A ruling by the European Court of Justice (ECJ) on the 6th of February 2025 (Case C-677/22) addresses the question of the validity of the payment conditions of invoices, established in contracts, when the established payment term exceeds 60 calendar days.
As is well known, said 60-day general term can be subject to modification through an express agreement between the parties. However, this raises the question of whether the mere fact that the contract contains a clause extending the 60-day term is a sufficient condition for its validity.
On the other hand, and in light of article 7 of Directive 2011/7/EU, relating to contractual clauses and abusive practices, the Member States must provide in their legislation for the unenforceability of a contract clause or commercial practice relating to the date or payment term, when it is manifestly unfair to the creditor. The question at hand is to understand what should be understood as “abusive”.
Both questions are the subject of study in the case under review. The scenario analysed by the ECJ dealt with the payment terms established in a contract between a polish mining company and another company of the same nationality that manufactured mining equipment. The contract, that established the supply of extractive machinery pieces, was executed after a tendering period organised online by a third party, and in which the applicable commercial and legal conditions were published, among which was the condition of payment of invoices within 120 days. And so the dispute arose between the parties regarding the enforceability or otherwise of the term of 120 days, the matter was submitted to the East Katowice district court, which in turn submitted the matter to a preliminary hearing in order to determine whether the payment exceeding 60 calendar days following the delivery of an invoice to the debtor, was set respecting the requirement provided for in article 3.5 of Directive 2011/7/EU. This article provides that in order for an agreement establishing a longer term to be valid, an express agreement to such effect must be included in the contract.
Essentially, the question was raised to the ECJ as to whether the phrase “an express agreement to the contrary included in the contract” which figured in the aforementioned article 3.5, objects to a contractual clause which establishes a payment clause for a term of more than 60 days, when this agreement has been unilaterally determined by the debtor.
The ECJ indicates that in order for the clause extending the payment term to be valid, the “concordant will” of the parties of the contract is required at the time of executing the contract, going beyond the mere mention thereof, regardless of whether the contract is a contract of adhesion or of a similar nature.
The judgement recalls that the will of the EU lawmaker is to avoid late payment in commercial transactions, as well as the abuse on the part of large companies of small and medium-size companies, based upon their dominant position. For this reason, establishing a payment term exceeding 60 days, must be understood as an exception to the general rule and as an exception, its validity is subject to both of the requirements mentioned: that the clause has been expressly agreed upon and it is not manifestly abusive.
In particular, adhesion contracts merit special consideration. In such scenarios, a clause which establishes a payment term exceeding 60 days will not be unenforceable due to the mere fact that it appears in an adhesion contract. Such clause will be deemed valid when it has been emphasised by one of the parties in the contractual documents (normally the provider) in such a way that it is clearly distinguished from the rest of the clauses of the contact, in order to highlight its exceptional nature, in such a way that the adhering party to the contract is aware of this particular condition when signing the contract.
In order to assess the abusiveness of the clause, all of the circumstances of the case must be taken into account, including any serious deviance from good commercial practices, actions contrary to good faith and loyalty, the nature of the good or service, and particularly, whether any objective reason exists for the debtor to stray from the ordinary term of 60 days. It may thus be assumed that the existence of abusiveness is not an automatic consequence of the prospective dominant financial position of the debtor in relation to the creditor, although it is an indication to be considered, but rather the specific circumstances of the case must be taken into account.
In view of the above considerations, the ECJ concludes that for a contractual agreement which establishes an exception to the general rule of payment within 60 days, “an express agreement to the contrary included in the contract” is required. Likewise, the agreement will also be valid when the clause containing the expression has been unilaterally determined by the debtor, although in this case it must be accredited, in view of all of the contractual documents and clauses contained in the contract, that the parts thereto have manifested their concordant will to be bound by the clause in question.
Eduardo Vilá
Vilá Abogados
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28th February 2025
