Destruction of general terms and conditions and the familiarity exception

Terms and conditions not made available, still applicable?

As lawyers in commercial law practice, we invariably advise our business clients to ensure that they provide their own general terms and conditions to their own customers in a timely manner. If they fail to do so, the law allows clients to set aside their contracting party's general terms and conditions. However, there are exceptions to that rule. Read more about the 'familiarity exception' here:

What does the law say?

According to the law, the user of general terms and conditions (the party using the general terms and conditions, i.e. a company) has a duty of information. Specifically, this means that the user must give its own contracting party (the 'other party') a reasonable opportunity to take note of the terms and conditions. Legally, we call this "making available" the general terms and conditions. This can be done, for example, by sending the general terms and conditions in advance by e-mail. This is a protective measure: the other party should know the conditions under which he is doing business and should not be confronted with unpleasant and unknown conditions afterwards. If the terms and conditions are not provided in time, the other party has the option to annul the terms and conditions.

What is this case about?

The selling party is a supplier of animal feed raw materials. The buyer, De Eendracht, is an animal feed cooperative that has been buying raw materials for many years. In 2014, the parties conclude two new purchase agreements by telephone. The same day, the seller confirms these agreements in a sales contract. That contract refers to industry conditions (CNGD), which include an arbitration clause. Subsequently, a disagreement arises between the parties about the quality of the delivered product. De Eendracht starts court proceedings, but the seller refers to the arbitration clause, meaning that the court has no jurisdiction to rule on the matter. De Eendracht then sought annulment of the general terms and conditions, claiming that the seller had never provided them.

What do the district court and the court of appeal decide?

The court annulled the conditions and found in favour of De Eendracht. But on appeal, the Court of Appeal came to a different judgement: the branch conditions had indeed not been handed over by the seller, but the director of De Eendracht had followed the 'Grain Course' several years ago in which the branch conditions (CNGD) as well as the arbitration clause were extensively discussed. This means that De Eendracht was familiar with the conditions (including the arbitration clause). Moreover, De Eendracht itself has used the CNGD several times in its agreements. Therefore, De Eendracht cannot now annul the terms and conditions under the guise 'we did not know what was in them'.

How does the Supreme Court rule?

In previous case law, the Supreme Court already made an exception to the statutory power to nullify: if a counterparty was 'familiar or could be deemed to be familiar' with the clause when concluding the agreement, it cannot nullify it. This is the so-called 'familiarity exception'. For example, if the parties regularly conclude similar agreements and the terms have already been handed over with the first agreement. In that case, the user has therefore already taken action so that the other party knows the terms and conditions.

In the present judgment, the Supreme Court indicates that a counterparty can no longer annul general terms and conditions if he is familiar with them. It then no longer matters whether this familiarity arose through the user's actions or whether the other party knew the contents of the terms and conditions in another way, for instance through the course the director of De Eendracht followed. Even in the latter case, the other party can no longer invoke the voidability of the condition, even if the user of the conditions was negligent in providing it.

You can read the full judgment of the Supreme Court here.

Are your own general terms and conditions still up to date? Or do you doubt the correct way of handing them over? Ask the lawyers at SPEE lawyers & mediation!

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