is time-barred. And for this we must consider the limitation period for claiming commissions (in general, three years) and that of the right to claim compensation for clientele (one year).

              In short: it does not seem that the right to receive information and to examine the principal’s documentation is limited by the term of the agency contract; although, on the other hand, it would be appropriate to analyse the possible limitation period for claiming commissions. In the absence of a clear answer to this question, the right to information should, in our opinion, prevail, without prejudice to the fact that the result may not entitle the claim because it is time-barred.

              SUMMARY: In large-scale events such as the Paris Olympics certain companies will attempt to «wildly» associate their brand with the event through a practice called «ambush marketing», defined by caselaw as «an advertising strategy implemented by a company in order to associate its commercial image with that of an event, and thus to benefit from the media impact of said event, without paying the related rights and without first obtaining the event organizer’s authorization» (Paris Court of Appeal, June 8, 2018, Case No 17/12912). A risky and punishable practice, that might sometimes yet be an option yet.

              Key takeaways

              • Ambush marketing might be a punished practice but is not prohibited as such;
              • As a counterpart of their investment, sponsors and official partners benefit from an extensive legal protection against all forms of ambush marketing in the event concerned, through various general texts (counterfeiting, parasitism, intellectual property) or more specific ones (e.g. sport law);
              • The Olympics Games are subject to specific regulations that further strengthen this protection, particularly in terms of intellectual property.
              • But these rights are not absolute, and they are still thin opportunities for astute ambush marketing.

              The protection offered to sponsors and official partners of sporting and cultural events from ambush marketing

              With a budget of over 4 billion euros, the 2024 Olympic and Paralympic Games are financed mostly by various official partners and sponsors, who in return benefit from a right to use Olympic and Paralympic properties to be able to associate their own brand image and distinctive signs with these events.

              Ambush marketing is not punishable as such under French law, but several scattered texts provide extensive protection against ambush marketing for sponsors and partners of sporting or cultural continental-wide or world-wide events. Indeed, sponsors are legitimately entitled to peacefully enjoy the rights offered to them in return for large-scale investments in events such as the FIFA or rugby World Cups, or the Olympic Games.

              In particular, official sponsors and organizers of such events may invoke:

              • the «classic» protections offered by intellectual property law (trademark law and copyright) in the context of infringement actions based on the French Intellectual Property Code,
              • tort law (parasitism and unfair competition based on article 1240 of the French Civil Code);
              • consumer law (misleading commercial practices) based on the French Consumer Code,
              • but also more specific texts such as the protection of the exploitation rights of sports federations and sports event organizers derived from the events or competitions they organize, as set out in article L.333-1 of the French Sports Code, which gives sports event organizers an exploitation monopoly.

              The following ambush marketing practices were sanctioned on the abovementioned grounds:

              • The use of a tennis competition name and of the trademark associated with it during the sporting event: The organization of online bets, by an online betting operator, on the Roland Garros tournament, using the protected sign and trademark Roland Garros to target the matches on which the bets were organized. The unlawful exploitation of the sporting event, was punished and 400 K€ were allowed as damages, based on article L. 333-1 of the French Sports Code, since only the French Tennis Federation (F.F.T.) owns the right to exploit Roland Garros. The use of the trademark was also punished as counterfeiting (with 300 K€ damages) and parasitism (with 500 K€ damages) (Paris Court of Appeal, Oct. 14, 2009, Case No 08/19179);
              • An advertising campaign taking place during a film festival and reproducing the event’s trademark: The organization, during the Cannes Film Festival, of a digital advertising campaign by a cosmetics brand through the publication on its social networks of videos showing the beauty makeovers of the brand’s muses, in some of which the official poster of the Cannes Film Festival was visible, one of which reproduced the registered trademark of the “Palme d’Or”, was punished on the grounds of copyright infringement and parasitism with a 50 K€ indemnity (Paris Judicial Court, Dec. 11, 2020, Case No19/08543);
              • An advertising campaign aimed at falsely claiming to be an official partner of an event: The use, during the Cannes Film Festival, of the slogan «official hairdresser for women» together with the expressions «Cannes» and «Cannes Festival», and other publications falsely leading the public to believe that the hairdresser was an official partner, to the detriment of the only official hairdresser of the Cannes festival, was punished on the grounds of unfair competition and parasitism with a 50 K€ indemnity (Paris Court of Appeal, June 8, 2018, Case No 17/12912).

              These financial penalties may be combined with injunctions to cease these behaviors, and/or publication in the press under penalty.

              An even greater protection for the Paris 2024 Olympic Games

              The Paris 2024 Olympic Games are also subject to specific regulations.

              Firstly, Article L.141-5 of the French Sports Code, enacted for the benefit of the «Comité national olympique et sportif français” (CNOSF) and the “Comité de l’organisation des Jeux Olympiques et Paralympiques de Paris 2024” (COJOP), protects Olympic signs such as the national Olympic emblems, but also the emblems, the flag, motto and Olympic symbol, Olympic anthem, logo, mascot, slogan and posters of the Olympic Games, the year of the Olympic Games «city + year», the terms «Jeux Olympiques», «Olympisme», «Olympiade», «JO», «olympique», «olympien» and «olympienne». Under no circumstances may these signs be reproduced or even imitated by third-party companies. The COJOP has also published a guide to the protection of the Olympic trademark, outlining the protected symbols, trademarks and signs, as well as the protection of the official partners of the Olympic Games.

              Secondly, Law no. 2018-202 of March 26, 2018 on the organization of the 2024 Olympic and Paralympic Games adds even more specific prohibitions, such as the reservation for official sponsors of advertising space located near Olympic venues, or located on the Olympic and Paralympic torch route. This protection is unique in the context of the Olympic Games, but usually unregulated in the context of simple sporting events.

              The following practices, for example, have already been sanctioned on the above-mentioned grounds:

              • Reproduction of a logo imitating the well-known «Olympic» trademark on a clothing collection: The marketing of a collection of clothing, during the 2016 Olympic Games, bearing a logo (five hearts in the colors of the 5 Olympic colors intersecting in the image of the Olympic logo) imitating the Olympic symbol in association with the words «RIO» and «RIO 2016», was punished on the grounds of parasitism (10 K€ damages) and articles L. 141-5 of the French Sports Code (35 K€) and L. 713-1 of the French Intellectual Property Code (10 K€ damages) (Paris Judicial Court, June 7, 2018, Case No16/10605);
              • The organization of a contest on social networks using protected symbols: During the 2018 Olympic Games in PyeongChang, a car rental company organized an online game inviting Internet users to nominate the athletes they wanted to win a clock radio, associated with the hashtags «#JO2018» («#OJ2018”), «#Jeuxolympiques» (“#Olympicsgame”) or «C’est parti pour les jeux Olympiques» (“let’s go for the Olympic Games”) without authorization from the CNOSF, owner of these distinctive signs under the 2018 law and article L.141-5 of the French Sport Code and punished on these grounds with 20 K€ damages and of 10 K€ damages for parasitism (Paris Judicial Court, May 29, 2020, n°18/14115).

              These regulations offer official partners greater protection for their investments against ambush marketing practices from non-official sponsors.

              Some marketing operations might be exempted

              An analysis of case law and promotional practices nonetheless reveals the contours of certain advertising practices that could be authorized (i.e. not sanctioned by the above-mentioned texts), provided they are skillfully prepared and presented. Here are a few exemples :

              • Communication of information for advertising purposes: The use of the results of a rugby match and the announcement of a forthcoming match in a newspaper to promote a motor vehicle and its distinctive features was deemed lawful: «France 13 Angleterre 24 — the Fiat 500 congratulates England on its victory and looks forward to seeing the French team on March 9 for France-Italy» (France 13 Angleterre 24 — la Fiat 500 félicite l’Angleterre pour sa victoire et donne rendez-vous à l’équipe de France le 9 mars pour France-Italie) the judges having considered that this publication «merely reproduces a current sporting result, acquired and made public on the front page of the sports newspaper, and refers to a future match also known as already announced by the newspaper in a news article» (Court of cassation, May 20, 2014, Case No 13-12.102).
              • Sponsorship of athletes, including those taking part in Olympic competitions: Subject to compliance with the applicable regulatory framework, particularly as regards models, any company may enter into partnerships with athletes taking part in the Olympic Games, for example by donating clothing bearing the desired logo or brand, which they could wear during their participation in the various events. Athletes may also, under certain conditions, broadcast acknowledgements from their partner (even if unofficial). Rule 40 of the Olympic Charter governs the use of athletes’, coaches’ and officials’ images for advertising purposes during the Olympic Games.

              The combined legal and marketing approach to the conception and preparation of the message of such a communication operation is essential to avoid legal proceedings, particularly on the grounds of parasitism; one might therefore legitimately contemplate advertising campaigns, particularly clever, or even malicious ones.

              In this first episode of Legalmondo’s Distribution Talks series, I spoke with Ignacio Alonso, a Madrid-based lawyer with extensive experience in international commercial distribution.

              Main discussion points:

              • in Spain, there is no specific law for distribution agreements, which are governed by the general rules of the Commercial Code;
              • therefore, it is essential to draft a clear and comprehensive contract, which will be the primary source of the parties’ rights and obligations;
              • it is also good to be aware of Spanish case law on commercial distribution, which in some cases applies the law on commercial agency by analogy.
              • the most common issues involving foreign producers distributing in Spain arise at the time of termination of the relationship, mainly because case law grants the terminated distributor an indemnity of clientele or goodwill if similar prerequisites to those in the agency regulations apply.
              • another frequent dispute concerns the adequacy of the notice period for terminating the contract, especially if there is no agreement between the parties: the advice is to follow what the agency regulations stipulate and thus establish a minimum notice period of one month for each year of the contract’s duration, up to 6 months for agreements lasting more than five years;
              • regarding dispute resolution tools, mediation is an option that should be carefully considered because it is quick, inexpensive, and allows a shared solution to be sought flexibly without disrupting the business relationship.
              • if mediation fails, the parties can provide for recourse to arbitration or state court. The choice depends on the case’s specific circumstances, and one factor in favor of jurisdiction is the possibility of appeal, which is excluded in the case of arbitration.

              Go deeper

              Summary

              On 1 June 2022, Regulation EU n. 720/2022, i.e.: the new Vertical Block Exemption Regulation (hereinafter: «VBER»), replaced the previous version (Regulation EU n. 330/2010), expired on 31 May 2022.

              The new VBER and the new vertical guidelines (hereinafter: “Guidelines”) have received the main evidence gathered during the lifetime of the previous VBER and contain some relevant provisions affecting the discipline of all B2B agreements among businesses operating at different levels of the supply chain.

              In this article, we will focus on the impact of the new VBER on sales through digital platforms, listing the main novelties impacting distribution chains, including a platform for marketing products/services.

              The general discipline of vertical agreements

              Article 101(1) of the Treaty on the Functioning of the European Union (“TFEU”) prohibits all agreements that prevent, restrict, or distort competition within the EU market, listing the main types, e.g.: price fixing; market partitioning; limitations on production/development/investment; unfair terms, etc.

              However, Article 101(3) TFEU exempts from such restrictions the agreements that contribute to improving the EU market, to be identified in a special category Regulation.

              The VBER establishes the category of vertical agreements (i.e., agreements between businesses operating at different levels of the supply chain), determining which of these agreements are exempted from Article 101(1) TFEU prohibition.

              In short, vertical agreements are presumed to be exempted (and therefore valid) if they do not contain so-called «hardcore restrictions» (i.e., severe restrictions of competition, such as an absolute ban on sales in a territory or the manufacturer’s determination of the distributor’s resale price) and if neither party’s market share exceeds 30%.

              The exempted agreements benefit from what has been termed the “safe harbour” of the VBER. In contrast, the others will be subject to the general prohibition of Article 101(1) TFEU unless they can benefit from an individual exemption under Article 101(3) TFUE.

              The innovations introduced by the new VBER to online platforms

              The first relevant aspect concerns the classification of the platforms, as the European Commission excluded that the online platform generally meets the conditions to be categorized as agency agreements.

              While there have never been doubts concerning platforms that operate by purchasing and reselling products (classic example: Amazon Retail), some have arisen concerning those platforms that merely promote the products of third parties without carrying out the activity of resale (classic example: Amazon Marketplace).

              With this statement, the European Commission wanted to clear the field of doubt, making explicit that intermediation service providers (such as online platforms) qualify as suppliers (as opposed to commercial agents) under the VBER. This reflects the approach of Regulation (EU) 2019/1150 («P2B Regulation»), which has, for the first time, dictated a specific discipline for digital platforms. It provided for a set of rules to create a “fair, transparent, and predictable environment” for smaller businesses and customers” and for the rationale of the Digital Markets Act, banning certain practices used by large platforms acting as “gatekeepers”.

              Therefore, all contracts concluded between manufacturers and platforms (defined as ‘providers of online intermediation services’) are subject to all the restrictions imposed by the VBER. These include the price, the territories to which or the customers to whom the intermediated goods or services may be sold, or the restrictions relating to online advertising and selling.

              Thus, to give an example, the operator of a platform may not impose a fixed or minimum sale price for a transaction promoted through the platform.

              The second most impactful aspect concerns hybrid platforms, i.e., competing in the relevant market to sell intermediated goods or services. Amazon is the most well-known example, as it is a provider of intermediation services (“Amazon Marketplace”), and – at the same time – it distributes the products of those parties (“Amazon Retail”). We have previously explored the distinction between those 2 business models (and the consequences in terms of intellectual property infringement) here.

              The new VBER explicitly does not apply to hybrid platforms. Therefore, the agreements concluded among such platforms and manufacturers are subject to the limitations of the TFEU, as such providers may have the incentive to favour their sales and the ability to influence the outcome of competition between undertakings that use their online intermediation services.

              Those agreements must be assessed individually under Article 101 of the TFEU, as they do not necessarily restrict competition within the meaning of TFEU, or they may fulfil the conditions of an individual exemption under Article 101(3) TFUE.

              The third very relevant aspect concerns the parity obligations (also referred to as Most Favoured Nation Clauses, or MFNs), i.e., the contract provisions in which a seller (directly or indirectly) agrees to give the buyer the best terms it makes available to any other buyer.

              Indeed, platforms’ contractual terms often contain parity obligation clauses to prevent users from offering their products/services at lower prices or on better conditions on their websites or other platforms.

              The new VBER deals explicitly with parity clauses, making a distinction between clauses whose purpose is to prohibit users of a platform from selling goods or services on more favourable terms through competing platforms (so-called “wide parity clauses”), and clauses that prohibit sales on more favourable terms only in respect of channels operated directly by the users (so-called “narrow parity clauses”).

              Wide parity clauses do not benefit from the VBER exemption; therefore, such obligations must be assessed individually under Article 101(3) TFEU.

              On the other hand, narrow parity clauses continue to benefit from the exemption already granted by the old VBER if they do not exceed the threshold of 30% of the relevant market share set out in Article 3 of the new VBER. However, the new Guidelines warn against using overly narrow parity obligations by online platforms covering a significant share of users, stating that if there is no evidence of pro-competitive effects, the benefit of the block exemption is likely to be withdrawn.

              Impact and takeaways

              The new VBER entered into force on 1 June 2022 and is already applicable to agreements signed after that date. Agreements already in force on 31 May 2022 that satisfy the conditions for exemption under the current VBER but do not satisfy the requirements under the new VBER shall benefit from a one-year transitional period.

              The new regime will be the playing field for all platform-driven sales over the next 12 years (the regulation expires on 31 May 2034). Currently, the rather restrictive novelties on hybrid platforms and parity obligations will likely necessitate substantial revisions to existing trade agreements.

              Here, then, are some tips for managing contracts and relationships with online platforms:

              • the new VBER is the right opportunity to review the existing distribution networks. The revision will have to consider not only the new regulatory limits (e.g., the ban on wide parity clauses) but also the new discipline reserved for hybrid platforms and dual distribution to coordinate the different distribution channels as efficiently as possible, by the stakes set by the new VBER and the Guidelines;
              • platforms are likely to play an even greater role during the next decade; it is, therefore, essential to consider these sales channels from the outset, coordinating them with the other existing ones (retail, direct sales, distributors, etc.) to avoid jeopardizing the marketing of products or services;
              • the European legislator’s attention toward platforms is growing. Looking up from the VBER, one should not forget that they are subject to a multitude of other European regulations, which are gradually regulating the sector and which must be considered when concluding contracts with platforms. The reference is not only to the recent Digital Market Act and P2B Regulation but also to the protection of IP rights on platforms, which — as we have already seen — is still an open issue.

