B2B supplier/buyer commercial contract: the essential clauses

A supplier who delivers without having settled its payment terms, a buyer who discovers after the event that late payment penalties are not capped, a commercial relationship of several years terminated overnight without written notice: most commercial disputes do not arise from bad faith, but from a poorly drafted contract or an order placed on a simple purchase order without conditions. A badly drafted B2B commercial contract always costs more than the time spent negotiating it. This guide sets out the clauses that must never be forgotten in a supplier/buyer relationship, in particular price, deadlines, penalties and retention of title, and flags the drafting errors that end up before the commercial court (tribunal de commerce).

Why a written contract remains essential between businesses

Under French law, a sale or supply contract is formed as soon as the parties agree on the goods and the price, even orally. An exchange of emails, an accepted purchase order or a simple delivery followed by payment is enough to create a commitment. The problem is therefore not the existence of the contract, but proof of its content.

When a dispute arises, the question is never "is there a contract?" but "what were the exact terms?". Without a written document, the supplier cannot show that it had provided for late payment penalties, the buyer cannot prove the agreed delivery period, and the judge decides on the basis of the default rules of the French Commercial Code and the French Civil Code, rarely to the advantage of the party that neglected the drafting.

The B2B contractual relationship often rests on three documents that must fit together: the supplier's general terms of sale (CGV), the buyer's general terms of purchase (CGA), and the framework agreement or purchase order that implements them. Article L441-1 of the French Commercial Code makes the general terms of sale the "sole basis of the commercial negotiation". A frequent mistake is to pile up these contradictory documents without a clause resolving conflicts between them: where the seller's general terms of sale and the buyer's general terms of purchase contradict each other on penalties or warranty, a dispute is bound to follow.

One-off contract or framework agreement

A one-off sale must be distinguished from a recurring flow of business. For an isolated order, solid general terms of sale and a signed purchase order are enough. For a relationship intended to last, a framework supply agreement is required: it settles once and for all the price or its method of calculation, the forecast volumes, the term, and the conditions of renewal and exit. Looking for a simple supplier-buyer contract template downloaded online often leads to this distinction being overlooked and to a one-off contract being applied to a long-term relationship, which exposes the parties to the risk of abrupt termination discussed below.

The price clause: the first source of disputes

The price seems obvious at the time of signing. It becomes contentious as soon as production costs rise, raw material prices soar or the relationship extends over several years. A poorly drafted price clause protects neither the supplier, who bears the increase, nor the buyer, who discovers a revision that it had not anticipated.

Several elements must be set out in black and white:

• the unit price excluding tax and the applicable VAT rate, specifying whether the price is fixed or revisable
• the currency, whenever one of the contracting parties is foreign, to avoid exchange rate risk
• what the price includes or excludes: transport, packaging, insurance, customs duties, installation, relying where appropriate on a specific Incoterm for international transactions
• the conditions of revision or indexation where the contract runs over time

The indexation clause deserves particular attention. It allows the price to be adjusted automatically according to an objective index (an INSEE index for a product category, the price of a raw material, a labour cost index). The chosen index must have a direct link with the subject matter of the contract or with the activity of one of the parties, failing which the clause may be annulled. A clause that indexed the price of an IT service to the price of wheat would be vulnerable.

Hardship (imprévision): anticipating economic upheaval

Since the reform of contract law, Article 1195 of the French Civil Code allows a party to request renegotiation of the contract where an unforeseeable change of circumstances makes performance excessively onerous. But this provision is a default rule: the parties may exclude or adapt it. Many contracts simply exclude it, which places the entire risk of a surge in costs on the supplier. Conversely, a tailor-made hardship clause, providing a trigger threshold and a renegotiation procedure, protects both parties. A B2B commercial contract that is silent on this point leaves the supplier exposed if its costs soar, with no recourse other than a judge. The regime of Article 1195 and the drafting of a hardship clause are detailed in our article on hardship in B2B contracts.

