Contracts between companies for outsourcing require mutual respect

Good agreements make good friends. Accordingly, when outsourcing certain activities, it is important to draw up a well-drafted contract between both companies. The expertise of specialized lawyers is often crucial in drafting such an agreement. Frank De Langhe, Sara Burm and Bruno Thoen of De Langhe Attorneys provide a number of useful points of attention.

From specializations such as ‘corporate and M&A’, finance, governance, tax law, estate planning, commercial and contract law, De Langhe Attorneys works exclusively for companies and their shareholders/managing directors. The office is therefore very much at home in the b2b-world and, from that position, has a good view on the evolution of outsourcing.

B2b versus b2c

“Outsourcing activities is something that has existed for decades”, Frank De Langhe opens. “This is done for matters that are separate from the core business of a company, such as transport, cleaning, IT, marketing and legal support. Apart from these, cooperation is also possible for core activities. For example, companies let partners make certain essential parts, or it can be a means to buy extra production capacity, without having to make extra investments themselves. In function of lower labour costs, one can also cooperate with foreign parties. Through subcontracting one can also respond to the shortage on the labour market.”

An important point of attention is the possible discrepancy between contracts with one’s partner or subcontractor on the one hand and one’s customer on the other. “Complaint deadlines, competent courts, warranty obligations, etc. should ideally be matched to one another”, Bruno Thoen points out. “Imagine: you have a conflict with a customer and he starts proceedings before a Belgian court, in which an expert is appointed. You know that your partner is actually liable for the problem, but according to his contract he is entitled to arbitration under German law. You would rather not find yourself in such a situation. When determining responsibilities, one should also bear in mind the fact that one may be subject to consumer protection law in relation to one’s (b2b)-customers, while those rules do not apply in the relationship with one’s (b2b)-partner.” 

Economic dependence

In the b2b-world, any contract concluded since 1 December 2020 must take into account the new legal framework, for which Europe had outlined the main principles. “Belgium has gone very far in interpreting those directives”, Bruno Thoen continues. “The scope is very broad. Overall, the new law aims to prevent companies from abusing economic dependency, from engaging in unfair market practices and from having excessively unbalanced contract terms. Certain clauses are null and void, others are in a grey area.”

“We can expect a lot of discussions about this in the future”, adds Frank De Langhe. “Because the new law has not been into force for a long period, it lacks the judicial review that exists on most other issues. It is important to know how the courts usually interpret certain legislation.”

Although much ink has already been spilled about the b2b-Act, not all contracts have been adapted to it. “It is unnecessary for entrepreneurs to take a legal course on this, but they would do well in any case to have their basic contracts and general terms and conditions regularly screened by a specialist so that they are fully compliant. In this way, one can avoid unpleasant problems. Suppose your insurance policy is tailored to the points for which you think you are liable, while the law stipulates that your liability goes much further; you then are faced with a double problem: you are liable and, moreover, not insured for it. You would rather avoid that”, says Frank De Langhe.

Conclusion

The more important the services provided by a certain partner, the more it is advisable to work on the best possible and preferably ‘watertight’ contract with that party. “A contract for subcontracting should never be a hindrance to the business and must be drawn up with mutual respect. It usually contains a confidentiality clause, a non-competition clause and a non-solicitation clause. In addition, it is best to take into account that such contracts are evolutionary in nature, depending on the operational flow, raw material prices, etc. It should allow both parties to earn a reasonable living with it”, Sara Burm concludes.

Gepubliceerd in Voka – Ondernemers West-Vlaanderen, 22 april 2022