              Summary

              To avoid disputes with important suppliers, it is advisable to plan purchases over the medium and long term and not operate solely on the basis of orders and order confirmations. Planning makes it possible to agree on the duration of the ‘supply agreement, minimum volumes of products to be delivered and delivery schedules, prices, and the conditions under which prices can be varied over time.
              The use of a framework purchase agreement can help avoid future uncertainties and allows various options to be used to manage commodity price fluctuations depending on the type of products , such as automatic price indexing or agreement to renegotiate in the event of commodity fluctuations beyond a certain set tolerance period.

              I read in a press release: “These days, the glass industry is sending wine companies new unilateral contract amendments with price changes of 20%…”

              What can one do to avoid the imposition of price increases by suppliers? 

              • Know your rights and act in an informed manner
              • Plan and organise your supply chain

              Does my supplier have the right to increase prices?

              If contracts have already been concluded, e.g., orders have already been confirmed by the supplier, the answer is often no.

              It is not legitimate to request a price change. It is much less legitimate to communicate it unilaterally, with the threat of cancelling the order or not delivering the goods if the request is not granted.

              What if he tells me it is force majeure?

              That’s wrong: increased costs are not a force majeure but rather an unforeseen excessive onerousness, which hardly happens.

              What if the supplier canceled the order, unilaterally increased the price, or did not deliver the goods?

              He would be in breach of contract and liable to pay damages for violating his contractual obligations.

              How can one avoid a tug-of-war with suppliers?

              The tools are there. You have to know them and use them.

              It is necessary to plan purchases in the medium term, agreeing with suppliers on a schedule in which are set out:

              • the quantities of products to be ordered
              • the delivery terms
              • the durationof the agreement
              • the pricesof the products or raw materials
              • the conditions under which prices can be varied

              There is a very effective instrument to do so: a framework purchase agreement.

              Using a framework purchase agreement, the parties negotiate the above elements, which will be valid for the agreed period.

              Once the agreement is concluded, product orders will follow, governed by the framework agreement, without the need to renegotiate the content of individual deliveries each time.

              For an in-depth discussion of this contract, see this article.

              • “Yes, but my suppliers will never sign it!”

              Why not? Ask them to explain the reason.

              This type of agreement is in the interest of both parties. It allows planning future orders and grants certainty as to whether, when, and how much the parties can change the price.

              In contrast, acting without written agreements forces the parties to operate in an environment of uncertainty. Suppliers can request price increases from one day to the next and refuse supply if the changes are not accepted.

              How are price changes for future supplies regulated?

              Depending on the type of products or services and the raw materials or energy relevant in determining the final price, there are several possibilities.

              • The first option is to index the price automatically. E.g., if the cost of a barrel of Brent oil increases/decreases by 10%, the party concerned is entitled to request a corresponding adjustment of the product’s price in all orders placed as of the following week.
              • An alternative is to provide for a price renegotiation in the event of a fluctuation of the reference commodity. E.g., suppose the LME Aluminium index of the London Stock Exchange increases above a certain threshold. In that case, the interested party may request a price renegotiationfor orders in the period following the increase.

              What if the parties do not agree on new prices?

              It is possible to terminate the contract or refer the price determination to a third party, who would act as arbitrator and set the new prices for future orders.

              Summary

              The framework supply contract is an agreement that regulates a series of future sales and purchases between two parties (customer and supplier) that take place over a certain period of time. This agreement determines the main elements of future contracts such as price, product volumes, delivery terms, technical or quality specifications, and the duration of the agreement.

              The framework contract is useful for ensuring continuity of supply from one or more suppliers of a certain product that is essential for planning industrial or commercial activity. While the general terms and conditions of purchase or sale are the rules that apply to all suppliers or customers of the company. The framework contract is advisable to be concluded with essential suppliers for the continuity of business activity, in general or in relation to a particular project.

              What I am talking about in this article:

              • What is the supply framework agreement?
              • What is the function of the supply framework agreement?
              • The difference with the general conditions of sale or purchase
              • When to enter a purchase framework agreement?
              • When is it beneficial to conclude a sales framework agreement?
              • The content of the supply framework agreement
              • Price revision clause and hardship
              • Delivery terms in the supply framework agreement
              • The Force Majeure clause in international sales contracts
              • International sales: applicable law and dispute resolution arrangements

              What is a framework supply agreement?

              It is an agreement that regulates a series of future sales and purchases between two parties (customer and supplier), which will take place over a certain period.

              It is therefore referred to as a «framework agreement» because it is an agreement that establishes the rules of a future series of sales and purchase contracts, determining their primary elements (such as the price, the volumes of products to be sold and purchased, the delivery terms of the products, and the duration of the contract).

              After concluding the framework agreement, the parties will exchange orders and order confirmations, entering a series of autonomous sales contracts without re-discussing the covenants already defined in the framework agreement.

              Depending on one’s point of view, this agreement is also called a sales framework agreement (if the seller/supplier uses it) or a purchasing framework agreement (if the customer proposes it).

              What is the function of the framework supply agreement?

              It is helpful to arrange a framework agreement in all cases where the parties intend to proceed with a series of purchases/sales of products over time and are interested in giving stability to the commercial agreement by determining its main elements.

              In particular, the purchase framework agreement may be helpful to a company that wishes to ensure continuity of supply from one or more suppliers of a specific product that is essential for planning its industrial or commercial activity (raw material, semi-finished product, component).

              By concluding the framework agreement, the company can obtain, for example, a commitment from the supplier to supply a particular minimum volume of products, at a specific price, with agreed terms and technical specifications, for a certain period.

              This agreement is also beneficial, at the same time, to the seller/supplier, which can plan sales for that period and organize, in turn, the supply chain that enables it to procure the raw materials and components necessary to produce the products.

              What is the difference between a purchase or sales framework agreement and the general terms and conditions?

              Whereas the framework agreement is an agreement that is used with one or more suppliers for a specific product and a certain time frame, determining the essential elements of future contracts, the general purchase (or sales) conditions are the rules that apply to all the company’s suppliers (or customers).

              The first agreement, therefore, is negotiated and defined on a case-by-case basis. At the same time, the general conditions are prepared unilaterally by the company, and the customers or suppliers (depending on whether they are sales or purchase conditions) adhere to and accept that the general conditions apply to the individual order and/or future contracts.

              The two agreements might also co-exist: in that case; it is a good idea to specify which contract should prevail in the event of a discrepancy between the different provisions (usually, this hierarchy is envisaged, ranging from the special to the general: order — order confirmation; framework agreement; general terms and conditions of purchase).

              When is it important to conclude a purchase framework agreement?

              It is beneficial to conclude this agreement when dealing with a mono-supplier or a supplier that would be very difficult to replace if it stopped selling products to the purchasing company.

              The risks one aims to avoid or diminish are so-called stock-outs, i.e., supply interruptions due to the supplier’s lack of availability of products or because the products are available, but the parties cannot agree on the delivery time or sales price.

              Another result that can be achieved is to bind a strategic supplier for a certain period by agreeing that it will reserve an agreed share of production for the buyer on predetermined terms and conditions and avoid competition with offers from third parties interested in the products for the duration of the agreement.

              When is it helpful to conclude a sales framework agreement?

              This agreement allows the seller/supplier to plan sales to a particular customer and thus to plan and organize its production and logistical capacity for the agreed period, avoiding extra costs or delays.

              Planning sales also makes it possible to correctly manage financial obligations and cash flows with a medium-term vision, harmonizing commitments and investments with the sales to one’s customers.

              What is the content of the supply framework agreement?

              There is no standard model of this agreement, which originated from business practice to meet the requirements indicated above.

              Generally, the agreement provides for a fixed period (e.g., 12 months) in which the parties undertake to conclude a series of purchases and sales of products, determining the price and terms of supply and the main covenants of future sales contracts.

              The most important clauses are:

              • the identification of products and technical specifications (often identified in an annex)
              • the minimum/maximum volume of supplies
              • the possible obligation to purchase/sell a minimum/maximum volume of products
              • the schedule of supplies
              • the delivery times
              • the determination of the price and the conditions for its possible modification (see also the next paragraph)
              • impediments to performance (Force Majeure)
              • cases of Hardship
              • penalties for delay or non-performance or for failure to achieve the agreed volumes
              • the hierarchy between the framework agreement and the orders and any other contracts between the parties
              • applicable law and dispute resolution (especially in international agreements)

              How to handle price revision in a supply contract?

              A crucial clause, especially in times of strong fluctuations in the prices of raw materials, transport, and energy, is the price revision clause.

              In the absence of an agreement on this issue, the parties bear the risk of a price increase by undertaking to respect the conditions initially agreed upon; except in exceptional cases (where the fluctuation is strong, affects a short period, and is caused by unforeseeable events), it isn’t straightforward to invoke the supervening excessive onerousness, which allows renegotiating the price, or the contract to be terminated.

              To avoid the uncertainty generated by price fluctuations, it is advisable to agree in the contract on the mechanisms for revising the price (e.g., automatic indexing following the quotation of raw materials). The so-called Hardship or Excessive Onerousness clause establishes what price fluctuation limits are accepted by the parties and what happens if the variations go beyond these limits, providing for the obligation to renegotiate the price or the termination of the contract if no agreement is reached within a certain period.

              How to manage delivery terms in a supply agreement?

              Another fundamental pact in a medium to long-term supply relationship concerns delivery terms. In this case, it is necessary to reconcile the purchaser’s interest in respecting the agreed dates with the supplier’s interest in avoiding claims for damages in the event of a delay, especially in the case of sales requiring intercontinental transport.

              The first thing to be clarified in this regard concerns the nature of delivery deadlines: are they essential or indicative? In the first case, the party affected has the right to terminate (i.e., wind up) the agreement in the event of non-compliance with the term; in the second case, due diligence, information, and timely notification of delays may be required, whereas termination is not a remedy that may be automatically invoked in the event of a delay.

              A useful instrument in this regard is the penalty clause: with this covenant, it is established that for each day/week/month of delay, a sum of money is due by way of damages in favor of the party harmed by the delay.

              If quantified correctly and not excessively, the penalty is helpful for both parties because it makes it possible to predict the damages that may be claimed for the delay, quantifying them in a fair and determined sum. Consequently, the seller is not exposed to claims for damages related to factors beyond his control. At the same time, the buyer can easily calculate the compensation for the delay without the need for further proof.

              The same mechanism, among other things, may be adopted to govern the buyer’s delay in accepting delivery of the goods.

              Finally, it is a good idea to specify the limit of the penalty (e.g.,10 percent of the price of the goods) and a maximum period of grace for the delay, beyond which the party concerned is entitled to terminate the contract by retaining the penalty.

              The Force Majeure clause in international sales contracts

              A situation that is often confused with excessive onerousness, but is, in fact, quite different, is that of Force Majeure, i.e., the supervening impossibility of performance of the contractual obligation due to any event beyond the reasonable control of the party affected, which could not have been reasonably foreseen and the effects of which cannot be overcome by reasonable efforts.

              The function of this clause is to set forth clearly when the parties consider that Force Majeure may be invoked, what specific events are included (e.g., a lock-down of the production plant by order of the authority), and what are the consequences for the parties’ obligations (e.g., suspension of the obligation for a certain period, as long as the cause of impossibility of performance lasts, after which the party affected by performance may declare its intention to dissolve the contract).

              If the wording of this clause is general (as is often the case), the risk is that it will be of little use; it is also advisable to check that the regulation of force majeure complies with the law applicable to the contract (here an in-depth analysis indicating the regime provided for by 42 national laws).

              Applicable law and dispute resolution clauses

              Suppose the customer or supplier is based abroad. In that case, several significant differences must be borne in mind: the first is the agreement’s language, which must be intelligible to the foreign party, therefore usually in English or another language familiar to the parties, possibly also in two languages with parallel text.

              The second issue concerns the applicable law, which should be expressly indicated in the agreement. This subject matter is vast, and here we can say that the decision on the applicable law must be made on a case-by-case basis, intentionally: in fact, it is not always convenient to recall the application of the law of one’s own country.

              In most international sales contracts, the 1980 Vienna Convention on the International Sale of Goods («CISG») applies, a uniform law that is balanced, clear, and easy to understand. Therefore, it is not advisable to exclude it.

              Finally, in a supply framework agreement with an international supplier, it is important to identify the method of dispute resolution: no solution fits all. Choosing a country’s jurisdiction is not always the right decision (indeed, it can often prove counterproductive).

              Eventually, after more than 30 years of negotiations, the world is now looking at the first pan-African trade agreement, which entered into force in 2019: the African Continental Free Trade Area, or AfCFTA.

              Africa, with its 55 countries and around 1.3 billion inhabitants, is the second largest continent in the world after Asia. The continent’s potential is huge: more than 50% of Africa’s population is under 20 years old and the population is growing at the fastest rate in the world. By 2050, one in four new-born babies is expected to be African. In addition, the continent is rich in fertile soil and raw materials.

              For Western investors, Africa has become considerably more important in recent years. As a result, a considerable amount of international trade has emerged, not least promoted by the “Compact with Africa” initiative adopted by the G20 countries in 2017, also known as the “Marshall Plan with Africa”. Its focus is on expanding Africa’s economic cooperation with the G20 countries by strengthening private investment.

              At the same time, however, intra-African trade has stagnated so far: partly still existing high intra-African tariffs, non-tariff barriers (NTBs), weak infrastructure, corruption, cumbersome bureaucracy, as well as non-transparent and inconsistent regulations, ensured that interregional exports could hardly develop and most recently accounted for only 17 % of the pan-African trade and only 0.36 % of world trade. It’s already been a long time since the African Union (AU) had put the creation of a common trade area on its agenda.

              What is behind AfCFTA?

              The establishment of a pan-African trade area was preceded by decades of negotiations, which finally resulted in the entry into force of the AfCFTA on 30 May 2019.

              AfCFTA is a free trade area established by its members, which — with the exception of Eritrea — covers the entire African continent and is thus the largest free trade area in the world by number of member states after the World Trade Organisation (WTO).

              How the common market was to be structured in detail was the subject of several individual negotiations, which were discussed in Phases I and II.

              Phase I comprises the negotiations on three protocols and is almost completed.

              The Protocol on Trade in Goods

              This protocol provides for the elimination of 90 % of all intra-African tariffs in all product categories within five years of entry into force. Of these, up to 7 % of products can be classified as sensitive goods, which are subject to a tariff elimination period of ten years. For the least developed countries (LDCs), the preparation period is extended from five to ten years and for sensitive products from ten to thirteen years, provided they demonstrate their need. The remaining 3 % of tariffs are fully exempted from tariff dismantling.

              A prerequisite for tariff dismantling is the clear delimitation of rules of origin. Otherwise, imports from third countries could benefit from the negotiated tariff advantages. Agreement has already been reached on most of the rules of origin.

              The Protocol on Trade in Services

              The AU General Assembly has so far agreed on five priority areas (transport, communications, tourism, financial and business services) and guidelines for the commitments applicable to them.  47 AU member states have so far submitted their offers for specific commitments and the review of 28 has been completed. In addition, negotiations, for example, on the recognition of professional qualifications, are still ongoing.

              The Protocol on Dispute Settlement

              With the Protocol on Rules and Procedures Governing the Dispute Settlement, the AfCFTA creates a dispute settlement system modelled on the WTO Dispute Settlement Understanding. Under this, the Dispute Settlement Body (DSB) administers the AfCFTA Dispute Settlement Protocol and establishes an Adjudicating Panel (Panel) and an Appellate Body (AB). The DSB is composed of a representative of each member state and intervenes as soon as there are differences of opinion between the contracting states on the interpretation and/or application of the agreement with regard to their rights and obligations.

              For the remaining Phase II, negotiations are planned on investment and competition policy, intellectual property issues, online trade and women and youth in trade, the results of which will be reflected in further protocols.

              The implementation of the AfCFTA

              In principle, the implementation of trade under a trade agreement can only begin once the legal framework has been finally clarified. However, AU Heads of State and Government agreed in December 2020 that trade can begin for goods for which negotiations have been finalised. Under this «transitional arrangement«, after a pandemic-related postponement, the first AfCFTA trade settlement from Ghana to South Africa took place on 4 January 2021.

              Building blocks of the AfCFTA

              All 55 members of the AU were involved in the AfCFTA negotiations. Of these, 47 belong to at least one — and some to more than one — recognised Regional Economic Communities (RECs), which, according to the preamble of the AfCFTA agreement, are to continue as building blocks of the trade agreement. It was therefore they who acted as the voice of their respective members in the AfCFTA negotiations. The AfCFTA provides for RECs to retain their legal instruments, institutions and dispute settlement mechanisms.

              Within the AU, there are eight recognised RECs, overlapping in some countries, which are either preferential trade agreements (Free Trade Agreements — FTAs) or customs unions.

              Under the AfCFTA, the RECs have various responsibilities. These are in particular:

              • coordinating negotiating positions and assisting member states in the implementation of the agreement.
              • solution-oriented mediation in the event of disagreements between member states
              • supporting member states in the harmonisation of tariffs and other border protection regulations
              • promoting the use of the AfCFTA notification procedure to reduce NTBs

              Outlook of the AfCFTA

              The AfCFTA has the potential to facilitate Africa’s integration into the global economy and creates the real possibility of a realignment of international integration and cooperation patterns.

              A trade agreement alone is no guarantee of economic success. For the agreement to achieve the predicted breakthrough, member states must have the political will to implement the new rules consistently and create the necessary capacity to do so. In particular, the short-term removal of trade barriers and the creation of a sustainable physical and digital infrastructure are likely to be crucial.

              If you are interested in the AfCFTA, you can read an extended version of this article here.

              The Legalmondo Africa Desk

              We help companies invest and do business in Africa with our experts in Algeria, Tunisia, Morocco, Senegal, Sudan, Egypt, Ghana, Lybia, Côte d’Ivoire, Cameroon, and Malawi.

              We can also assist foreign entities in African countries where we are not directly present with an office through our network of local partners.

              How it works

              • We set up a meeting (in person or online) with one of our experts to understand the client’s needs.
              • Once we start working together, we follow the client with a dedicated counsel for all its legal needs (single cases, or ongoing legal assistance)

              Get in touch to know more.

              Summary

              Political, environmental or health crises (like the Covid-19 outbreak and the attack of Ukraine by the Russian army) can cause an increase in the price of raw materials and components and generalized inflation. Both suppliers and distributors find themselves faced with problems related to the often sudden and very substantial increase in the price of their own supplies. French law lays down specific rules in that regard.

              Two main situations can be distinguished: where the parties have just established a simple flow of orders and where the parties have concluded a framework agreement fixing firm prices for a fixed term.

              Price increase in a business relationship

              The situation is as follows: the parties have not concluded a framework agreement, each sales contract concluded (each order) is governed by the General T&Cs of the supplier; the latter has not undertaken to maintain the prices for a minimum period and applies the prices of the current tariff.

              In principle, the supplier can modify its prices at any time by sending a new tariff. However, it must give written and reasonable notice in accordance with the provisions of Article L. 442-1.II of the Commercial Code, before the price increase comes into effect. Failure to respect sufficient notice, it could be accused of a sudden «partial» termination of commercial relations (and subject to damages).

              A sudden termination following a price increase would be characterized when the following conditions are met:

              • the commercial relationship must be established: broader concept than the simple contract, taking into account the duration but also the importance and the regularity of the exchanges between the parties;
              • the price increase must be assimilated to a rupture: it is mainly the size of the price increase (+1%, 10% or 25%?) that will lead a judge to determine whether the increase constitutes a «partial» termination (in the event of a substantial modification of the relationship which is nevertheless maintained) or a total termination (if the increase is such that it involves a termination of the relationship) or if it does not constitute a termination (if the increase is minimal);
              • the notice granted is insufficient by comparing the duration of the notice actually granted with that of the notice in accordance with Article L. 442-1.II, taking into account in particular the duration of the commercial relationship and the possible dependence of the victim of the termination with respect to the other party.

              Article L. 442-1.II must be respected as soon as French law applies to the relation. In international business relations, to know how to deal with Article L.442-1.II and conflicts of laws and jurisdiction of competent courts, please see our previous article published on Legalmondo blog.

              Price increase in a framework contract

              If the parties have concluded a framework contract (such as supply, manufacturing, …) for several years and the supplier has committed to fixed prices, how, in this case, can it change these prices?

              In addition to any indexation clause or renegotiation (hardship) clause which would be stipulated in the contract (and besides specific legal provisions applicable to special agreements as to their nature or economic sector), the supplier may seek to avail himself of the legal mechanism of «unforeseeability» provided for by article 1195 of the civil code.

              Three prerequisites must be cumulatively met:

              • an unforeseeable change in circumstances at the time of the conclusion of the contract (i.e.: the parties could not reasonably anticipate this upheaval);
              • a performance of the contract that has become excessively onerous (i.e.: beyond the simple difficulty, the upheaval must cause a disproportionate imbalance);
              • the absence of acceptance of these risks by the debtor of the obligation when concluding the contract.

              The implementation of this mechanism must stick to the following steps:

              • first, the party in difficulty must request the renegotiation of the contract from its co-contracting party;
              • then, in the event of failure of the negotiation or refusal to negotiate by the other party, the parties can (i) agree together on the termination of the contract, on the date and under the conditions that they determine, or (ii) ask together the competent judge to adapt it;
              • finally, in the absence of agreement between the parties on one of the two aforementioned options, within a reasonable time, the judge, seized by one of the parties, may revise the contract or terminate it, on the date and under the conditions that he will set.

              The party wishing to implement this legal mechanism must also anticipate the following points:

              • article 1195 of the Civil Code only applies to contracts concluded on or after October 1, 2016 (or renewed after this date). Judges do not have the power to adapt or rebalance contracts concluded before this date;
              • this provision is not of public order. Therefore, the parties can exclude it or modify its conditions of application and/or implementation (the most common being the framework of the powers of the judge);
              • during the renegotiation, the supplier must continue to sell at the initial price because, unlike force majeure, unforeseen circumstances do not lead to the suspension of compliance with the obligations.

              Key takeaways:

              • analyse carefully the framework of the commercial relationship before deciding to notify a price increase, in order to identify whether the prices are firm for a minimum period and the contractual levers for renegotiation;
              • correctly anticipate the length of notice that must be given to the partner before the entry into force of the new pricing conditions, depending on the length of the relationship and the degree of dependence;
              • document the causes of the price increase;
              • check if and how the legal mechanism of unforeseeability has been amended or excluded by the framework contract or the General T&Cs;
              • consider alternatives strategies, possibly based on stopping production/delivery justified by a force majeure event or on the significant imbalance of the contractual provisions.

              Ignacio Alonso

              Области практики

              • Агентство
              • Корпоративный
              • Распространение
              • Франчайзинг
              Связаться Ignacio
              Franchising Spain - Legalmondo

              Spain | Franchising, Theory Of Risk and Guarantees By Franchisee
              • Распространение
              • Судебная практика
              • Испания
              Vietnam - Legalmondo

              Vietnam on the EU Tax Blacklist: A Guide for EU Buyers
              • Корпоративный
              • Распространение
              • Вьетнам
              Brazil - Legalmondo

              Brazil’s New Digital Child Protection Law: Practical Implications for Foreign Tech Companies
              • Конфиденциальность - Защита данных
              • Бразилия
              France - Legalmondo

              France | Pre-contractual disclosure in distribution and franchise agreements
              • Распространение
              • Франчайзинг
              • Франция
              International distribution agreements - Key Clauses and Lessons learned from the history of Nike - Legalmondo

              International distribution agreements | Key Clauses and Lessons learned from the history of Nike
              • Контракты
              • Распространение
              • Италия
              Saudi Arabia - Legalmondo

              How to Joint Venture in Saudi Arabia
              • Контракты
              • Корпоративный
              • Саудовская Аравия
              Contracts Responsibility - Legalmondo

              Corporate Sustainability in Practice – How Contracts Shape Responsibility
              • Контракты
              • Распространение
              • Finland
              Legalmondo - Oil prices

              Rising Oil Prices and International Contracts: How to Manage Hardship in Global Supply Chains
              • Контракты
              • Распространение
              • Италия
              African Continental Free Trade-Agreement - Legalmondo

              Why the African Continental Free Trade Agreement has not yet turned into Reality — and What That Means for Egypt
              • Распространение
              • Иностранные инвестиции
              • Египет
              Spain lawyer-coach - Legalmondo

              The lawyer-coach: a new way of practising
              • Альтернативное разрешение споров
              • Контракты
              • Испания
              Spain - Legalmondo

              Agency and distribution agreements. Phrases to avoid when ending a business relationship without a written contract
              • Без категории
              • Контракты
              • Испания
              Business people Legalmondo

              Spain | Appropriate Means of Dispute Resolution (ADR) as a prerequisite for litigation
              • Альтернативное разрешение споров
              • Судебная практика
              • Испания
              Spain Influencer-Legalmondo

              Spain – Can an influencer be considered a «commercial agent»?
              • Без категории
              • Распространение
              • Испания
              Spain advance payment - Legalmondo

              Spain — Is it possible to advance payment of customer indemnity in agency contracts?
              • Без категории
              • Испания
              Companies in Spain - Legalmondo

              Spain — Powers of Representation of Companies
              • Корпоративный
              • Испания
              Spain - Legalmondo

              Spain | Clientele Compensation for Agents and Distributors
              • Без категории
              • Контракты
              • Испания
              Debt - Legalmondo

              International debt recovery: risk prevention and best practices
              • Распространение
              • Судебная практика
              • Испания
              mediation - legalmondo

              The importance of Mediation in Distribution Contracts
              • Альтернативное разрешение споров
              • Распространение
              • Испания

              Scrivi a Ignacio





                Read the privacy policy of Legalmondo.
                This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

                France: control by the supplier of online resales by its distributors

                31.12.2020

                • Франция
                • Распространение

                The commercial agent has the right to obtain certain information about the sales of the principal. The Spanish Law on Agency Contracts provides (15.2 LCA) that the agent has the right to demand to see the accounts of the principal in order to verify all matters relating to the commissions due to him. And also, to be provided with the information available to the principal and necessary to verify the amount of such commissions.

                This article is in line with the 1986 Commercial Agents Directive, according to which (12.3) the agent is entitled to demand to be provided with all information at the disposal of the principal, particularly an extract from the books of account, which is necessary to verify the amount of commission due to the agent. This may not be altered to the detriment of the commercial agent by agreement.

                The question is, does this right remain even after the termination of the agency contract? In other words: once the agency contract is terminated, can the agent request the information and documentation mentioned in these articles and is the Principal obliged to provide it?

                In our opinion, the rule does not say anything that limits this right, rather the opposite is to be expected. Therefore, to the extent that there is still any possible commission that may arise from such verification, the answer must be yes. Let us see.

                The right to demand the production of accounts exists so that the agent can verify the amount of commissions. And the agent is entitled to commissions for acts and operations concluded during the term of the contract (art. 12 LCA), but also for acts or operations concluded after the termination of the contract (art. 13 LCA), and for operations not carried out due to circumstances attributable to the principal (art. 17 LCA). In addition, the agent is entitled to have the commission accrued at the time when the act or transaction should have been executed (art. 14 LCA).

                All these transactions can take place after the conclusion of the contract. Consider the usual situation where orders are placed during the contract but are accepted or executed afterwards. To reduce the agent’s right to be informed only during the term of the contract would be to limit his entitlement to the corresponding commission unduly. And it should be borne in mind that the amount of the commissions during the last five years may also influence the calculation of the client (goodwill) indemnity (art. 28 LCA), so that the agent’s interest in knowing them is twofold: what he would receive as commission, and what could increase the basis for future indemnity.

                This has been confirmed, for example, by the Provincial Court (Audiencia Provincial) of Madrid (AAP 227/2017, of 29 June [ECLI:ES:APM:2017:2873A]) which textually states:

                […] art. 15.2 of the Agency Contract Act provides for the right of the agent to demand the exhibition of the Principal’s accounts in the particulars necessary to verify everything relating to the commissions corresponding to him, as well as to be provided with the information available to the Principal and necessary to verify the amount. This does not prevent, […], the agency contract having already been terminated, as this does not imply that commissions would cease to accrue for policies, contracted with the mediation of the agent, which remain in force.

                The question then arises as to whether this right to information is unlimited in time. And here the answer would be in the negative. The limitation of the right to receive information would be linked to the statute of limitations of the right to claim the corresponding commission. If the right to receive the commission were undoubtedly time-barred, it could be argued that it would not be possible to receive information about it. But for such an exception, the statute of limitations must be clear, therefore, taking into account possible interruptions due to claims, even extrajudicial ones. In case of doubt, it will be necessary to recognise the right to demand the information, without prejudice to later invoking and recognising the impossibility of claiming the commission if the right is time-barred. And for this we must consider the limitation period for claiming commissions (in general, three years) and that of the right to claim compensation for clientele (one year).

                In short: it does not seem that the right to receive information and to examine the principal’s documentation is limited by the term of the agency contract; although, on the other hand, it would be appropriate to analyse the possible limitation period for claiming commissions. In the absence of a clear answer to this question, the right to information should, in our opinion, prevail, without prejudice to the fact that the result may not entitle the claim because it is time-barred.

                SUMMARY: In large-scale events such as the Paris Olympics certain companies will attempt to «wildly» associate their brand with the event through a practice called «ambush marketing», defined by caselaw as «an advertising strategy implemented by a company in order to associate its commercial image with that of an event, and thus to benefit from the media impact of said event, without paying the related rights and without first obtaining the event organizer’s authorization» (Paris Court of Appeal, June 8, 2018, Case No 17/12912). A risky and punishable practice, that might sometimes yet be an option yet.

                Key takeaways

                • Ambush marketing might be a punished practice but is not prohibited as such;
                • As a counterpart of their investment, sponsors and official partners benefit from an extensive legal protection against all forms of ambush marketing in the event concerned, through various general texts (counterfeiting, parasitism, intellectual property) or more specific ones (e.g. sport law);
                • The Olympics Games are subject to specific regulations that further strengthen this protection, particularly in terms of intellectual property.
                • But these rights are not absolute, and they are still thin opportunities for astute ambush marketing.

                The protection offered to sponsors and official partners of sporting and cultural events from ambush marketing

                With a budget of over 4 billion euros, the 2024 Olympic and Paralympic Games are financed mostly by various official partners and sponsors, who in return benefit from a right to use Olympic and Paralympic properties to be able to associate their own brand image and distinctive signs with these events.

                Ambush marketing is not punishable as such under French law, but several scattered texts provide extensive protection against ambush marketing for sponsors and partners of sporting or cultural continental-wide or world-wide events. Indeed, sponsors are legitimately entitled to peacefully enjoy the rights offered to them in return for large-scale investments in events such as the FIFA or rugby World Cups, or the Olympic Games.

                In particular, official sponsors and organizers of such events may invoke:

                • the «classic» protections offered by intellectual property law (trademark law and copyright) in the context of infringement actions based on the French Intellectual Property Code,
                • tort law (parasitism and unfair competition based on article 1240 of the French Civil Code);
                • consumer law (misleading commercial practices) based on the French Consumer Code,
                • but also more specific texts such as the protection of the exploitation rights of sports federations and sports event organizers derived from the events or competitions they organize, as set out in article L.333-1 of the French Sports Code, which gives sports event organizers an exploitation monopoly.

                The following ambush marketing practices were sanctioned on the abovementioned grounds:

                • The use of a tennis competition name and of the trademark associated with it during the sporting event: The organization of online bets, by an online betting operator, on the Roland Garros tournament, using the protected sign and trademark Roland Garros to target the matches on which the bets were organized. The unlawful exploitation of the sporting event, was punished and 400 K€ were allowed as damages, based on article L. 333-1 of the French Sports Code, since only the French Tennis Federation (F.F.T.) owns the right to exploit Roland Garros. The use of the trademark was also punished as counterfeiting (with 300 K€ damages) and parasitism (with 500 K€ damages) (Paris Court of Appeal, Oct. 14, 2009, Case No 08/19179);
                • An advertising campaign taking place during a film festival and reproducing the event’s trademark: The organization, during the Cannes Film Festival, of a digital advertising campaign by a cosmetics brand through the publication on its social networks of videos showing the beauty makeovers of the brand’s muses, in some of which the official poster of the Cannes Film Festival was visible, one of which reproduced the registered trademark of the “Palme d’Or”, was punished on the grounds of copyright infringement and parasitism with a 50 K€ indemnity (Paris Judicial Court, Dec. 11, 2020, Case No19/08543);
                • An advertising campaign aimed at falsely claiming to be an official partner of an event: The use, during the Cannes Film Festival, of the slogan «official hairdresser for women» together with the expressions «Cannes» and «Cannes Festival», and other publications falsely leading the public to believe that the hairdresser was an official partner, to the detriment of the only official hairdresser of the Cannes festival, was punished on the grounds of unfair competition and parasitism with a 50 K€ indemnity (Paris Court of Appeal, June 8, 2018, Case No 17/12912).

                These financial penalties may be combined with injunctions to cease these behaviors, and/or publication in the press under penalty.

                An even greater protection for the Paris 2024 Olympic Games

                The Paris 2024 Olympic Games are also subject to specific regulations.