Payment terms: a strictly regulated area

This is the most heavily regulated and most heavily sanctioned area. Article L441-10 of the French Commercial Code sets a ceiling of public policy: unless otherwise agreed, the payment period may not exceed thirty days after receipt of the goods or performance of the service. The parties may agree a longer period, but within a twofold limit: either sixty days from the date of issue of the invoice, or forty-five days from the end of the month if this is expressly stipulated and does not constitute a manifest abuse.

Exceeding these ceilings is not only a contractual risk, it is an offence. The DGCCRF (the French Directorate General for Competition, Consumer Affairs and Fraud Control) actively monitors payment terms and regularly publishes named administrative penalties against companies that exceed them. The fine can reach a high amount for a legal entity, and the decision is often made public, with the reputational effect that this entails.

A well-constructed standard supplier contract systematically restates three mandatory particulars relating to payment:

• the precise payment period, in line with the statutory ceilings
• the rate of the applicable late payment penalties
• the fixed indemnity for recovery costs

Late payment penalties and recovery indemnity

Late payment penalties fall due automatically from the day after the due date, without any reminder being necessary. Article L441-10 imposes a minimum rate: it may not be lower than three times the legal interest rate, and in the absence of a stipulation it corresponds to the European Central Bank refinancing rate plus ten percentage points. To this is added a fixed indemnity for recovery costs set at forty euros by Article D441-5 of the French Commercial Code, without prejudice to additional compensation on production of supporting evidence.

The supplier's classic mistake is to omit these particulars from its general terms of sale and from its invoices, which deprives it of a valuable argument against a client who pays late and exposes it to a penalty itself, since failure to state the penalties on invoices is itself punishable. The buyer's symmetrical mistake is to accept penalties far above the statutory minimum without negotiating them, turning a simple delay into a disproportionate debt.

Delivery periods and the penalty clause

After payment, delivery is the second central obligation of the contract. A vague period ("as soon as possible", "promptly") is worthless: a firm date or a quantified period running from an identifiable event is needed (order confirmation, receipt of the deposit, provision of the plans).

The contract must specify:

• the delivery date or period, and its starting point
• the place of delivery and the time of transfer of risk, often aligned with an Incoterm
• the consequences of a delay attributable to the supplier
• the acceptance procedure and the period for raising reservations as to conformity or quantity

The penalty clause (clause pénale), governed by Article 1231-5 of the French Civil Code, allows the amount payable in the event of delay or non-performance to be fixed in advance, for example a percentage of the price per day or per week of delay. Its advantage is that it avoids having to prove the actual loss. But two limits must be known: the judge may of his or her own motion reduce a manifestly excessive penalty or increase a derisory one, and an unbalanced penalty clause may be recharacterised as an abusive clause between businesses.

"The judge may, even of his or her own motion, reduce or increase the penalty thus agreed if it is manifestly excessive or derisory." (Article 1231-5 of the French Civil Code)

Distinguishing the penalty clause from the limitation of liability clause is essential. The former fixes a lump-sum indemnity; the latter caps the amount that may be claimed. A contract that provides both for high late delivery penalties on the supplier and for a very low liability cap for that same supplier creates an imbalance that the aggrieved partner may challenge. The differences in regime between these two stipulations and the ways of securing them are analysed in our article comparing limitation of liability clauses and penalty clauses.

Retention of title: the supplier's forgotten protection

The retention of title clause is one of the most useful and one of the most often missing. It allows the seller to remain the owner of the goods delivered until the price has been paid in full. Without it, ownership passes on sale, and if the buyer does not pay, the supplier becomes a mere unsecured creditor, last in line in the event of difficulties.

Its value becomes clear in the event of insolvency proceedings against the buyer. Where a client is placed in administration (redressement judiciaire) or compulsory liquidation (liquidation judiciaire), a supplier holding a valid retention of title clause may claim back the unpaid goods and recover them, provided that they are still in the stock in kind. Articles 2367 et seq. of the French Civil Code frame this mechanism, and Article L624-16 of the French Commercial Code governs its implementation in insolvency proceedings. The substantive conditions and the timetable for the claim are dealt with separately in our article on the retention of title clause in the face of a client's insolvency proceedings.

