Understanding B2b Transactions And Two-Part Connect Laws

Business-to-business (B2B) refers to a transaction between two businesses, such as a manufacturer and a wholesaler, or a retailer and a wholesaler. B2B is typically contrasted with business-to-consumer (B2C) transactions, which involve companies selling products or services directly to individual consumers. B2B transactions are common in supply chains, where raw materials or components are purchased by one company from another for use in their manufacturing processes. This also includes services, such as accounting, that are provided by one business to another. B2B transactions are also common in the automobile industry, where many vehicle components are manufactured by various companies and sold to auto manufacturers for assembly.

B2B law and company law

Business-to-business (B2B) law is a complex and dynamic field that requires effective advising, which can have a significant impact on the future success of an enterprise. B2B law relates to company law in several ways.

Firstly, B2B law applies to company contracts concluded between enterprises. For example, when several companies decide to incorporate a joint venture, this agreement falls under the scope of B2B law. Similarly, agreements between shareholders, which may include irrevocable put options, preferential rights, unequal voting, or profit-sharing agreements, should also consider B2B law to avoid any unfair terms.

Additionally, B2B law is relevant when a shareholder (company) wants to sell its shares to another company, as this involves a share transfer agreement. In this case, the B2B law helps regulate the representations and warranties that determine the selling company's liability and the regime of possible breaches.

It is important to note that B2B law does not apply to all company agreements. For instance, a shareholders' agreement involving an individual who does not have economic activity is not subject to B2B law.

Furthermore, the rules of company law may take precedence over B2B law. If a specific term or clause is authorised by company law, it may override any sanctions imposed by B2B law, even if it creates an imbalance between the rights and obligations of the parties involved.

B2B law also intersects with company law when it comes to "core clauses". These are clauses that are essential to the contract and are of such importance that the parties would not have entered into the agreement without them. However, determining what constitutes a "core clause" can be challenging, especially in company contracts where the distinction between essential and subsidiary clauses may not always be clear.

In conclusion, while B2B law does intersect with company law, it is important to carefully examine each contract and situation on a case-by-case basis to determine the applicability of B2B law and navigate the complexities of company law.

B2B contracts

Building Trust and Professional Relationships

Managing Expectations and Preventing Misunderstandings

By outlining the terms of the agreement, B2B contracts help manage expectations and prevent misunderstandings. When all parties are aware of their responsibilities, there is less room for confusion or disappointment. Clear communication channels and dispute resolution processes can also be established through well-drafted contracts, allowing businesses to work together to address any issues that may arise.

Protecting Business Interests

Ensuring Legal Compliance

In many cases, B2B contracts are legally required. Depending on the industry and type of agreement, businesses may need to comply with various regulations and statutes. A well-drafted contract ensures that both parties are aware of and agree to abide by these regulations, reducing the risk of legal penalties or fines.

Common Types of B2B Contracts

There are several common types of B2B contracts, including service agreements, supply and distribution agreements, licensing agreements, partnership agreements, and joint venture agreements. Service agreements outline the scope of work, deliverables, and payment terms for services such as consulting, marketing, or design work. Supply and distribution agreements cover the price, quantity, delivery, and responsibility for goods supplied to other businesses. Licensing agreements grant one party the right to use another party's intellectual property, with terms outlining any restrictions on usage. Partnership agreements are for ongoing business relationships, detailing roles, responsibilities, profit and loss sharing, and dispute resolution. Joint venture agreements are similar but pertain to specific projects or ventures, outlining terms such as roles, timelines, and budgets.

Key Elements of B2B Contracts

When drafting a B2B contract, it is essential to clearly identify the parties involved, their roles, and contact information. The scope of work and deliverables should be specified, including milestones, deadlines, and associated documentation. Payment terms and conditions, including amounts, schedules, methods, and penalties for late or missed payments, are critical components. Confidentiality and non-disclosure agreements are also standard, addressing the use and protection of sensitive information. Intellectual property rights should be established, outlining ownership and usage rights for patents, trademarks, copyrights, and trade secrets. Finally, a termination section should outline the process and consequences of ending the agreement early.

B2B services and distribution contracts

When drafting B2B services and distribution contracts, it is crucial to ensure compliance with the B2B law, which applies to all contracts between businesses. This law seeks to address potential imbalances in negotiating power between larger and smaller companies. To achieve this, the B2B law targets unfair terms in contracts, particularly those that create manifest inequalities or disproportionately favour one party over the other.

To avoid legal repercussions, businesses must be cautious of certain "blacklisted" and "greylisted" clauses that may be deemed unfair or unjustified. For instance, a "blacklisted" clause might prohibit a business from suspending services while also giving their business partner the right to suspend invoice payments. Similarly, a "greylisted" clause might place all commercial and economic risks on one party, or require a supplier to take back unsold products from their distributor without compensation.

To ensure compliance with the B2B law, businesses should proactively review their standard contracts and make necessary adjustments. This involves providing detailed context for the terms chosen, outlining the steps taken during negotiations, and specifying the reasons for unilateral changes to certain conditions. Additionally, it is important to ensure that both parties have a clear understanding of their commitments by providing relevant information and documentation prior to concluding the contract.

B2B franchising contracts

B2B, or business-to-business, is a transaction where one business sells products or services to another business. B2B franchising is a growing sector, though less visible than food or retail franchises. B2B franchises offer services and products to other companies, helping them to run efficiently. They often provide general business support in areas such as IT, sales consulting, marketing, payroll, insurance, or commercial cleaning.

Classic clauses in franchise contracts that may be deemed unfair include:

• The franchisor setting a maximum resale price or recommending predetermined resale prices.
• Allowing the franchisor to unilaterally modify the network system, with the franchisee obliged to adapt.
• Requiring the franchisee to purchase from specific suppliers chosen by the franchisor.
• Clauses requiring the franchisee to make periodic investments or contribute to common network costs.
• The franchisee must comply with all standards and the franchise manual.
• Allowing the franchisor to unilaterally change the price, features, or conditions of the franchise agreement.

However, not all these traditional terms will automatically become unfair. The unfairness of a contractual term must be assessed on a case-by-case basis, taking into account factors such as the circumstances surrounding the conclusion of the contract and the usages of each commercial formula chosen.

In the context of franchising, a "valid reason" for a potentially problematic clause could be the franchisor's mission to evolve its concept to meet changing customer expectations. For example, consumers expecting a homogeneous network and favorable economic conditions for all franchisees could justify imposing approved suppliers.

B2B leases

In addition, the B2B Law interacts with the Commercial Rental Law, which governs commercial rental agreements. While the provisions of the Commercial Rental Law are mandatory, the law allows for a wide range of situations where parties are free to deviate contractually. For instance, tenants may carry out renovation works to make the premises suitable for their business.

It is important to ensure that the clauses in a B2B lease are lawful. There is a "black" and "grey" list of unlawful clauses to refer to. Blacklisted clauses will always be considered unlawful, while grey list clauses are presumed unlawful but can be proved otherwise.

Frequently asked questions