                Firstly, Article L.141-5 of the French Sports Code, enacted for the benefit of the «Comité national olympique et sportif français” (CNOSF) and the “Comité de l’organisation des Jeux Olympiques et Paralympiques de Paris 2024” (COJOP), protects Olympic signs such as the national Olympic emblems, but also the emblems, the flag, motto and Olympic symbol, Olympic anthem, logo, mascot, slogan and posters of the Olympic Games, the year of the Olympic Games «city + year», the terms «Jeux Olympiques», «Olympisme», «Olympiade», «JO», «olympique», «olympien» and «olympienne». Under no circumstances may these signs be reproduced or even imitated by third-party companies. The COJOP has also published a guide to the protection of the Olympic trademark, outlining the protected symbols, trademarks and signs, as well as the protection of the official partners of the Olympic Games.

                Secondly, Law no. 2018-202 of March 26, 2018 on the organization of the 2024 Olympic and Paralympic Games adds even more specific prohibitions, such as the reservation for official sponsors of advertising space located near Olympic venues, or located on the Olympic and Paralympic torch route. This protection is unique in the context of the Olympic Games, but usually unregulated in the context of simple sporting events.

                The following practices, for example, have already been sanctioned on the above-mentioned grounds:

                • Reproduction of a logo imitating the well-known «Olympic» trademark on a clothing collection: The marketing of a collection of clothing, during the 2016 Olympic Games, bearing a logo (five hearts in the colors of the 5 Olympic colors intersecting in the image of the Olympic logo) imitating the Olympic symbol in association with the words «RIO» and «RIO 2016», was punished on the grounds of parasitism (10 K€ damages) and articles L. 141-5 of the French Sports Code (35 K€) and L. 713-1 of the French Intellectual Property Code (10 K€ damages) (Paris Judicial Court, June 7, 2018, Case No16/10605);
                • The organization of a contest on social networks using protected symbols: During the 2018 Olympic Games in PyeongChang, a car rental company organized an online game inviting Internet users to nominate the athletes they wanted to win a clock radio, associated with the hashtags «#JO2018» («#OJ2018”), «#Jeuxolympiques» (“#Olympicsgame”) or «C’est parti pour les jeux Olympiques» (“let’s go for the Olympic Games”) without authorization from the CNOSF, owner of these distinctive signs under the 2018 law and article L.141-5 of the French Sport Code and punished on these grounds with 20 K€ damages and of 10 K€ damages for parasitism (Paris Judicial Court, May 29, 2020, n°18/14115).

                These regulations offer official partners greater protection for their investments against ambush marketing practices from non-official sponsors.

                Some marketing operations might be exempted

                An analysis of case law and promotional practices nonetheless reveals the contours of certain advertising practices that could be authorized (i.e. not sanctioned by the above-mentioned texts), provided they are skillfully prepared and presented. Here are a few exemples :

                • Communication of information for advertising purposes: The use of the results of a rugby match and the announcement of a forthcoming match in a newspaper to promote a motor vehicle and its distinctive features was deemed lawful: «France 13 Angleterre 24 — the Fiat 500 congratulates England on its victory and looks forward to seeing the French team on March 9 for France-Italy» (France 13 Angleterre 24 — la Fiat 500 félicite l’Angleterre pour sa victoire et donne rendez-vous à l’équipe de France le 9 mars pour France-Italie) the judges having considered that this publication «merely reproduces a current sporting result, acquired and made public on the front page of the sports newspaper, and refers to a future match also known as already announced by the newspaper in a news article» (Court of cassation, May 20, 2014, Case No 13-12.102).
                • Sponsorship of athletes, including those taking part in Olympic competitions: Subject to compliance with the applicable regulatory framework, particularly as regards models, any company may enter into partnerships with athletes taking part in the Olympic Games, for example by donating clothing bearing the desired logo or brand, which they could wear during their participation in the various events. Athletes may also, under certain conditions, broadcast acknowledgements from their partner (even if unofficial). Rule 40 of the Olympic Charter governs the use of athletes’, coaches’ and officials’ images for advertising purposes during the Olympic Games.

                The combined legal and marketing approach to the conception and preparation of the message of such a communication operation is essential to avoid legal proceedings, particularly on the grounds of parasitism; one might therefore legitimately contemplate advertising campaigns, particularly clever, or even malicious ones.

                In this first episode of Legalmondo’s Distribution Talks series, I spoke with Ignacio Alonso, a Madrid-based lawyer with extensive experience in international commercial distribution.

                Main discussion points:

                • in Spain, there is no specific law for distribution agreements, which are governed by the general rules of the Commercial Code;
                • therefore, it is essential to draft a clear and comprehensive contract, which will be the primary source of the parties’ rights and obligations;
                • it is also good to be aware of Spanish case law on commercial distribution, which in some cases applies the law on commercial agency by analogy.
                • the most common issues involving foreign producers distributing in Spain arise at the time of termination of the relationship, mainly because case law grants the terminated distributor an indemnity of clientele or goodwill if similar prerequisites to those in the agency regulations apply.
                • another frequent dispute concerns the adequacy of the notice period for terminating the contract, especially if there is no agreement between the parties: the advice is to follow what the agency regulations stipulate and thus establish a minimum notice period of one month for each year of the contract’s duration, up to 6 months for agreements lasting more than five years;
                • regarding dispute resolution tools, mediation is an option that should be carefully considered because it is quick, inexpensive, and allows a shared solution to be sought flexibly without disrupting the business relationship.
                • if mediation fails, the parties can provide for recourse to arbitration or state court. The choice depends on the case’s specific circumstances, and one factor in favor of jurisdiction is the possibility of appeal, which is excluded in the case of arbitration.

                Go deeper

                Summary

                On 1 June 2022, Regulation EU n. 720/2022, i.e.: the new Vertical Block Exemption Regulation (hereinafter: «VBER»), replaced the previous version (Regulation EU n. 330/2010), expired on 31 May 2022.

                The new VBER and the new vertical guidelines (hereinafter: “Guidelines”) have received the main evidence gathered during the lifetime of the previous VBER and contain some relevant provisions affecting the discipline of all B2B agreements among businesses operating at different levels of the supply chain.

                In this article, we will focus on the impact of the new VBER on sales through digital platforms, listing the main novelties impacting distribution chains, including a platform for marketing products/services.

                The general discipline of vertical agreements

                Article 101(1) of the Treaty on the Functioning of the European Union (“TFEU”) prohibits all agreements that prevent, restrict, or distort competition within the EU market, listing the main types, e.g.: price fixing; market partitioning; limitations on production/development/investment; unfair terms, etc.

                However, Article 101(3) TFEU exempts from such restrictions the agreements that contribute to improving the EU market, to be identified in a special category Regulation.

                The VBER establishes the category of vertical agreements (i.e., agreements between businesses operating at different levels of the supply chain), determining which of these agreements are exempted from Article 101(1) TFEU prohibition.

                In short, vertical agreements are presumed to be exempted (and therefore valid) if they do not contain so-called «hardcore restrictions» (i.e., severe restrictions of competition, such as an absolute ban on sales in a territory or the manufacturer’s determination of the distributor’s resale price) and if neither party’s market share exceeds 30%.

                The exempted agreements benefit from what has been termed the “safe harbour” of the VBER. In contrast, the others will be subject to the general prohibition of Article 101(1) TFEU unless they can benefit from an individual exemption under Article 101(3) TFUE.

                The innovations introduced by the new VBER to online platforms

                The first relevant aspect concerns the classification of the platforms, as the European Commission excluded that the online platform generally meets the conditions to be categorized as agency agreements.

                While there have never been doubts concerning platforms that operate by purchasing and reselling products (classic example: Amazon Retail), some have arisen concerning those platforms that merely promote the products of third parties without carrying out the activity of resale (classic example: Amazon Marketplace).

                With this statement, the European Commission wanted to clear the field of doubt, making explicit that intermediation service providers (such as online platforms) qualify as suppliers (as opposed to commercial agents) under the VBER. This reflects the approach of Regulation (EU) 2019/1150 («P2B Regulation»), which has, for the first time, dictated a specific discipline for digital platforms. It provided for a set of rules to create a “fair, transparent, and predictable environment” for smaller businesses and customers” and for the rationale of the Digital Markets Act, banning certain practices used by large platforms acting as “gatekeepers”.

                Therefore, all contracts concluded between manufacturers and platforms (defined as ‘providers of online intermediation services’) are subject to all the restrictions imposed by the VBER. These include the price, the territories to which or the customers to whom the intermediated goods or services may be sold, or the restrictions relating to online advertising and selling.

                Thus, to give an example, the operator of a platform may not impose a fixed or minimum sale price for a transaction promoted through the platform.

                The second most impactful aspect concerns hybrid platforms, i.e., competing in the relevant market to sell intermediated goods or services. Amazon is the most well-known example, as it is a provider of intermediation services (“Amazon Marketplace”), and – at the same time – it distributes the products of those parties (“Amazon Retail”). We have previously explored the distinction between those 2 business models (and the consequences in terms of intellectual property infringement) here.

                The new VBER explicitly does not apply to hybrid platforms. Therefore, the agreements concluded among such platforms and manufacturers are subject to the limitations of the TFEU, as such providers may have the incentive to favour their sales and the ability to influence the outcome of competition between undertakings that use their online intermediation services.

                Those agreements must be assessed individually under Article 101 of the TFEU, as they do not necessarily restrict competition within the meaning of TFEU, or they may fulfil the conditions of an individual exemption under Article 101(3) TFUE.

                The third very relevant aspect concerns the parity obligations (also referred to as Most Favoured Nation Clauses, or MFNs), i.e., the contract provisions in which a seller (directly or indirectly) agrees to give the buyer the best terms it makes available to any other buyer.

                Indeed, platforms’ contractual terms often contain parity obligation clauses to prevent users from offering their products/services at lower prices or on better conditions on their websites or other platforms.

                The new VBER deals explicitly with parity clauses, making a distinction between clauses whose purpose is to prohibit users of a platform from selling goods or services on more favourable terms through competing platforms (so-called “wide parity clauses”), and clauses that prohibit sales on more favourable terms only in respect of channels operated directly by the users (so-called “narrow parity clauses”).

                Wide parity clauses do not benefit from the VBER exemption; therefore, such obligations must be assessed individually under Article 101(3) TFEU.

                On the other hand, narrow parity clauses continue to benefit from the exemption already granted by the old VBER if they do not exceed the threshold of 30% of the relevant market share set out in Article 3 of the new VBER. However, the new Guidelines warn against using overly narrow parity obligations by online platforms covering a significant share of users, stating that if there is no evidence of pro-competitive effects, the benefit of the block exemption is likely to be withdrawn.

                Impact and takeaways

                The new VBER entered into force on 1 June 2022 and is already applicable to agreements signed after that date. Agreements already in force on 31 May 2022 that satisfy the conditions for exemption under the current VBER but do not satisfy the requirements under the new VBER shall benefit from a one-year transitional period.

                The new regime will be the playing field for all platform-driven sales over the next 12 years (the regulation expires on 31 May 2034). Currently, the rather restrictive novelties on hybrid platforms and parity obligations will likely necessitate substantial revisions to existing trade agreements.

                Here, then, are some tips for managing contracts and relationships with online platforms:

                • the new VBER is the right opportunity to review the existing distribution networks. The revision will have to consider not only the new regulatory limits (e.g., the ban on wide parity clauses) but also the new discipline reserved for hybrid platforms and dual distribution to coordinate the different distribution channels as efficiently as possible, by the stakes set by the new VBER and the Guidelines;
                • platforms are likely to play an even greater role during the next decade; it is, therefore, essential to consider these sales channels from the outset, coordinating them with the other existing ones (retail, direct sales, distributors, etc.) to avoid jeopardizing the marketing of products or services;
                • the European legislator’s attention toward platforms is growing. Looking up from the VBER, one should not forget that they are subject to a multitude of other European regulations, which are gradually regulating the sector and which must be considered when concluding contracts with platforms. The reference is not only to the recent Digital Market Act and P2B Regulation but also to the protection of IP rights on platforms, which — as we have already seen — is still an open issue.

                Summary

                To avoid disputes with important suppliers, it is advisable to plan purchases over the medium and long term and not operate solely on the basis of orders and order confirmations. Planning makes it possible to agree on the duration of the ‘supply agreement, minimum volumes of products to be delivered and delivery schedules, prices, and the conditions under which prices can be varied over time.
                The use of a framework purchase agreement can help avoid future uncertainties and allows various options to be used to manage commodity price fluctuations depending on the type of products , such as automatic price indexing or agreement to renegotiate in the event of commodity fluctuations beyond a certain set tolerance period.

                I read in a press release: “These days, the glass industry is sending wine companies new unilateral contract amendments with price changes of 20%…”

                What can one do to avoid the imposition of price increases by suppliers? 

                • Know your rights and act in an informed manner
                • Plan and organise your supply chain

                Does my supplier have the right to increase prices?

                If contracts have already been concluded, e.g., orders have already been confirmed by the supplier, the answer is often no.

                It is not legitimate to request a price change. It is much less legitimate to communicate it unilaterally, with the threat of cancelling the order or not delivering the goods if the request is not granted.

                What if he tells me it is force majeure?

                That’s wrong: increased costs are not a force majeure but rather an unforeseen excessive onerousness, which hardly happens.

                What if the supplier canceled the order, unilaterally increased the price, or did not deliver the goods?

                He would be in breach of contract and liable to pay damages for violating his contractual obligations.

                How can one avoid a tug-of-war with suppliers?

                The tools are there. You have to know them and use them.

                It is necessary to plan purchases in the medium term, agreeing with suppliers on a schedule in which are set out:

                • the quantities of products to be ordered
                • the delivery terms
                • the durationof the agreement
                • the pricesof the products or raw materials
                • the conditions under which prices can be varied

                There is a very effective instrument to do so: a framework purchase agreement.

                Using a framework purchase agreement, the parties negotiate the above elements, which will be valid for the agreed period.

                Once the agreement is concluded, product orders will follow, governed by the framework agreement, without the need to renegotiate the content of individual deliveries each time.

                For an in-depth discussion of this contract, see this article.

                • “Yes, but my suppliers will never sign it!”

                Why not? Ask them to explain the reason.

                This type of agreement is in the interest of both parties. It allows planning future orders and grants certainty as to whether, when, and how much the parties can change the price.

                In contrast, acting without written agreements forces the parties to operate in an environment of uncertainty. Suppliers can request price increases from one day to the next and refuse supply if the changes are not accepted.

                How are price changes for future supplies regulated?

                Depending on the type of products or services and the raw materials or energy relevant in determining the final price, there are several possibilities.

                • The first option is to index the price automatically. E.g., if the cost of a barrel of Brent oil increases/decreases by 10%, the party concerned is entitled to request a corresponding adjustment of the product’s price in all orders placed as of the following week.
                • An alternative is to provide for a price renegotiation in the event of a fluctuation of the reference commodity. E.g., suppose the LME Aluminium index of the London Stock Exchange increases above a certain threshold. In that case, the interested party may request a price renegotiationfor orders in the period following the increase.

                What if the parties do not agree on new prices?

                It is possible to terminate the contract or refer the price determination to a third party, who would act as arbitrator and set the new prices for future orders.

                Summary

                The framework supply contract is an agreement that regulates a series of future sales and purchases between two parties (customer and supplier) that take place over a certain period of time. This agreement determines the main elements of future contracts such as price, product volumes, delivery terms, technical or quality specifications, and the duration of the agreement.

                The framework contract is useful for ensuring continuity of supply from one or more suppliers of a certain product that is essential for planning industrial or commercial activity. While the general terms and conditions of purchase or sale are the rules that apply to all suppliers or customers of the company. The framework contract is advisable to be concluded with essential suppliers for the continuity of business activity, in general or in relation to a particular project.

                What I am talking about in this article:

                • What is the supply framework agreement?
                • What is the function of the supply framework agreement?
                • The difference with the general conditions of sale or purchase
                • When to enter a purchase framework agreement?
                • When is it beneficial to conclude a sales framework agreement?
                • The content of the supply framework agreement
                • Price revision clause and hardship
                • Delivery terms in the supply framework agreement
                • The Force Majeure clause in international sales contracts
                • International sales: applicable law and dispute resolution arrangements

                What is a framework supply agreement?

                It is an agreement that regulates a series of future sales and purchases between two parties (customer and supplier), which will take place over a certain period.

                It is therefore referred to as a «framework agreement» because it is an agreement that establishes the rules of a future series of sales and purchase contracts, determining their primary elements (such as the price, the volumes of products to be sold and purchased, the delivery terms of the products, and the duration of the contract).

                After concluding the framework agreement, the parties will exchange orders and order confirmations, entering a series of autonomous sales contracts without re-discussing the covenants already defined in the framework agreement.

                Depending on one’s point of view, this agreement is also called a sales framework agreement (if the seller/supplier uses it) or a purchasing framework agreement (if the customer proposes it).

                What is the function of the framework supply agreement?

                It is helpful to arrange a framework agreement in all cases where the parties intend to proceed with a series of purchases/sales of products over time and are interested in giving stability to the commercial agreement by determining its main elements.

                In particular, the purchase framework agreement may be helpful to a company that wishes to ensure continuity of supply from one or more suppliers of a specific product that is essential for planning its industrial or commercial activity (raw material, semi-finished product, component).

                By concluding the framework agreement, the company can obtain, for example, a commitment from the supplier to supply a particular minimum volume of products, at a specific price, with agreed terms and technical specifications, for a certain period.

                This agreement is also beneficial, at the same time, to the seller/supplier, which can plan sales for that period and organize, in turn, the supply chain that enables it to procure the raw materials and components necessary to produce the products.

                What is the difference between a purchase or sales framework agreement and the general terms and conditions?

                Whereas the framework agreement is an agreement that is used with one or more suppliers for a specific product and a certain time frame, determining the essential elements of future contracts, the general purchase (or sales) conditions are the rules that apply to all the company’s suppliers (or customers).

                The first agreement, therefore, is negotiated and defined on a case-by-case basis. At the same time, the general conditions are prepared unilaterally by the company, and the customers or suppliers (depending on whether they are sales or purchase conditions) adhere to and accept that the general conditions apply to the individual order and/or future contracts.

                The two agreements might also co-exist: in that case; it is a good idea to specify which contract should prevail in the event of a discrepancy between the different provisions (usually, this hierarchy is envisaged, ranging from the special to the general: order — order confirmation; framework agreement; general terms and conditions of purchase).

                When is it important to conclude a purchase framework agreement?

                It is beneficial to conclude this agreement when dealing with a mono-supplier or a supplier that would be very difficult to replace if it stopped selling products to the purchasing company.

                The risks one aims to avoid or diminish are so-called stock-outs, i.e., supply interruptions due to the supplier’s lack of availability of products or because the products are available, but the parties cannot agree on the delivery time or sales price.

                Another result that can be achieved is to bind a strategic supplier for a certain period by agreeing that it will reserve an agreed share of production for the buyer on predetermined terms and conditions and avoid competition with offers from third parties interested in the products for the duration of the agreement.

                When is it helpful to conclude a sales framework agreement?

                This agreement allows the seller/supplier to plan sales to a particular customer and thus to plan and organize its production and logistical capacity for the agreed period, avoiding extra costs or delays.

                Planning sales also makes it possible to correctly manage financial obligations and cash flows with a medium-term vision, harmonizing commitments and investments with the sales to one’s customers.

                What is the content of the supply framework agreement?

                There is no standard model of this agreement, which originated from business practice to meet the requirements indicated above.

                Generally, the agreement provides for a fixed period (e.g., 12 months) in which the parties undertake to conclude a series of purchases and sales of products, determining the price and terms of supply and the main covenants of future sales contracts.

                The most important clauses are:

                • the identification of products and technical specifications (often identified in an annex)
                • the minimum/maximum volume of supplies
                • the possible obligation to purchase/sell a minimum/maximum volume of products
                • the schedule of supplies
                • the delivery times
                • the determination of the price and the conditions for its possible modification (see also the next paragraph)
                • impediments to performance (Force Majeure)
                • cases of Hardship
                • penalties for delay or non-performance or for failure to achieve the agreed volumes
                • the hierarchy between the framework agreement and the orders and any other contracts between the parties
                • applicable law and dispute resolution (especially in international agreements)

                How to handle price revision in a supply contract?

                A crucial clause, especially in times of strong fluctuations in the prices of raw materials, transport, and energy, is the price revision clause.

                In the absence of an agreement on this issue, the parties bear the risk of a price increase by undertaking to respect the conditions initially agreed upon; except in exceptional cases (where the fluctuation is strong, affects a short period, and is caused by unforeseeable events), it isn’t straightforward to invoke the supervening excessive onerousness, which allows renegotiating the price, or the contract to be terminated.

                To avoid the uncertainty generated by price fluctuations, it is advisable to agree in the contract on the mechanisms for revising the price (e.g., automatic indexing following the quotation of raw materials). The so-called Hardship or Excessive Onerousness clause establishes what price fluctuation limits are accepted by the parties and what happens if the variations go beyond these limits, providing for the obligation to renegotiate the price or the termination of the contract if no agreement is reached within a certain period.

                How to manage delivery terms in a supply agreement?

                Another fundamental pact in a medium to long-term supply relationship concerns delivery terms. In this case, it is necessary to reconcile the purchaser’s interest in respecting the agreed dates with the supplier’s interest in avoiding claims for damages in the event of a delay, especially in the case of sales requiring intercontinental transport.

                The first thing to be clarified in this regard concerns the nature of delivery deadlines: are they essential or indicative? In the first case, the party affected has the right to terminate (i.e., wind up) the agreement in the event of non-compliance with the term; in the second case, due diligence, information, and timely notification of delays may be required, whereas termination is not a remedy that may be automatically invoked in the event of a delay.

                A useful instrument in this regard is the penalty clause: with this covenant, it is established that for each day/week/month of delay, a sum of money is due by way of damages in favor of the party harmed by the delay.

                If quantified correctly and not excessively, the penalty is helpful for both parties because it makes it possible to predict the damages that may be claimed for the delay, quantifying them in a fair and determined sum. Consequently, the seller is not exposed to claims for damages related to factors beyond his control. At the same time, the buyer can easily calculate the compensation for the delay without the need for further proof.

                The same mechanism, among other things, may be adopted to govern the buyer’s delay in accepting delivery of the goods.

                Finally, it is a good idea to specify the limit of the penalty (e.g.,10 percent of the price of the goods) and a maximum period of grace for the delay, beyond which the party concerned is entitled to terminate the contract by retaining the penalty.

                The Force Majeure clause in international sales contracts

                A situation that is often confused with excessive onerousness, but is, in fact, quite different, is that of Force Majeure, i.e., the supervening impossibility of performance of the contractual obligation due to any event beyond the reasonable control of the party affected, which could not have been reasonably foreseen and the effects of which cannot be overcome by reasonable efforts.

                The function of this clause is to set forth clearly when the parties consider that Force Majeure may be invoked, what specific events are included (e.g., a lock-down of the production plant by order of the authority), and what are the consequences for the parties’ obligations (e.g., suspension of the obligation for a certain period, as long as the cause of impossibility of performance lasts, after which the party affected by performance may declare its intention to dissolve the contract).

                If the wording of this clause is general (as is often the case), the risk is that it will be of little use; it is also advisable to check that the regulation of force majeure complies with the law applicable to the contract (here an in-depth analysis indicating the regime provided for by 42 national laws).

                Applicable law and dispute resolution clauses

                Suppose the customer or supplier is based abroad. In that case, several significant differences must be borne in mind: the first is the agreement’s language, which must be intelligible to the foreign party, therefore usually in English or another language familiar to the parties, possibly also in two languages with parallel text.

                The second issue concerns the applicable law, which should be expressly indicated in the agreement. This subject matter is vast, and here we can say that the decision on the applicable law must be made on a case-by-case basis, intentionally: in fact, it is not always convenient to recall the application of the law of one’s own country.

                In most international sales contracts, the 1980 Vienna Convention on the International Sale of Goods («CISG») applies, a uniform law that is balanced, clear, and easy to understand. Therefore, it is not advisable to exclude it.

                Finally, in a supply framework agreement with an international supplier, it is important to identify the method of dispute resolution: no solution fits all. Choosing a country’s jurisdiction is not always the right decision (indeed, it can often prove counterproductive).

                Eventually, after more than 30 years of negotiations, the world is now looking at the first pan-African trade agreement, which entered into force in 2019: the African Continental Free Trade Area, or AfCFTA.

                Africa, with its 55 countries and around 1.3 billion inhabitants, is the second largest continent in the world after Asia. The continent’s potential is huge: more than 50% of Africa’s population is under 20 years old and the population is growing at the fastest rate in the world. By 2050, one in four new-born babies is expected to be African. In addition, the continent is rich in fertile soil and raw materials.

                For Western investors, Africa has become considerably more important in recent years. As a result, a considerable amount of international trade has emerged, not least promoted by the “Compact with Africa” initiative adopted by the G20 countries in 2017, also known as the “Marshall Plan with Africa”. Its focus is on expanding Africa’s economic cooperation with the G20 countries by strengthening private investment.

                At the same time, however, intra-African trade has stagnated so far: partly still existing high intra-African tariffs, non-tariff barriers (NTBs), weak infrastructure, corruption, cumbersome bureaucracy, as well as non-transparent and inconsistent regulations, ensured that interregional exports could hardly develop and most recently accounted for only 17 % of the pan-African trade and only 0.36 % of world trade. It’s already been a long time since the African Union (AU) had put the creation of a common trade area on its agenda.

                What is behind AfCFTA?

                The establishment of a pan-African trade area was preceded by decades of negotiations, which finally resulted in the entry into force of the AfCFTA on 30 May 2019.

                AfCFTA is a free trade area established by its members, which — with the exception of Eritrea — covers the entire African continent and is thus the largest free trade area in the world by number of member states after the World Trade Organisation (WTO).

                How the common market was to be structured in detail was the subject of several individual negotiations, which were discussed in Phases I and II.

                Phase I comprises the negotiations on three protocols and is almost completed.

                The Protocol on Trade in Goods

                This protocol provides for the elimination of 90 % of all intra-African tariffs in all product categories within five years of entry into force. Of these, up to 7 % of products can be classified as sensitive goods, which are subject to a tariff elimination period of ten years. For the least developed countries (LDCs), the preparation period is extended from five to ten years and for sensitive products from ten to thirteen years, provided they demonstrate their need. The remaining 3 % of tariffs are fully exempted from tariff dismantling.

                A prerequisite for tariff dismantling is the clear delimitation of rules of origin. Otherwise, imports from third countries could benefit from the negotiated tariff advantages. Agreement has already been reached on most of the rules of origin.

                The Protocol on Trade in Services

                The AU General Assembly has so far agreed on five priority areas (transport, communications, tourism, financial and business services) and guidelines for the commitments applicable to them.  47 AU member states have so far submitted their offers for specific commitments and the review of 28 has been completed. In addition, negotiations, for example, on the recognition of professional qualifications, are still ongoing.

                The Protocol on Dispute Settlement

                With the Protocol on Rules and Procedures Governing the Dispute Settlement, the AfCFTA creates a dispute settlement system modelled on the WTO Dispute Settlement Understanding. Under this, the Dispute Settlement Body (DSB) administers the AfCFTA Dispute Settlement Protocol and establishes an Adjudicating Panel (Panel) and an Appellate Body (AB). The DSB is composed of a representative of each member state and intervenes as soon as there are differences of opinion between the contracting states on the interpretation and/or application of the agreement with regard to their rights and obligations.

                For the remaining Phase II, negotiations are planned on investment and competition policy, intellectual property issues, online trade and women and youth in trade, the results of which will be reflected in further protocols.

                The implementation of the AfCFTA

                In principle, the implementation of trade under a trade agreement can only begin once the legal framework has been finally clarified. However, AU Heads of State and Government agreed in December 2020 that trade can begin for goods for which negotiations have been finalised. Under this «transitional arrangement«, after a pandemic-related postponement, the first AfCFTA trade settlement from Ghana to South Africa took place on 4 January 2021.

                Building blocks of the AfCFTA

                All 55 members of the AU were involved in the AfCFTA negotiations. Of these, 47 belong to at least one — and some to more than one — recognised Regional Economic Communities (RECs), which, according to the preamble of the AfCFTA agreement, are to continue as building blocks of the trade agreement. It was therefore they who acted as the voice of their respective members in the AfCFTA negotiations. The AfCFTA provides for RECs to retain their legal instruments, institutions and dispute settlement mechanisms.

                Within the AU, there are eight recognised RECs, overlapping in some countries, which are either preferential trade agreements (Free Trade Agreements — FTAs) or customs unions.

                Under the AfCFTA, the RECs have various responsibilities. These are in particular:

                • coordinating negotiating positions and assisting member states in the implementation of the agreement.
                • solution-oriented mediation in the event of disagreements between member states
                • supporting member states in the harmonisation of tariffs and other border protection regulations
                • promoting the use of the AfCFTA notification procedure to reduce NTBs

                Outlook of the AfCFTA

                The AfCFTA has the potential to facilitate Africa’s integration into the global economy and creates the real possibility of a realignment of international integration and cooperation patterns.

                A trade agreement alone is no guarantee of economic success. For the agreement to achieve the predicted breakthrough, member states must have the political will to implement the new rules consistently and create the necessary capacity to do so. In particular, the short-term removal of trade barriers and the creation of a sustainable physical and digital infrastructure are likely to be crucial.

                If you are interested in the AfCFTA, you can read an extended version of this article here.

                The Legalmondo Africa Desk

                We help companies invest and do business in Africa with our experts in Algeria, Tunisia, Morocco, Senegal, Sudan, Egypt, Ghana, Lybia, Côte d’Ivoire, Cameroon, and Malawi.

                We can also assist foreign entities in African countries where we are not directly present with an office through our network of local partners.

                How it works

                • We set up a meeting (in person or online) with one of our experts to understand the client’s needs.
                • Once we start working together, we follow the client with a dedicated counsel for all its legal needs (single cases, or ongoing legal assistance)

                Get in touch to know more.

                Summary

                Political, environmental or health crises (like the Covid-19 outbreak and the attack of Ukraine by the Russian army) can cause an increase in the price of raw materials and components and generalized inflation. Both suppliers and distributors find themselves faced with problems related to the often sudden and very substantial increase in the price of their own supplies. French law lays down specific rules in that regard.

                Two main situations can be distinguished: where the parties have just established a simple flow of orders and where the parties have concluded a framework agreement fixing firm prices for a fixed term.

                Price increase in a business relationship

                The situation is as follows: the parties have not concluded a framework agreement, each sales contract concluded (each order) is governed by the General T&Cs of the supplier; the latter has not undertaken to maintain the prices for a minimum period and applies the prices of the current tariff.

                In principle, the supplier can modify its prices at any time by sending a new tariff. However, it must give written and reasonable notice in accordance with the provisions of Article L. 442-1.II of the Commercial Code, before the price increase comes into effect. Failure to respect sufficient notice, it could be accused of a sudden «partial» termination of commercial relations (and subject to damages).

                A sudden termination following a price increase would be characterized when the following conditions are met:

                • the commercial relationship must be established: broader concept than the simple contract, taking into account the duration but also the importance and the regularity of the exchanges between the parties;
                • the price increase must be assimilated to a rupture: it is mainly the size of the price increase (+1%, 10% or 25%?) that will lead a judge to determine whether the increase constitutes a «partial» termination (in the event of a substantial modification of the relationship which is nevertheless maintained) or a total termination (if the increase is such that it involves a termination of the relationship) or if it does not constitute a termination (if the increase is minimal);
                • the notice granted is insufficient by comparing the duration of the notice actually granted with that of the notice in accordance with Article L. 442-1.II, taking into account in particular the duration of the commercial relationship and the possible dependence of the victim of the termination with respect to the other party.

                Article L. 442-1.II must be respected as soon as French law applies to the relation. In international business relations, to know how to deal with Article L.442-1.II and conflicts of laws and jurisdiction of competent courts, please see our previous article published on Legalmondo blog.

                Price increase in a framework contract

                If the parties have concluded a framework contract (such as supply, manufacturing, …) for several years and the supplier has committed to fixed prices, how, in this case, can it change these prices?

                In addition to any indexation clause or renegotiation (hardship) clause which would be stipulated in the contract (and besides specific legal provisions applicable to special agreements as to their nature or economic sector), the supplier may seek to avail himself of the legal mechanism of «unforeseeability» provided for by article 1195 of the civil code.

                Three prerequisites must be cumulatively met:

                • an unforeseeable change in circumstances at the time of the conclusion of the contract (i.e.: the parties could not reasonably anticipate this upheaval);
                • a performance of the contract that has become excessively onerous (i.e.: beyond the simple difficulty, the upheaval must cause a disproportionate imbalance);
                • the absence of acceptance of these risks by the debtor of the obligation when concluding the contract.

                The implementation of this mechanism must stick to the following steps:

                • first, the party in difficulty must request the renegotiation of the contract from its co-contracting party;
                • then, in the event of failure of the negotiation or refusal to negotiate by the other party, the parties can (i) agree together on the termination of the contract, on the date and under the conditions that they determine, or (ii) ask together the competent judge to adapt it;
                • finally, in the absence of agreement between the parties on one of the two aforementioned options, within a reasonable time, the judge, seized by one of the parties, may revise the contract or terminate it, on the date and under the conditions that he will set.

                The party wishing to implement this legal mechanism must also anticipate the following points:

                • article 1195 of the Civil Code only applies to contracts concluded on or after October 1, 2016 (or renewed after this date). Judges do not have the power to adapt or rebalance contracts concluded before this date;
                • this provision is not of public order. Therefore, the parties can exclude it or modify its conditions of application and/or implementation (the most common being the framework of the powers of the judge);
                • during the renegotiation, the supplier must continue to sell at the initial price because, unlike force majeure, unforeseen circumstances do not lead to the suspension of compliance with the obligations.