To be enforceable, the clause must satisfy strict conditions:

• it must be agreed in writing no later than the time of delivery, which means that it must appear in the accepted general terms of sale and not only on an invoice issued after the event
• the goods must be identifiable and still be found in kind at the buyer's premises
• the claim must be made within the periods provided by law, generally within three months of the opening of the insolvency proceedings

The classic mistake is to insert the clause only on invoices. Yet the invoice post-dates delivery: the clause arrives too late to be enforceable. It must appear in the contractual document accepted before or at the time the goods are handed over. A supplier that sells resaleable goods has every interest in making this clause standard in its supplier contract.

Warranties, liability and transfer of risk

The contract must organise the warranty on products or services and allocate risks. Between businesses, freedom of contract is broad, but certain statutory warranties remain, such as the warranty against latent defects under Article 1641 of the French Civil Code, which the contract may adapt within the limits accepted by case law, taking account of the buyer's status as a professional in the same field as the seller.

Several points need to be framed:

• the nature and duration of the contractual warranty, distinct from the statutory warranties
• the limitation or exclusion of liability clause, bearing in mind that a clause cannot deprive the essential obligation of its substance or cover gross negligence or wilful misconduct
• the transfer of risk, which determines who bears the loss of or damage to the goods during transport
• the insurance obligation, in particular appropriate professional liability insurance

The force majeure clause, based on Article 1218 of the French Civil Code, deserves to be drafted to measure rather than taken from a generic template. Defining the events regarded as force majeure, the notification procedure and the consequences (suspension, then termination beyond a certain duration) avoids sterile debates when a serious event prevents performance.

Term, termination and breakdown of commercial relationships

The end of the contract generates as many disputes as its performance. The contract must specify its term, its conditions of renewal (tacit renewal or not), and above all the terms of termination.

Two clauses are decisive. The termination clause (clause résolutoire) allows the contract to be terminated automatically in the event of a breach by one party, after a formal notice has gone unheeded. It must list precisely the breaches that trigger it, failing which it is ineffective. The notice clause sets the period to be observed in order to end an open-ended relationship or not to renew a relationship.

The trap of abrupt termination

Article L442-1, II of the French Commercial Code penalises the abrupt termination of an established commercial relationship. A party that ends, even partially, a continuous and stable relationship without observing written notice that takes account of the length of the relationship incurs liability. The sanction is not the forced continuation of the relationship, but damages corresponding to the margin that the partner would have earned during the notice period that should have been observed.

This is one of the most frequent B2B disputes before the commercial courts. A buyer that has ordered from the same supplier for years cannot abruptly stop its orders by simply pointing to the absence of a written contract: the de facto relationship is enough to trigger the protection. Conversely, a supplier that loses a long-standing client overnight must check whether sufficient notice was owed to it. Providing from the outset for a realistic notice period, proportionate to the length of the relationship and the volume of business, greatly reduces this risk.

Governing law, dispute resolution and strategic clauses

The last part of the contract, often skimmed over, in fact decides the outcome of any future dispute. The jurisdiction clause designates the competent court: between businesses, it is in principle valid and avoids a dispersion of jurisdiction. Failing that, the court of the defendant's domicile or of the place of performance applies, which may force a party to litigate far from its registered office.

The parties may also prefer arbitration by means of an arbitration clause (clause compromissoire), which is more confidential but more costly, or introduce a prior mediation or conciliation clause requiring an attempt at amicable settlement before any court action. This amicable stage, increasingly valued, often makes it possible to extinguish a dispute before it escalates.

For international contracts, two points must be made. The governing law must be expressly chosen, failing which complex conflict-of-laws rules apply. And the Vienna Convention of 11 April 1980 on contracts for the international sale of goods (CISG) applies by default to many cross-border sales between businesses: if the parties do not wish to be subject to it, they must expressly exclude it.

Significant imbalance, a sword of Damocles

Article L442-1, I of the French Commercial Code penalises subjecting a commercial partner to obligations that create a significant imbalance in the rights and obligations of the parties. This concept makes it possible to challenge abusive clauses between businesses, including in a freely signed contract. A contract that imposed, for example, one-sided penalties on the supplier alone, with nothing in return for the buyer, or variable payment periods solely to the benefit of the stronger party, is exposed to this complaint. The party that drafts the general terms of sale or imposes its terms therefore has an interest in ensuring a minimum of reciprocity.

Conclusion: draft so as not to litigate

The point of a good B2B commercial contract is not to win a future case, but to avoid it. Each clause examined here, price, indexation, payment terms, penalties, delivery, retention of title, warranty, termination, jurisdiction, corresponds to a friction point identified in litigation practice. The most costly disputes almost always arise from what was not written: a non-revisable price in a long relationship, a retention of title clause appearing only on the invoice, an old relationship ended without notice, unbalanced penalties that turn against their author.

The reflex of the downloaded generic template is the most dangerous: a standard supplier contract not adapted to the actual business gives a false sense of security and sometimes creates more risks than it covers. Before signing a recurring or large-scale contract, have your general terms of sale and your framework agreement reviewed by a business law professional, checking as a priority the compliance of the payment terms, the validity of the retention of title clause and the consistency between your contractual documents and those of your partner.

Frequently asked questions

Must a B2B commercial contract be in writing?

No, a sale contract between businesses is validly formed as soon as the parties agree on the goods and the price, including orally or by exchange of emails. But writing is essential to prove the exact content of the commitments in the event of a dispute. Without a written document, it is the judge who reconstructs the terms from the default rules of the French Commercial Code and the French Civil Code, rarely to the advantage of the negligent party.

What is the maximum payment period between businesses in France?

Article L441-10 of the French Commercial Code sets a default period of thirty days after receipt, which the parties may extend to sixty days from the date of issue of the invoice, or forty-five days from the end of the month if this is expressly agreed and not abusive. Exceeding these ceilings is an offence penalised by the DGCCRF, with administrative fines and possible publication of the penalty.

Is a retention of title clause valid if it appears only on the invoice?

No, since the invoice is issued after delivery, a clause appearing only there arrives too late to be enforceable. Retention of title must be agreed in writing no later than the time of delivery, that is, in the general terms of sale or the contract accepted before the goods are handed over, in accordance with Articles 2367 et seq. of the French Civil Code. It then allows the supplier to claim back unpaid goods, in particular in the event of insolvency proceedings against the buyer.

Can a commercial relationship with a supplier or a client be freely terminated?

No, Article L442-1, II of the French Commercial Code penalises the abrupt termination of an established commercial relationship, that is, one that is continuous and stable. Written notice must be given that takes account in particular of the length of the relationship, even in the absence of a written contract. Failing that, the party responsible for the termination owes damages corresponding to the margin lost during the notice period that should have been granted.

Can the judge reduce a late payment penalty provided for in the contract?

Yes, under Article 1231-5 of the French Civil Code, the judge may, even of his or her own motion, reduce a manifestly excessive penalty clause or increase a derisory penalty. A penalty that is too heavy can therefore be reduced, and a penalty that is unbalanced between the parties can also be challenged on the basis of the significant imbalance provision of Article L442-1, I of the French Commercial Code.

Should a supplier-buyer contract template found online be used?

A generic template can serve as a starting point, but applying it without adaptation creates a false sense of security. A template takes account neither of your sector, nor of whether the relationship is one-off or recurring, nor of strategic clauses such as price indexation or retention of title. Review by a lawyer in business law makes it possible to adjust the clauses to your real situation and to avoid inconsistencies between your general terms of sale and your partner's purchasing terms.

What is the difference between a penalty clause and a limitation of liability clause?

The penalty clause fixes in advance a lump sum payable in the event of delay or non-performance, which removes the need to prove the actual loss. The limitation of liability clause, by contrast, caps the amount that may be claimed from the defaulting party. The two may coexist, but a marked imbalance between high penalties on one side and a very low liability cap on the other weakens the contract and may be challenged.