Using general terms and conditions

The use of general terms and conditions is something companies can no longer do without. Contracting parties refer to their own general terms and conditions in small print, often containing favorable clauses for their own benefit. But what is the power of general terms and conditions? And what should be considered when using them?

In this blog, we will first discuss the power of using general terms and conditions. After that, we will give five points of attention for the use of general terms and conditions.

Power of general terms and conditions

The power of using general terms and conditions is hidden in its regular use. This is because general terms and conditions contain clauses that are regularly used by the user in their contracts or which the user expects to use frequently. The use of general terms and conditions prevents possible negotiations on individual, frequently used clauses, in contracts.

General terms and conditions may contain important clauses. These may include provisions regarding payment of your invoices, retention of title, warranties and liability. These provisions are usually beneficial to the user.

Points of attention

There are some points to consider before using or agreeing to general terms and conditions. These points affect both the binding of the general terms and conditions and the content of the general terms and conditions.

1. Informing the opposing contract party

Opposing parties must be able to acquaint themselves with the general terms and conditions of the user in order to become legally bound by them. Such is the case if:

1. the general terms and conditions are attached or printed/recorded on the back of documents exchanged during negotiations;
2. the general terms and conditions are available to the parties at the time of physical negotiations;
3. the parties use electronic communication, and the general terms and conditions are electronically accessible to the other party at the time of negotiation;
4. the parties have previously entered into agreements that were subject to the same general terms and conditions.

If an opposing party was able to take note of the general terms and conditions in any of the above ways, the opposing party is bound by the general terms and conditions. It is therefore essential to always send the general terms and conditions with the conclusion of an agreement.

2. Clear and applicable terms

Clauses in general terms and conditions should be as clear as possible. Own clauses that are not clear are frequently interpreted in favor of the opposing party. When determining an interpretation of an unclear clause, the judge often looks to how a reasonably thinking opposing party would interpret the clause. This could lead to the clause being interpreted in a disadvantage to the user of the general terms and conditions that include the clause.

In addition, it is important to use only provisions that relate to the user’s business activities. Provisions in the general terms and conditions that do not relate to the activities used by the company may prove to be even contradictory. Thus, it is important to check whether the provisions are in line with the activities carried out by the company.

3. Unreasonably restrictive clauses

The Dutch Civil Code contains two lists: the grey list and the black list. If the general terms and conditions contain a provision that conflicts with the black list, the provision is deemed unreasonably onerous and the court will annul the provision in question when it comes to proceedings. Provisions that conflict with the grey list are presumably deemed to be unreasonably onerous and, in all likelihood, the court will also set them aside. For the user of the general terms and conditions, this means that he can no longer invoke this clause and thus this provision remains inapplicable.

In principle, the grey and black lists only apply in the event a contract is entered into with a consumer. It is important to check that there are no clauses in your general terms and conditions that violate the black list or grey list.

For companies the rule is that, in principle, they cannot invoke the annulment of a provision in a business-to-business (B2B) contract. However, even in B2B traffic, the grey and black lists have some reflex effect. In situations where your company has concluded an agreement in the course of its business, but this agreement does not relate to its actual professional or business activities, for example, you may still be able to invoke the nullification of the clause on the basis of these lists. For this purpose, the nature of the agreement and the capacity of the parties, among other things, will be considered.

4. International trade

In cases of international trade, language and bonding issues can arise, for example when parties speak different languages and refer to their own general terms and conditions. In international trade, it is important that both the reference to the general terms and conditions and the content of the general terms and conditions are understandable to the other party. After all, the general terms and conditions must be drafted in a language that the other party can understand. You can use a language:

• in which the negotiations were conducted;
• when it is the language of the contract; or
• which the other party normally speaks.

There is no reason to assume that the other party understands certain languages, such as English, when you have not used them in the negotiations or in the contract.

In the event that both parties refer to their own general terms and conditions, in international trade, as laid down in the United Nations Convention on Contracts for the International Sale of Goods (CISG) and the UNIDROIT Principles, only corresponding general terms and conditions apply to the contract. An exception to this is if a party has clearly and timely indicated its disagreement.

In the event that the CISG or UNIDROIT Principles do not apply, the applicable law is considered. In that case, international commercial law deviates from the Dutch rule. In Dutch law, the main rule is that only the general terms and conditions referred to first apply to the contract, unless the other party explicitly rejects them. In contrast, the main rule in the United Kingdom is that general terms and conditions referred to last apply. The United States applies the same rule as the CISG: only the corresponding terms apply to the contract.

5. For the benefit of the user

General terms and conditions are often drafted in a way that is particularly favourable to the user. Therefore, being bound by the other party’s terms and conditions can be a risk to your business and potentially very detrimental to your business. This is something you should always be aware of when entering into a contract.

Drafting or reviewing standard terms and conditions?

Do you not yet use standard terms and conditions and would like to have them drafted? Or do you already have general terms and conditions and would like to know whether they are legally correct? Do not hesitate to contact us: