Adam and the American manufacturer concluded an exclusive distribution agreement for packaging equipment in Poland. According to it, the American company was to deliver a certain amount of equipment based on orders placed by Adam. The orders specified, for example, the date of equipment delivery agreed between the parties.
Adam concluded a number of contracts for the sale of packaging equipment with end customers. The delivery dates were adjusted to the delivery schedule agreed with the American manufacturer. To put it simply, the Polish distributor set the delivery dates of the equipment to its customers, taking into account the time of delivery stated by the American business partner.
Among indicated contracts, Adam also concluded a contract for the supply of packaging equipment worth 1 million PLN. The agreement specified the delivery date for the ordered equipment. At the same time, the contract imposed an obligation on Adam to pay a contractual penalty in case of delay in the delivery, as well as a supplementary compensation, if the agreed contractual penalty did not cover the full amount of the claimed damages. The agreement also included the contractual penalty and potential supplementary compensation in case of withdrawal from the contract due to Adam’s fault.
Right after concluding the above mentioned contract with the end customer, satisfied Adam placed an order of equipment from an American manufacturer. The delivery date was agreed to be one month before the deadline resulting from the agreement concluded by Adam with the end customer. The order was accepted.
Just before the deadline with the end customer, Adam received information from the American manufacturer that the order would not be fulfilled on time and the earliest possible time for its realization would be six months. It was justified by the lack of availability of components necessary for the production of the device.
Adam immediately passed on this information to the Polish contractor who was supposed to buy equipment worth 1 million PLN from him. The buyer withdrew from the contract, stating that in this situation it had lost its economic significance for him. The distributor was charged with the obligation to pay a contractual penalty in the amount agreed in the contract.
The following questions can be raised based on the defined factual situation:
There is no one explanation to the above case, and their fundamental part will depend on the AGREEMENT BETWEEN THE PARTIES and the established APPLICABLE LAW. The contract is valid and has an impact on the possibility of realizing the parties’ rights related to the conducted business cooperation, as well as its financial consequences. It is worth taking the time to negotiate provisions in order to focus on running the business in the future.
Joanna Lubecka
attorney
However, when there is a dispute in the court, the basic practical difficulty leads to answering the question - where will such a dispute take place. In the contractor country or abroad? Can it be secured somehow?
One of the most important points that needs to be clarified in a B2B contract concluded with a foreign contractor are the terms of payment of the agreed remuneration. Payment after delivery of the subject of the contract or prepayment? And if so, what should be its amount? Which solution to choose? Read below.
Regardless of the form in which the agreement with a foreign partner is concluded, it is important that the parties agree on the most crucial elements of the contract. Incorporating these clauses will enable the parties to execute the contract in a transparent manner, without any ambiguity or uncertainties.
When force majeure events occur in international trade contracts, significant problems may arise in the process of its performance. However, including appropriate clauses in the contract that address such issues can help to manage the situation in a controlled and orderly manner.
As it is for the pandemic the world is slowly returning to normality, and there is much less talking about coronavirus cases, many entrepreneurs still feel the severe effects caused by the pandemic, including: disruptions in supply chains, lack of availability of materials or lack of components.
Case study. Check what Adam forgot when negotiating a contract with a foreign contractor
Although the indicated issues should be clearly regulated in each contract on the basis of which the guarantee is granted, in the case of foreign deliveries they are particularly important.
Below you will find some useful information on how to negotiate contracts concluded with a foreign business partner.
The purpose of the NDA is to secure the confidential nature of information that is provided to the other party in connection with the commencement of negotiations, determining the terms of possible cooperation between the parties, the concluded contract, cooperation or employment.
The standard practice is to start reading each document from the beginning. In the case of B2B contracts concluded with a foreign contractor, it is worth reversing this order.