As an entrepreneur, you face numerous challenges, not only due to ongoing legislative changes but, above all, due to the COVID-19 pandemic, the Russia-Ukraine conflict that began in 2022 and global supply problems.
The following is intended to show you what you should pay particular attention to when drafting contracts, in order to find regulations that comply with legal requirements on the one hand and to be prepared for further unforeseen events on the other hand.
I. Contractual adjustments to the new law of obligations
The new provisions introduced by the modernization of the law of obligations concern the general law of obligations, sales law and the law on general terms and conditions.
The new provisions introduced by the modernization of the law of obligations concern the general law of obligations, sales law and the law on general terms and conditions.
- Adaptation of the concept of a material defect
The concept of a material defect was previously designed so that the agreed quality took precedence, i.e. a product was free of material defects if it met the agreed quality, even if it did not meet the objective requirements. The provision now gives equal ranking to the subjective requirements, the objective requirements and the installation requirements.
However, in sales contracts between businesses, a quality that deviates from the objective requirements can still be agreed. The quality agreement should in any case be worded as specifically as possible.
- T&C law
Contracts for the regular delivery of goods or the provision of work or services, e.g. with gyms, gas or electricity suppliers or newspaper subscriptions, must now be terminable on a monthly basis after the minimum contract term has expired.
Clauses to the contrary in relations with consumers in general terms and conditions are now invalid. Especially in the case of the mass transactions mentioned above, you as an entrepreneur may also be affected in your private capacity.
In B2B sector longer commitment periods may well be agreed.
II. Contractual arrangements to protect against unforeseen events
The last two years have been characterized by unpredictable events with drastic effects on trade. Therefore, it is imperative to review future as well as existing contracts in light of these events and, if necessary, adapt them.
1. Impact on existing contracts
Contracts that have already been concluded should be reviewed to determine whether there is a claim for contract adjustment to the changed economic conditions. In particular, the Russia-Ukraine conflict has caused gas, oil, and energy prices to rise to unprecedented levels.
In such cases, a contract adjustment may be possible if performance of the contract would otherwise be unreasonable, for example because the resulting costs make it impossible to generate any profit at all.
The current events are affecting not only prices but also the supply chains. For example, there are shortages in many industries, which could make it difficult to meet the contractual deadlines.
In any case, you should communicate with the other contracting party in good time in order to avoid claims for damages due to delay
2. Impact on future contracts
For contracts concluded in the future, it is essential to include clauses that take effect in the event of an unforeseeable economic event.
a) Exclusion of the obligation to perform in the event of unforeseeable events
Among other things, it is possible to agree contractually that the obligation to perform is excluded if circumstances of force majeure make performance drastically more difficult.
However, regarding the wording of the clause, it should be noted that it should not be formulated too broadly or too specifically. A clause that is too general leaves too much room for interpretation and will not provide clarity in the event of a dispute. A clause that is too narrowly formulated, on the other hand, may not cover unexpected events and may not be applicable in the event of doubt.
b) Agreement on price-increase clauses and special termination rights
In addition, an agreement should be made on possible price increases in case unforeseeable cost increases, for example in material costs, jeopardize the profitability of the business.
In this context, special termination rights should also be granted to both contracting parties if the provision of the service is no longer reasonable due to the changed circumstances.
However, in this case too, a framework of reasonableness should be established by the contracting parties in order to eliminate any doubts in the event of a dispute.
III. Outlook
The last three years have been particularly challenging for entrepreneurs, and economic uncertainty will continue to persist in the near future. Especially with regard to contract drafting, several changes must be considered and implemented in order to remain contractually protected even in uncertain times.
We are happy to assist you in this.