                Key takeaways:

                • analyse carefully the framework of the commercial relationship before deciding to notify a price increase, in order to identify whether the prices are firm for a minimum period and the contractual levers for renegotiation;
                • correctly anticipate the length of notice that must be given to the partner before the entry into force of the new pricing conditions, depending on the length of the relationship and the degree of dependence;
                • document the causes of the price increase;
                • check if and how the legal mechanism of unforeseeability has been amended or excluded by the framework contract or the General T&Cs;
                • consider alternatives strategies, possibly based on stopping production/delivery justified by a force majeure event or on the significant imbalance of the contractual provisions.

                Christophe Hery

                Области практики

                • Агентство
                • Антимонопольное законодательство
                • Арбитраж
                • Распространение
                • Электронная коммерция
                Связаться Christophe
                Franchising Spain - Legalmondo

                Spain | Franchising, Theory Of Risk and Guarantees By Franchisee
                • Распространение
                • Судебная практика
                • Испания
                Vietnam - Legalmondo

                Vietnam on the EU Tax Blacklist: A Guide for EU Buyers
                • Корпоративный
                • Распространение
                • Вьетнам
                Brazil - Legalmondo

                Brazil’s New Digital Child Protection Law: Practical Implications for Foreign Tech Companies
                • Конфиденциальность - Защита данных
                • Бразилия
                France - Legalmondo

                France | Pre-contractual disclosure in distribution and franchise agreements
                • Распространение
                • Франчайзинг
                • Франция
                International distribution agreements - Key Clauses and Lessons learned from the history of Nike - Legalmondo

                International distribution agreements | Key Clauses and Lessons learned from the history of Nike
                • Контракты
                • Распространение
                • Италия
                Saudi Arabia - Legalmondo

                How to Joint Venture in Saudi Arabia
                • Контракты
                • Корпоративный
                • Саудовская Аравия
                Contracts Responsibility - Legalmondo

                Corporate Sustainability in Practice – How Contracts Shape Responsibility
                • Контракты
                • Распространение
                • Finland
                Legalmondo - Oil prices

                Rising Oil Prices and International Contracts: How to Manage Hardship in Global Supply Chains
                • Контракты
                • Распространение
                • Италия
                African Continental Free Trade-Agreement - Legalmondo

                Why the African Continental Free Trade Agreement has not yet turned into Reality — and What That Means for Egypt
                • Распространение
                • Иностранные инвестиции
                • Египет
                Spain lawyer-coach - Legalmondo

                The lawyer-coach: a new way of practising
                • Альтернативное разрешение споров
                • Контракты
                • Испания
                Spain - Legalmondo

                Agency and distribution agreements. Phrases to avoid when ending a business relationship without a written contract
                • Без категории
                • Контракты
                • Испания
                Business people Legalmondo

                Spain | Appropriate Means of Dispute Resolution (ADR) as a prerequisite for litigation
                • Альтернативное разрешение споров
                • Судебная практика
                • Испания
                Spain Influencer-Legalmondo

                Spain – Can an influencer be considered a «commercial agent»?
                • Без категории
                • Распространение
                • Испания
                Spain advance payment - Legalmondo

                Spain — Is it possible to advance payment of customer indemnity in agency contracts?
                • Без категории
                • Испания
                Companies in Spain - Legalmondo

                Spain — Powers of Representation of Companies
                • Корпоративный
                • Испания
                Spain - Legalmondo

                Spain | Clientele Compensation for Agents and Distributors
                • Без категории
                • Контракты
                • Испания
                Debt - Legalmondo

                International debt recovery: risk prevention and best practices
                • Распространение
                • Судебная практика
                • Испания
                mediation - legalmondo

                The importance of Mediation in Distribution Contracts
                • Альтернативное разрешение споров
                • Распространение
                • Испания

                Scrivi a Christophe





                  Read the privacy policy of Legalmondo.
                  This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

                  International debt recovery: risk prevention and best practices

                  07.12.2020

                  • Испания
                  • Распространение
                  • Судебная практика

                  The commercial agent has the right to obtain certain information about the sales of the principal. The Spanish Law on Agency Contracts provides (15.2 LCA) that the agent has the right to demand to see the accounts of the principal in order to verify all matters relating to the commissions due to him. And also, to be provided with the information available to the principal and necessary to verify the amount of such commissions.

                  This article is in line with the 1986 Commercial Agents Directive, according to which (12.3) the agent is entitled to demand to be provided with all information at the disposal of the principal, particularly an extract from the books of account, which is necessary to verify the amount of commission due to the agent. This may not be altered to the detriment of the commercial agent by agreement.

                  The question is, does this right remain even after the termination of the agency contract? In other words: once the agency contract is terminated, can the agent request the information and documentation mentioned in these articles and is the Principal obliged to provide it?

                  In our opinion, the rule does not say anything that limits this right, rather the opposite is to be expected. Therefore, to the extent that there is still any possible commission that may arise from such verification, the answer must be yes. Let us see.

                  The right to demand the production of accounts exists so that the agent can verify the amount of commissions. And the agent is entitled to commissions for acts and operations concluded during the term of the contract (art. 12 LCA), but also for acts or operations concluded after the termination of the contract (art. 13 LCA), and for operations not carried out due to circumstances attributable to the principal (art. 17 LCA). In addition, the agent is entitled to have the commission accrued at the time when the act or transaction should have been executed (art. 14 LCA).

                  All these transactions can take place after the conclusion of the contract. Consider the usual situation where orders are placed during the contract but are accepted or executed afterwards. To reduce the agent’s right to be informed only during the term of the contract would be to limit his entitlement to the corresponding commission unduly. And it should be borne in mind that the amount of the commissions during the last five years may also influence the calculation of the client (goodwill) indemnity (art. 28 LCA), so that the agent’s interest in knowing them is twofold: what he would receive as commission, and what could increase the basis for future indemnity.

                  This has been confirmed, for example, by the Provincial Court (Audiencia Provincial) of Madrid (AAP 227/2017, of 29 June [ECLI:ES:APM:2017:2873A]) which textually states:

                  […] art. 15.2 of the Agency Contract Act provides for the right of the agent to demand the exhibition of the Principal’s accounts in the particulars necessary to verify everything relating to the commissions corresponding to him, as well as to be provided with the information available to the Principal and necessary to verify the amount. This does not prevent, […], the agency contract having already been terminated, as this does not imply that commissions would cease to accrue for policies, contracted with the mediation of the agent, which remain in force.

                  The question then arises as to whether this right to information is unlimited in time. And here the answer would be in the negative. The limitation of the right to receive information would be linked to the statute of limitations of the right to claim the corresponding commission. If the right to receive the commission were undoubtedly time-barred, it could be argued that it would not be possible to receive information about it. But for such an exception, the statute of limitations must be clear, therefore, taking into account possible interruptions due to claims, even extrajudicial ones. In case of doubt, it will be necessary to recognise the right to demand the information, without prejudice to later invoking and recognising the impossibility of claiming the commission if the right is time-barred. And for this we must consider the limitation period for claiming commissions (in general, three years) and that of the right to claim compensation for clientele (one year).

                  In short: it does not seem that the right to receive information and to examine the principal’s documentation is limited by the term of the agency contract; although, on the other hand, it would be appropriate to analyse the possible limitation period for claiming commissions. In the absence of a clear answer to this question, the right to information should, in our opinion, prevail, without prejudice to the fact that the result may not entitle the claim because it is time-barred.

                  SUMMARY: In large-scale events such as the Paris Olympics certain companies will attempt to «wildly» associate their brand with the event through a practice called «ambush marketing», defined by caselaw as «an advertising strategy implemented by a company in order to associate its commercial image with that of an event, and thus to benefit from the media impact of said event, without paying the related rights and without first obtaining the event organizer’s authorization» (Paris Court of Appeal, June 8, 2018, Case No 17/12912). A risky and punishable practice, that might sometimes yet be an option yet.

                  Key takeaways

                  • Ambush marketing might be a punished practice but is not prohibited as such;
                  • As a counterpart of their investment, sponsors and official partners benefit from an extensive legal protection against all forms of ambush marketing in the event concerned, through various general texts (counterfeiting, parasitism, intellectual property) or more specific ones (e.g. sport law);
                  • The Olympics Games are subject to specific regulations that further strengthen this protection, particularly in terms of intellectual property.
                  • But these rights are not absolute, and they are still thin opportunities for astute ambush marketing.

                  The protection offered to sponsors and official partners of sporting and cultural events from ambush marketing

                  With a budget of over 4 billion euros, the 2024 Olympic and Paralympic Games are financed mostly by various official partners and sponsors, who in return benefit from a right to use Olympic and Paralympic properties to be able to associate their own brand image and distinctive signs with these events.

                  Ambush marketing is not punishable as such under French law, but several scattered texts provide extensive protection against ambush marketing for sponsors and partners of sporting or cultural continental-wide or world-wide events. Indeed, sponsors are legitimately entitled to peacefully enjoy the rights offered to them in return for large-scale investments in events such as the FIFA or rugby World Cups, or the Olympic Games.

                  In particular, official sponsors and organizers of such events may invoke:

                  • the «classic» protections offered by intellectual property law (trademark law and copyright) in the context of infringement actions based on the French Intellectual Property Code,
                  • tort law (parasitism and unfair competition based on article 1240 of the French Civil Code);
                  • consumer law (misleading commercial practices) based on the French Consumer Code,
                  • but also more specific texts such as the protection of the exploitation rights of sports federations and sports event organizers derived from the events or competitions they organize, as set out in article L.333-1 of the French Sports Code, which gives sports event organizers an exploitation monopoly.

                  The following ambush marketing practices were sanctioned on the abovementioned grounds:

                  • The use of a tennis competition name and of the trademark associated with it during the sporting event: The organization of online bets, by an online betting operator, on the Roland Garros tournament, using the protected sign and trademark Roland Garros to target the matches on which the bets were organized. The unlawful exploitation of the sporting event, was punished and 400 K€ were allowed as damages, based on article L. 333-1 of the French Sports Code, since only the French Tennis Federation (F.F.T.) owns the right to exploit Roland Garros. The use of the trademark was also punished as counterfeiting (with 300 K€ damages) and parasitism (with 500 K€ damages) (Paris Court of Appeal, Oct. 14, 2009, Case No 08/19179);
                  • An advertising campaign taking place during a film festival and reproducing the event’s trademark: The organization, during the Cannes Film Festival, of a digital advertising campaign by a cosmetics brand through the publication on its social networks of videos showing the beauty makeovers of the brand’s muses, in some of which the official poster of the Cannes Film Festival was visible, one of which reproduced the registered trademark of the “Palme d’Or”, was punished on the grounds of copyright infringement and parasitism with a 50 K€ indemnity (Paris Judicial Court, Dec. 11, 2020, Case No19/08543);
                  • An advertising campaign aimed at falsely claiming to be an official partner of an event: The use, during the Cannes Film Festival, of the slogan «official hairdresser for women» together with the expressions «Cannes» and «Cannes Festival», and other publications falsely leading the public to believe that the hairdresser was an official partner, to the detriment of the only official hairdresser of the Cannes festival, was punished on the grounds of unfair competition and parasitism with a 50 K€ indemnity (Paris Court of Appeal, June 8, 2018, Case No 17/12912).

                  These financial penalties may be combined with injunctions to cease these behaviors, and/or publication in the press under penalty.

                  An even greater protection for the Paris 2024 Olympic Games

                  The Paris 2024 Olympic Games are also subject to specific regulations.

                  Firstly, Article L.141-5 of the French Sports Code, enacted for the benefit of the «Comité national olympique et sportif français” (CNOSF) and the “Comité de l’organisation des Jeux Olympiques et Paralympiques de Paris 2024” (COJOP), protects Olympic signs such as the national Olympic emblems, but also the emblems, the flag, motto and Olympic symbol, Olympic anthem, logo, mascot, slogan and posters of the Olympic Games, the year of the Olympic Games «city + year», the terms «Jeux Olympiques», «Olympisme», «Olympiade», «JO», «olympique», «olympien» and «olympienne». Under no circumstances may these signs be reproduced or even imitated by third-party companies. The COJOP has also published a guide to the protection of the Olympic trademark, outlining the protected symbols, trademarks and signs, as well as the protection of the official partners of the Olympic Games.

                  Secondly, Law no. 2018-202 of March 26, 2018 on the organization of the 2024 Olympic and Paralympic Games adds even more specific prohibitions, such as the reservation for official sponsors of advertising space located near Olympic venues, or located on the Olympic and Paralympic torch route. This protection is unique in the context of the Olympic Games, but usually unregulated in the context of simple sporting events.

                  The following practices, for example, have already been sanctioned on the above-mentioned grounds:

                  • Reproduction of a logo imitating the well-known «Olympic» trademark on a clothing collection: The marketing of a collection of clothing, during the 2016 Olympic Games, bearing a logo (five hearts in the colors of the 5 Olympic colors intersecting in the image of the Olympic logo) imitating the Olympic symbol in association with the words «RIO» and «RIO 2016», was punished on the grounds of parasitism (10 K€ damages) and articles L. 141-5 of the French Sports Code (35 K€) and L. 713-1 of the French Intellectual Property Code (10 K€ damages) (Paris Judicial Court, June 7, 2018, Case No16/10605);
                  • The organization of a contest on social networks using protected symbols: During the 2018 Olympic Games in PyeongChang, a car rental company organized an online game inviting Internet users to nominate the athletes they wanted to win a clock radio, associated with the hashtags «#JO2018» («#OJ2018”), «#Jeuxolympiques» (“#Olympicsgame”) or «C’est parti pour les jeux Olympiques» (“let’s go for the Olympic Games”) without authorization from the CNOSF, owner of these distinctive signs under the 2018 law and article L.141-5 of the French Sport Code and punished on these grounds with 20 K€ damages and of 10 K€ damages for parasitism (Paris Judicial Court, May 29, 2020, n°18/14115).

                  These regulations offer official partners greater protection for their investments against ambush marketing practices from non-official sponsors.

                  Some marketing operations might be exempted

                  An analysis of case law and promotional practices nonetheless reveals the contours of certain advertising practices that could be authorized (i.e. not sanctioned by the above-mentioned texts), provided they are skillfully prepared and presented. Here are a few exemples :

                  • Communication of information for advertising purposes: The use of the results of a rugby match and the announcement of a forthcoming match in a newspaper to promote a motor vehicle and its distinctive features was deemed lawful: «France 13 Angleterre 24 — the Fiat 500 congratulates England on its victory and looks forward to seeing the French team on March 9 for France-Italy» (France 13 Angleterre 24 — la Fiat 500 félicite l’Angleterre pour sa victoire et donne rendez-vous à l’équipe de France le 9 mars pour France-Italie) the judges having considered that this publication «merely reproduces a current sporting result, acquired and made public on the front page of the sports newspaper, and refers to a future match also known as already announced by the newspaper in a news article» (Court of cassation, May 20, 2014, Case No 13-12.102).
                  • Sponsorship of athletes, including those taking part in Olympic competitions: Subject to compliance with the applicable regulatory framework, particularly as regards models, any company may enter into partnerships with athletes taking part in the Olympic Games, for example by donating clothing bearing the desired logo or brand, which they could wear during their participation in the various events. Athletes may also, under certain conditions, broadcast acknowledgements from their partner (even if unofficial). Rule 40 of the Olympic Charter governs the use of athletes’, coaches’ and officials’ images for advertising purposes during the Olympic Games.

                  The combined legal and marketing approach to the conception and preparation of the message of such a communication operation is essential to avoid legal proceedings, particularly on the grounds of parasitism; one might therefore legitimately contemplate advertising campaigns, particularly clever, or even malicious ones.

                  In this first episode of Legalmondo’s Distribution Talks series, I spoke with Ignacio Alonso, a Madrid-based lawyer with extensive experience in international commercial distribution.

                  Main discussion points:

                  • in Spain, there is no specific law for distribution agreements, which are governed by the general rules of the Commercial Code;
                  • therefore, it is essential to draft a clear and comprehensive contract, which will be the primary source of the parties’ rights and obligations;
                  • it is also good to be aware of Spanish case law on commercial distribution, which in some cases applies the law on commercial agency by analogy.
                  • the most common issues involving foreign producers distributing in Spain arise at the time of termination of the relationship, mainly because case law grants the terminated distributor an indemnity of clientele or goodwill if similar prerequisites to those in the agency regulations apply.
                  • another frequent dispute concerns the adequacy of the notice period for terminating the contract, especially if there is no agreement between the parties: the advice is to follow what the agency regulations stipulate and thus establish a minimum notice period of one month for each year of the contract’s duration, up to 6 months for agreements lasting more than five years;
                  • regarding dispute resolution tools, mediation is an option that should be carefully considered because it is quick, inexpensive, and allows a shared solution to be sought flexibly without disrupting the business relationship.
                  • if mediation fails, the parties can provide for recourse to arbitration or state court. The choice depends on the case’s specific circumstances, and one factor in favor of jurisdiction is the possibility of appeal, which is excluded in the case of arbitration.

