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New Act on Contractual Advantage, new risks for business

On 23 November, the President signed a new Act on Combating Unfair Use of Contractual Advantage in Trade in Agricultural and Food Products. This a long name, and will mean many changes on the market. These changes will also mean many new dangers.

The situation in the past

The first act regulating this issue in Poland came into force in 2017, and on that basis the President of UOKiK has issued 12 decisions to date.

That act contains a general clause prohibiting unfair use of a contractual advantage, and also lists four examples of violations of this kind. It does not provide detailed guidelines on when a contractual advantage exists. It only contains a vague definition, which says that an advantage exists when there is a significant disproportion between the financial means of the parties. A contractual advantage is used unfairly when the conduct of one of the parties contravenes good customs and poses a threat to a major interest of the other party,or violates such an interest.

The cause of the changes

The new act transposes Directive (EU) 2019/633 of the European Parliament and of the Council on unfair trading practices in business-to-business relationships in the agricultural and food supply chain.

The situation in the future

The new act extends the list of practices that are prohibited, and these include “black list” practices (prohibited in any situation). Examples are excessive deadlines for payment for delivery of agricultural products, unilateral change of contractual terms by buyers, or requiring suppliers to make payments unrelated to sale of agricultural and food products. Six “gray list” practices are also included. These are practices that are permitted on condition that the parties agree them explicitly in consultations before they are applied, such as the buyer requiring the supplier to pay fees for advertising or marketing their products. One practice – where the buyer requires the supplier to cover the cost in whole or in part of decreases in the prices of products on special offer, must be provided for in advance in a contract that lays down the special offer terms and conditions in full.

The danger

Once again, the President of UOKiK will enforce the laws. The new rules on prohibited practices pose new risks of being in breach of the law and incurring severe fines of up to 3% of the turnover of the undertaking in question.