Lack of payment for the delivery of goods - how to protect?

When entrepreneurs initiate collaboration with a foreign business partner, they engage in negotiations concerning various terms and conditions governing the manner in which it will be carried out. They determine among others:

• what is the subject of the contract,
• how it is going to be performed,
• what is the deadline and what are the milestones to be achieved,
• what are the delivery terms,
• and what should be the amount of remuneration for the delivered goods.

However, there are situations where a foreign business partner fails make the payment, despite having received the goods that were delivered in accordance with the terms of the contract.

In the domestic trade, entrepreneurs are used to the fact that the lack of payment for the delivered goods, which has no justification, will end up in court, and if the case is not overly complicated, the proceedings should run quite smoothly. In this case, however, the goods were delivered abroad. Consequently, a valid questions emerges – which court holds jurisdiction to hear a lawsuit against a contractor-buyer who has failed on payment for the goods he ordered?

In order to answer this question, it is necessary to analyze the content of the contract concluded between the parties, including its subject matter, as well as international legal acts, including EU regulations.

In legal relations within the European Union, the Brussels I bis Regulation, i.e. Regulation No. 1215/2012, will apply. In the case of sales contracts, this regulation indicates that the competent court to hear a dispute between the parties will be the court of the country to which the goods were or were to be delivered. In practice, therefore, it is most often the court of the country competent for the location of the contractor-buyer.

Yes.

1. Conclude a valid jurisdiction agreement under which the court competent to hear any dispute that may arise from the agreement is a court preferred by the parties.
2. Include a jurisdiction clause in the General Terms and Conditions used by the seller, and then obtain effective acceptance of the above mentioned conditions by the contractor.
3. Ensure that the consequences of the applicable legal provisions for a particular contractual relation are understood and whether they offer a favorable jurisdictional rules, even if there is no agreement between the parties regarding which country’s courts should have jurisdiction to hear any potential disputes.

The concluding of a jurisdiction agreement in a specific case depends on the negotiation power possessed by a given entrepreneur. In the vast majority of cases, the party with stronger negotiation leverage will secure a favorable jurisdictional solution for themselves. Even if it is not possible to obtain a solution that allows for a dispute to be brought before a preferred court in a particular contract, it is still worth to know what the agreement entails and which court will have jurisdiction. If it is the counterparty’s court, it is possible to apply other types of safeguards against the risk associated with non-payment, such as a higher advance payment for a given order.

It is therefore essential that the entrepreneur knows his legal situation.

Joanna Lubecka
attorney