                  Go deeper

                  Summary

                  On 1 June 2022, Regulation EU n. 720/2022, i.e.: the new Vertical Block Exemption Regulation (hereinafter: «VBER»), replaced the previous version (Regulation EU n. 330/2010), expired on 31 May 2022.

                  The new VBER and the new vertical guidelines (hereinafter: “Guidelines”) have received the main evidence gathered during the lifetime of the previous VBER and contain some relevant provisions affecting the discipline of all B2B agreements among businesses operating at different levels of the supply chain.

                  In this article, we will focus on the impact of the new VBER on sales through digital platforms, listing the main novelties impacting distribution chains, including a platform for marketing products/services.

                  The general discipline of vertical agreements

                  Article 101(1) of the Treaty on the Functioning of the European Union (“TFEU”) prohibits all agreements that prevent, restrict, or distort competition within the EU market, listing the main types, e.g.: price fixing; market partitioning; limitations on production/development/investment; unfair terms, etc.

                  However, Article 101(3) TFEU exempts from such restrictions the agreements that contribute to improving the EU market, to be identified in a special category Regulation.

                  The VBER establishes the category of vertical agreements (i.e., agreements between businesses operating at different levels of the supply chain), determining which of these agreements are exempted from Article 101(1) TFEU prohibition.

                  In short, vertical agreements are presumed to be exempted (and therefore valid) if they do not contain so-called «hardcore restrictions» (i.e., severe restrictions of competition, such as an absolute ban on sales in a territory or the manufacturer’s determination of the distributor’s resale price) and if neither party’s market share exceeds 30%.

                  The exempted agreements benefit from what has been termed the “safe harbour” of the VBER. In contrast, the others will be subject to the general prohibition of Article 101(1) TFEU unless they can benefit from an individual exemption under Article 101(3) TFUE.

                  The innovations introduced by the new VBER to online platforms

                  The first relevant aspect concerns the classification of the platforms, as the European Commission excluded that the online platform generally meets the conditions to be categorized as agency agreements.

                  While there have never been doubts concerning platforms that operate by purchasing and reselling products (classic example: Amazon Retail), some have arisen concerning those platforms that merely promote the products of third parties without carrying out the activity of resale (classic example: Amazon Marketplace).

                  With this statement, the European Commission wanted to clear the field of doubt, making explicit that intermediation service providers (such as online platforms) qualify as suppliers (as opposed to commercial agents) under the VBER. This reflects the approach of Regulation (EU) 2019/1150 («P2B Regulation»), which has, for the first time, dictated a specific discipline for digital platforms. It provided for a set of rules to create a “fair, transparent, and predictable environment” for smaller businesses and customers” and for the rationale of the Digital Markets Act, banning certain practices used by large platforms acting as “gatekeepers”.

                  Therefore, all contracts concluded between manufacturers and platforms (defined as ‘providers of online intermediation services’) are subject to all the restrictions imposed by the VBER. These include the price, the territories to which or the customers to whom the intermediated goods or services may be sold, or the restrictions relating to online advertising and selling.

                  Thus, to give an example, the operator of a platform may not impose a fixed or minimum sale price for a transaction promoted through the platform.

                  The second most impactful aspect concerns hybrid platforms, i.e., competing in the relevant market to sell intermediated goods or services. Amazon is the most well-known example, as it is a provider of intermediation services (“Amazon Marketplace”), and – at the same time – it distributes the products of those parties (“Amazon Retail”). We have previously explored the distinction between those 2 business models (and the consequences in terms of intellectual property infringement) here.

                  The new VBER explicitly does not apply to hybrid platforms. Therefore, the agreements concluded among such platforms and manufacturers are subject to the limitations of the TFEU, as such providers may have the incentive to favour their sales and the ability to influence the outcome of competition between undertakings that use their online intermediation services.

                  Those agreements must be assessed individually under Article 101 of the TFEU, as they do not necessarily restrict competition within the meaning of TFEU, or they may fulfil the conditions of an individual exemption under Article 101(3) TFUE.

                  The third very relevant aspect concerns the parity obligations (also referred to as Most Favoured Nation Clauses, or MFNs), i.e., the contract provisions in which a seller (directly or indirectly) agrees to give the buyer the best terms it makes available to any other buyer.

                  Indeed, platforms’ contractual terms often contain parity obligation clauses to prevent users from offering their products/services at lower prices or on better conditions on their websites or other platforms.

                  The new VBER deals explicitly with parity clauses, making a distinction between clauses whose purpose is to prohibit users of a platform from selling goods or services on more favourable terms through competing platforms (so-called “wide parity clauses”), and clauses that prohibit sales on more favourable terms only in respect of channels operated directly by the users (so-called “narrow parity clauses”).

                  Wide parity clauses do not benefit from the VBER exemption; therefore, such obligations must be assessed individually under Article 101(3) TFEU.

                  On the other hand, narrow parity clauses continue to benefit from the exemption already granted by the old VBER if they do not exceed the threshold of 30% of the relevant market share set out in Article 3 of the new VBER. However, the new Guidelines warn against using overly narrow parity obligations by online platforms covering a significant share of users, stating that if there is no evidence of pro-competitive effects, the benefit of the block exemption is likely to be withdrawn.

                  Impact and takeaways

                  The new VBER entered into force on 1 June 2022 and is already applicable to agreements signed after that date. Agreements already in force on 31 May 2022 that satisfy the conditions for exemption under the current VBER but do not satisfy the requirements under the new VBER shall benefit from a one-year transitional period.

                  The new regime will be the playing field for all platform-driven sales over the next 12 years (the regulation expires on 31 May 2034). Currently, the rather restrictive novelties on hybrid platforms and parity obligations will likely necessitate substantial revisions to existing trade agreements.

                  Here, then, are some tips for managing contracts and relationships with online platforms:

                  • the new VBER is the right opportunity to review the existing distribution networks. The revision will have to consider not only the new regulatory limits (e.g., the ban on wide parity clauses) but also the new discipline reserved for hybrid platforms and dual distribution to coordinate the different distribution channels as efficiently as possible, by the stakes set by the new VBER and the Guidelines;
                  • platforms are likely to play an even greater role during the next decade; it is, therefore, essential to consider these sales channels from the outset, coordinating them with the other existing ones (retail, direct sales, distributors, etc.) to avoid jeopardizing the marketing of products or services;
                  • the European legislator’s attention toward platforms is growing. Looking up from the VBER, one should not forget that they are subject to a multitude of other European regulations, which are gradually regulating the sector and which must be considered when concluding contracts with platforms. The reference is not only to the recent Digital Market Act and P2B Regulation but also to the protection of IP rights on platforms, which — as we have already seen — is still an open issue.

                  Summary

                  To avoid disputes with important suppliers, it is advisable to plan purchases over the medium and long term and not operate solely on the basis of orders and order confirmations. Planning makes it possible to agree on the duration of the ‘supply agreement, minimum volumes of products to be delivered and delivery schedules, prices, and the conditions under which prices can be varied over time.
                  The use of a framework purchase agreement can help avoid future uncertainties and allows various options to be used to manage commodity price fluctuations depending on the type of products , such as automatic price indexing or agreement to renegotiate in the event of commodity fluctuations beyond a certain set tolerance period.

                  I read in a press release: “These days, the glass industry is sending wine companies new unilateral contract amendments with price changes of 20%…”

                  What can one do to avoid the imposition of price increases by suppliers? 

                  • Know your rights and act in an informed manner
                  • Plan and organise your supply chain

                  Does my supplier have the right to increase prices?

                  If contracts have already been concluded, e.g., orders have already been confirmed by the supplier, the answer is often no.

                  It is not legitimate to request a price change. It is much less legitimate to communicate it unilaterally, with the threat of cancelling the order or not delivering the goods if the request is not granted.

                  What if he tells me it is force majeure?

                  That’s wrong: increased costs are not a force majeure but rather an unforeseen excessive onerousness, which hardly happens.

                  What if the supplier canceled the order, unilaterally increased the price, or did not deliver the goods?

                  He would be in breach of contract and liable to pay damages for violating his contractual obligations.

                  How can one avoid a tug-of-war with suppliers?

                  The tools are there. You have to know them and use them.

                  It is necessary to plan purchases in the medium term, agreeing with suppliers on a schedule in which are set out:

                  • the quantities of products to be ordered
                  • the delivery terms
                  • the durationof the agreement
                  • the pricesof the products or raw materials
                  • the conditions under which prices can be varied

                  There is a very effective instrument to do so: a framework purchase agreement.

                  Using a framework purchase agreement, the parties negotiate the above elements, which will be valid for the agreed period.

                  Once the agreement is concluded, product orders will follow, governed by the framework agreement, without the need to renegotiate the content of individual deliveries each time.

                  For an in-depth discussion of this contract, see this article.

                  • “Yes, but my suppliers will never sign it!”

                  Why not? Ask them to explain the reason.

                  This type of agreement is in the interest of both parties. It allows planning future orders and grants certainty as to whether, when, and how much the parties can change the price.

                  In contrast, acting without written agreements forces the parties to operate in an environment of uncertainty. Suppliers can request price increases from one day to the next and refuse supply if the changes are not accepted.

                  How are price changes for future supplies regulated?

                  Depending on the type of products or services and the raw materials or energy relevant in determining the final price, there are several possibilities.

                  • The first option is to index the price automatically. E.g., if the cost of a barrel of Brent oil increases/decreases by 10%, the party concerned is entitled to request a corresponding adjustment of the product’s price in all orders placed as of the following week.
                  • An alternative is to provide for a price renegotiation in the event of a fluctuation of the reference commodity. E.g., suppose the LME Aluminium index of the London Stock Exchange increases above a certain threshold. In that case, the interested party may request a price renegotiationfor orders in the period following the increase.

                  What if the parties do not agree on new prices?

                  It is possible to terminate the contract or refer the price determination to a third party, who would act as arbitrator and set the new prices for future orders.

                  Summary

                  The framework supply contract is an agreement that regulates a series of future sales and purchases between two parties (customer and supplier) that take place over a certain period of time. This agreement determines the main elements of future contracts such as price, product volumes, delivery terms, technical or quality specifications, and the duration of the agreement.

                  The framework contract is useful for ensuring continuity of supply from one or more suppliers of a certain product that is essential for planning industrial or commercial activity. While the general terms and conditions of purchase or sale are the rules that apply to all suppliers or customers of the company. The framework contract is advisable to be concluded with essential suppliers for the continuity of business activity, in general or in relation to a particular project.

                  What I am talking about in this article:

                  • What is the supply framework agreement?
                  • What is the function of the supply framework agreement?
                  • The difference with the general conditions of sale or purchase
                  • When to enter a purchase framework agreement?
                  • When is it beneficial to conclude a sales framework agreement?
                  • The content of the supply framework agreement
                  • Price revision clause and hardship
                  • Delivery terms in the supply framework agreement
                  • The Force Majeure clause in international sales contracts
                  • International sales: applicable law and dispute resolution arrangements

                  What is a framework supply agreement?

                  It is an agreement that regulates a series of future sales and purchases between two parties (customer and supplier), which will take place over a certain period.

                  It is therefore referred to as a «framework agreement» because it is an agreement that establishes the rules of a future series of sales and purchase contracts, determining their primary elements (such as the price, the volumes of products to be sold and purchased, the delivery terms of the products, and the duration of the contract).

                  After concluding the framework agreement, the parties will exchange orders and order confirmations, entering a series of autonomous sales contracts without re-discussing the covenants already defined in the framework agreement.

                  Depending on one’s point of view, this agreement is also called a sales framework agreement (if the seller/supplier uses it) or a purchasing framework agreement (if the customer proposes it).

                  What is the function of the framework supply agreement?

                  It is helpful to arrange a framework agreement in all cases where the parties intend to proceed with a series of purchases/sales of products over time and are interested in giving stability to the commercial agreement by determining its main elements.

                  In particular, the purchase framework agreement may be helpful to a company that wishes to ensure continuity of supply from one or more suppliers of a specific product that is essential for planning its industrial or commercial activity (raw material, semi-finished product, component).

                  By concluding the framework agreement, the company can obtain, for example, a commitment from the supplier to supply a particular minimum volume of products, at a specific price, with agreed terms and technical specifications, for a certain period.

                  This agreement is also beneficial, at the same time, to the seller/supplier, which can plan sales for that period and organize, in turn, the supply chain that enables it to procure the raw materials and components necessary to produce the products.

                  What is the difference between a purchase or sales framework agreement and the general terms and conditions?

                  Whereas the framework agreement is an agreement that is used with one or more suppliers for a specific product and a certain time frame, determining the essential elements of future contracts, the general purchase (or sales) conditions are the rules that apply to all the company’s suppliers (or customers).

                  The first agreement, therefore, is negotiated and defined on a case-by-case basis. At the same time, the general conditions are prepared unilaterally by the company, and the customers or suppliers (depending on whether they are sales or purchase conditions) adhere to and accept that the general conditions apply to the individual order and/or future contracts.

                  The two agreements might also co-exist: in that case; it is a good idea to specify which contract should prevail in the event of a discrepancy between the different provisions (usually, this hierarchy is envisaged, ranging from the special to the general: order — order confirmation; framework agreement; general terms and conditions of purchase).

                  When is it important to conclude a purchase framework agreement?

                  It is beneficial to conclude this agreement when dealing with a mono-supplier or a supplier that would be very difficult to replace if it stopped selling products to the purchasing company.

                  The risks one aims to avoid or diminish are so-called stock-outs, i.e., supply interruptions due to the supplier’s lack of availability of products or because the products are available, but the parties cannot agree on the delivery time or sales price.

                  Another result that can be achieved is to bind a strategic supplier for a certain period by agreeing that it will reserve an agreed share of production for the buyer on predetermined terms and conditions and avoid competition with offers from third parties interested in the products for the duration of the agreement.

                  When is it helpful to conclude a sales framework agreement?

                  This agreement allows the seller/supplier to plan sales to a particular customer and thus to plan and organize its production and logistical capacity for the agreed period, avoiding extra costs or delays.

                  Planning sales also makes it possible to correctly manage financial obligations and cash flows with a medium-term vision, harmonizing commitments and investments with the sales to one’s customers.

                  What is the content of the supply framework agreement?

                  There is no standard model of this agreement, which originated from business practice to meet the requirements indicated above.

                  Generally, the agreement provides for a fixed period (e.g., 12 months) in which the parties undertake to conclude a series of purchases and sales of products, determining the price and terms of supply and the main covenants of future sales contracts.

                  The most important clauses are:

                  • the identification of products and technical specifications (often identified in an annex)
                  • the minimum/maximum volume of supplies
                  • the possible obligation to purchase/sell a minimum/maximum volume of products
                  • the schedule of supplies
                  • the delivery times
                  • the determination of the price and the conditions for its possible modification (see also the next paragraph)
                  • impediments to performance (Force Majeure)
                  • cases of Hardship
                  • penalties for delay or non-performance or for failure to achieve the agreed volumes
                  • the hierarchy between the framework agreement and the orders and any other contracts between the parties
                  • applicable law and dispute resolution (especially in international agreements)

                  How to handle price revision in a supply contract?

                  A crucial clause, especially in times of strong fluctuations in the prices of raw materials, transport, and energy, is the price revision clause.

                  In the absence of an agreement on this issue, the parties bear the risk of a price increase by undertaking to respect the conditions initially agreed upon; except in exceptional cases (where the fluctuation is strong, affects a short period, and is caused by unforeseeable events), it isn’t straightforward to invoke the supervening excessive onerousness, which allows renegotiating the price, or the contract to be terminated.

                  To avoid the uncertainty generated by price fluctuations, it is advisable to agree in the contract on the mechanisms for revising the price (e.g., automatic indexing following the quotation of raw materials). The so-called Hardship or Excessive Onerousness clause establishes what price fluctuation limits are accepted by the parties and what happens if the variations go beyond these limits, providing for the obligation to renegotiate the price or the termination of the contract if no agreement is reached within a certain period.

                  How to manage delivery terms in a supply agreement?

                  Another fundamental pact in a medium to long-term supply relationship concerns delivery terms. In this case, it is necessary to reconcile the purchaser’s interest in respecting the agreed dates with the supplier’s interest in avoiding claims for damages in the event of a delay, especially in the case of sales requiring intercontinental transport.

                  The first thing to be clarified in this regard concerns the nature of delivery deadlines: are they essential or indicative? In the first case, the party affected has the right to terminate (i.e., wind up) the agreement in the event of non-compliance with the term; in the second case, due diligence, information, and timely notification of delays may be required, whereas termination is not a remedy that may be automatically invoked in the event of a delay.

                  A useful instrument in this regard is the penalty clause: with this covenant, it is established that for each day/week/month of delay, a sum of money is due by way of damages in favor of the party harmed by the delay.

                  If quantified correctly and not excessively, the penalty is helpful for both parties because it makes it possible to predict the damages that may be claimed for the delay, quantifying them in a fair and determined sum. Consequently, the seller is not exposed to claims for damages related to factors beyond his control. At the same time, the buyer can easily calculate the compensation for the delay without the need for further proof.

                  The same mechanism, among other things, may be adopted to govern the buyer’s delay in accepting delivery of the goods.

                  Finally, it is a good idea to specify the limit of the penalty (e.g.,10 percent of the price of the goods) and a maximum period of grace for the delay, beyond which the party concerned is entitled to terminate the contract by retaining the penalty.

                  The Force Majeure clause in international sales contracts

                  A situation that is often confused with excessive onerousness, but is, in fact, quite different, is that of Force Majeure, i.e., the supervening impossibility of performance of the contractual obligation due to any event beyond the reasonable control of the party affected, which could not have been reasonably foreseen and the effects of which cannot be overcome by reasonable efforts.

                  The function of this clause is to set forth clearly when the parties consider that Force Majeure may be invoked, what specific events are included (e.g., a lock-down of the production plant by order of the authority), and what are the consequences for the parties’ obligations (e.g., suspension of the obligation for a certain period, as long as the cause of impossibility of performance lasts, after which the party affected by performance may declare its intention to dissolve the contract).

                  If the wording of this clause is general (as is often the case), the risk is that it will be of little use; it is also advisable to check that the regulation of force majeure complies with the law applicable to the contract (here an in-depth analysis indicating the regime provided for by 42 national laws).

                  Applicable law and dispute resolution clauses

                  Suppose the customer or supplier is based abroad. In that case, several significant differences must be borne in mind: the first is the agreement’s language, which must be intelligible to the foreign party, therefore usually in English or another language familiar to the parties, possibly also in two languages with parallel text.

                  The second issue concerns the applicable law, which should be expressly indicated in the agreement. This subject matter is vast, and here we can say that the decision on the applicable law must be made on a case-by-case basis, intentionally: in fact, it is not always convenient to recall the application of the law of one’s own country.

                  In most international sales contracts, the 1980 Vienna Convention on the International Sale of Goods («CISG») applies, a uniform law that is balanced, clear, and easy to understand. Therefore, it is not advisable to exclude it.

                  Finally, in a supply framework agreement with an international supplier, it is important to identify the method of dispute resolution: no solution fits all. Choosing a country’s jurisdiction is not always the right decision (indeed, it can often prove counterproductive).

                  Eventually, after more than 30 years of negotiations, the world is now looking at the first pan-African trade agreement, which entered into force in 2019: the African Continental Free Trade Area, or AfCFTA.

                  Africa, with its 55 countries and around 1.3 billion inhabitants, is the second largest continent in the world after Asia. The continent’s potential is huge: more than 50% of Africa’s population is under 20 years old and the population is growing at the fastest rate in the world. By 2050, one in four new-born babies is expected to be African. In addition, the continent is rich in fertile soil and raw materials.

                  For Western investors, Africa has become considerably more important in recent years. As a result, a considerable amount of international trade has emerged, not least promoted by the “Compact with Africa” initiative adopted by the G20 countries in 2017, also known as the “Marshall Plan with Africa”. Its focus is on expanding Africa’s economic cooperation with the G20 countries by strengthening private investment.

                  At the same time, however, intra-African trade has stagnated so far: partly still existing high intra-African tariffs, non-tariff barriers (NTBs), weak infrastructure, corruption, cumbersome bureaucracy, as well as non-transparent and inconsistent regulations, ensured that interregional exports could hardly develop and most recently accounted for only 17 % of the pan-African trade and only 0.36 % of world trade. It’s already been a long time since the African Union (AU) had put the creation of a common trade area on its agenda.

                  What is behind AfCFTA?

                  The establishment of a pan-African trade area was preceded by decades of negotiations, which finally resulted in the entry into force of the AfCFTA on 30 May 2019.

                  AfCFTA is a free trade area established by its members, which — with the exception of Eritrea — covers the entire African continent and is thus the largest free trade area in the world by number of member states after the World Trade Organisation (WTO).

                  How the common market was to be structured in detail was the subject of several individual negotiations, which were discussed in Phases I and II.

                  Phase I comprises the negotiations on three protocols and is almost completed.

                  The Protocol on Trade in Goods

                  This protocol provides for the elimination of 90 % of all intra-African tariffs in all product categories within five years of entry into force. Of these, up to 7 % of products can be classified as sensitive goods, which are subject to a tariff elimination period of ten years. For the least developed countries (LDCs), the preparation period is extended from five to ten years and for sensitive products from ten to thirteen years, provided they demonstrate their need. The remaining 3 % of tariffs are fully exempted from tariff dismantling.

                  A prerequisite for tariff dismantling is the clear delimitation of rules of origin. Otherwise, imports from third countries could benefit from the negotiated tariff advantages. Agreement has already been reached on most of the rules of origin.

                  The Protocol on Trade in Services

                  The AU General Assembly has so far agreed on five priority areas (transport, communications, tourism, financial and business services) and guidelines for the commitments applicable to them.  47 AU member states have so far submitted their offers for specific commitments and the review of 28 has been completed. In addition, negotiations, for example, on the recognition of professional qualifications, are still ongoing.

                  The Protocol on Dispute Settlement

                  With the Protocol on Rules and Procedures Governing the Dispute Settlement, the AfCFTA creates a dispute settlement system modelled on the WTO Dispute Settlement Understanding. Under this, the Dispute Settlement Body (DSB) administers the AfCFTA Dispute Settlement Protocol and establishes an Adjudicating Panel (Panel) and an Appellate Body (AB). The DSB is composed of a representative of each member state and intervenes as soon as there are differences of opinion between the contracting states on the interpretation and/or application of the agreement with regard to their rights and obligations.

                  For the remaining Phase II, negotiations are planned on investment and competition policy, intellectual property issues, online trade and women and youth in trade, the results of which will be reflected in further protocols.

                  The implementation of the AfCFTA

                  In principle, the implementation of trade under a trade agreement can only begin once the legal framework has been finally clarified. However, AU Heads of State and Government agreed in December 2020 that trade can begin for goods for which negotiations have been finalised. Under this «transitional arrangement«, after a pandemic-related postponement, the first AfCFTA trade settlement from Ghana to South Africa took place on 4 January 2021.

                  Building blocks of the AfCFTA

                  All 55 members of the AU were involved in the AfCFTA negotiations. Of these, 47 belong to at least one — and some to more than one — recognised Regional Economic Communities (RECs), which, according to the preamble of the AfCFTA agreement, are to continue as building blocks of the trade agreement. It was therefore they who acted as the voice of their respective members in the AfCFTA negotiations. The AfCFTA provides for RECs to retain their legal instruments, institutions and dispute settlement mechanisms.

                  Within the AU, there are eight recognised RECs, overlapping in some countries, which are either preferential trade agreements (Free Trade Agreements — FTAs) or customs unions.

                  Under the AfCFTA, the RECs have various responsibilities. These are in particular:

                  • coordinating negotiating positions and assisting member states in the implementation of the agreement.
                  • solution-oriented mediation in the event of disagreements between member states
                  • supporting member states in the harmonisation of tariffs and other border protection regulations
                  • promoting the use of the AfCFTA notification procedure to reduce NTBs

                  Outlook of the AfCFTA

                  The AfCFTA has the potential to facilitate Africa’s integration into the global economy and creates the real possibility of a realignment of international integration and cooperation patterns.

                  A trade agreement alone is no guarantee of economic success. For the agreement to achieve the predicted breakthrough, member states must have the political will to implement the new rules consistently and create the necessary capacity to do so. In particular, the short-term removal of trade barriers and the creation of a sustainable physical and digital infrastructure are likely to be crucial.

                  If you are interested in the AfCFTA, you can read an extended version of this article here.

                  The Legalmondo Africa Desk

                  We help companies invest and do business in Africa with our experts in Algeria, Tunisia, Morocco, Senegal, Sudan, Egypt, Ghana, Lybia, Côte d’Ivoire, Cameroon, and Malawi.

                  We can also assist foreign entities in African countries where we are not directly present with an office through our network of local partners.

                  How it works

                  • We set up a meeting (in person or online) with one of our experts to understand the client’s needs.
                  • Once we start working together, we follow the client with a dedicated counsel for all its legal needs (single cases, or ongoing legal assistance)

                  Get in touch to know more.

                  Summary

                  Political, environmental or health crises (like the Covid-19 outbreak and the attack of Ukraine by the Russian army) can cause an increase in the price of raw materials and components and generalized inflation. Both suppliers and distributors find themselves faced with problems related to the often sudden and very substantial increase in the price of their own supplies. French law lays down specific rules in that regard.

                  Two main situations can be distinguished: where the parties have just established a simple flow of orders and where the parties have concluded a framework agreement fixing firm prices for a fixed term.

                  Price increase in a business relationship

                  The situation is as follows: the parties have not concluded a framework agreement, each sales contract concluded (each order) is governed by the General T&Cs of the supplier; the latter has not undertaken to maintain the prices for a minimum period and applies the prices of the current tariff.

                  In principle, the supplier can modify its prices at any time by sending a new tariff. However, it must give written and reasonable notice in accordance with the provisions of Article L. 442-1.II of the Commercial Code, before the price increase comes into effect. Failure to respect sufficient notice, it could be accused of a sudden «partial» termination of commercial relations (and subject to damages).

                  A sudden termination following a price increase would be characterized when the following conditions are met:

                  • the commercial relationship must be established: broader concept than the simple contract, taking into account the duration but also the importance and the regularity of the exchanges between the parties;
                  • the price increase must be assimilated to a rupture: it is mainly the size of the price increase (+1%, 10% or 25%?) that will lead a judge to determine whether the increase constitutes a «partial» termination (in the event of a substantial modification of the relationship which is nevertheless maintained) or a total termination (if the increase is such that it involves a termination of the relationship) or if it does not constitute a termination (if the increase is minimal);
                  • the notice granted is insufficient by comparing the duration of the notice actually granted with that of the notice in accordance with Article L. 442-1.II, taking into account in particular the duration of the commercial relationship and the possible dependence of the victim of the termination with respect to the other party.

                  Article L. 442-1.II must be respected as soon as French law applies to the relation. In international business relations, to know how to deal with Article L.442-1.II and conflicts of laws and jurisdiction of competent courts, please see our previous article published on Legalmondo blog.

                  Price increase in a framework contract

                  If the parties have concluded a framework contract (such as supply, manufacturing, …) for several years and the supplier has committed to fixed prices, how, in this case, can it change these prices?

                  In addition to any indexation clause or renegotiation (hardship) clause which would be stipulated in the contract (and besides specific legal provisions applicable to special agreements as to their nature or economic sector), the supplier may seek to avail himself of the legal mechanism of «unforeseeability» provided for by article 1195 of the civil code.

                  Three prerequisites must be cumulatively met:

                  • an unforeseeable change in circumstances at the time of the conclusion of the contract (i.e.: the parties could not reasonably anticipate this upheaval);
                  • a performance of the contract that has become excessively onerous (i.e.: beyond the simple difficulty, the upheaval must cause a disproportionate imbalance);
                  • the absence of acceptance of these risks by the debtor of the obligation when concluding the contract.

                  The implementation of this mechanism must stick to the following steps:

                  • first, the party in difficulty must request the renegotiation of the contract from its co-contracting party;
                  • then, in the event of failure of the negotiation or refusal to negotiate by the other party, the parties can (i) agree together on the termination of the contract, on the date and under the conditions that they determine, or (ii) ask together the competent judge to adapt it;
                  • finally, in the absence of agreement between the parties on one of the two aforementioned options, within a reasonable time, the judge, seized by one of the parties, may revise the contract or terminate it, on the date and under the conditions that he will set.

                  The party wishing to implement this legal mechanism must also anticipate the following points:

                  • article 1195 of the Civil Code only applies to contracts concluded on or after October 1, 2016 (or renewed after this date). Judges do not have the power to adapt or rebalance contracts concluded before this date;
                  • this provision is not of public order. Therefore, the parties can exclude it or modify its conditions of application and/or implementation (the most common being the framework of the powers of the judge);
                  • during the renegotiation, the supplier must continue to sell at the initial price because, unlike force majeure, unforeseen circumstances do not lead to the suspension of compliance with the obligations.

                  Key takeaways:

                  • analyse carefully the framework of the commercial relationship before deciding to notify a price increase, in order to identify whether the prices are firm for a minimum period and the contractual levers for renegotiation;
                  • correctly anticipate the length of notice that must be given to the partner before the entry into force of the new pricing conditions, depending on the length of the relationship and the degree of dependence;
                  • document the causes of the price increase;
                  • check if and how the legal mechanism of unforeseeability has been amended or excluded by the framework contract or the General T&Cs;
                  • consider alternatives strategies, possibly based on stopping production/delivery justified by a force majeure event or on the significant imbalance of the contractual provisions.

                  Ignacio Alonso

                  Области практики

                  • Агентство
                  • Корпоративный
                  • Распространение
                  • Франчайзинг
                  Связаться Ignacio
                  Franchising Spain - Legalmondo

                  Spain | Franchising, Theory Of Risk and Guarantees By Franchisee
                  • Распространение
                  • Судебная практика
                  • Испания
                  Vietnam - Legalmondo

                  Vietnam on the EU Tax Blacklist: A Guide for EU Buyers
                  • Корпоративный
                  • Распространение
                  • Вьетнам
                  Brazil - Legalmondo

                  Brazil’s New Digital Child Protection Law: Practical Implications for Foreign Tech Companies
                  • Конфиденциальность - Защита данных
                  • Бразилия
                  France - Legalmondo

                  France | Pre-contractual disclosure in distribution and franchise agreements
                  • Распространение
                  • Франчайзинг
                  • Франция
                  International distribution agreements - Key Clauses and Lessons learned from the history of Nike - Legalmondo

                  International distribution agreements | Key Clauses and Lessons learned from the history of Nike
                  • Контракты
                  • Распространение
                  • Италия
                  Saudi Arabia - Legalmondo

                  How to Joint Venture in Saudi Arabia
                  • Контракты
                  • Корпоративный
                  • Саудовская Аравия
                  Contracts Responsibility - Legalmondo

                  Corporate Sustainability in Practice – How Contracts Shape Responsibility
                  • Контракты
                  • Распространение
                  • Finland
                  Legalmondo - Oil prices

                  Rising Oil Prices and International Contracts: How to Manage Hardship in Global Supply Chains
                  • Контракты
                  • Распространение
                  • Италия
                  African Continental Free Trade-Agreement - Legalmondo

                  Why the African Continental Free Trade Agreement has not yet turned into Reality — and What That Means for Egypt
                  • Распространение
                  • Иностранные инвестиции
                  • Египет
                  Spain lawyer-coach - Legalmondo

                  The lawyer-coach: a new way of practising
                  • Альтернативное разрешение споров
                  • Контракты
                  • Испания
                  Spain - Legalmondo

                  Agency and distribution agreements. Phrases to avoid when ending a business relationship without a written contract
                  • Без категории
                  • Контракты
                  • Испания
                  Business people Legalmondo

                  Spain | Appropriate Means of Dispute Resolution (ADR) as a prerequisite for litigation
                  • Альтернативное разрешение споров
                  • Судебная практика
                  • Испания
                  Spain Influencer-Legalmondo

                  Spain – Can an influencer be considered a «commercial agent»?
                  • Без категории
                  • Распространение
                  • Испания
                  Spain advance payment - Legalmondo

                  Spain — Is it possible to advance payment of customer indemnity in agency contracts?
                  • Без категории
                  • Испания
                  Companies in Spain - Legalmondo

                  Spain — Powers of Representation of Companies
                  • Корпоративный
                  • Испания
                  Spain - Legalmondo

                  Spain | Clientele Compensation for Agents and Distributors
                  • Без категории
                  • Контракты
                  • Испания
                  Debt - Legalmondo

                  International debt recovery: risk prevention and best practices
                  • Распространение
                  • Судебная практика
                  • Испания
                  mediation - legalmondo

                  The importance of Mediation in Distribution Contracts
                  • Альтернативное разрешение споров
                  • Распространение
                  • Испания

                  Scrivi a Ignacio





                    Read the privacy policy of Legalmondo.
                    This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.