Blog
15 July 2020
Supply Contract

A supply contract is regulated by Articles 605-612 of the Civil Code. By a supply contract, the supplier commits to manufacture movable property specified only according to its type and to deliver them in parts or periodically, and the recipient commits to collect those things and to pay the price.

The elements necessary for a contract to be called a supply contract are:

  • supplier’s commitment to manufacture movable property specified according to its type;
  • supplier’s commitment to deliver them in parts or periodically;
  • recipient’s commitment to collect the movable property and pay the price.

What is more, an additional unique feature of supply contracts is the right of the recipient to control the manufacturing process and the quality of the materials to be used to manufacture the goods.

As a rule, the object of a supply contract should be manufactured directly by the supplier. The use of other entities when performing the supply by the supplier is a sensitive issue (J. Jezioro, E. Gniewek, Commentary, 2011, pp. 1089–1090; K. Zaradkiewicz, K. Pietrzykowski, Commentary, Vol. II, 2011, pp. 385–386).

The fact that the parties are always able to determine in the contract the scope of permissible use of third parties when performing the supply, listing certain entities (third parties) which will perform individual elements of the object of delivery, should not raise doubts. Upon the consent of the recipient, the supplier may entrust the performance of the supply to another entity, in part or in whole, also during the performance of the contract.

Nonetheless, if the recipient clearly opposes the idea, it seems not an option to act contrary to his differing opinion, even in view of just economic or purposive reasons. Therefore, any supplier wishing to entrust the performance of the supply or its individual elements to a third party, should at least notify the recipient thereof and, if the recipient objects, the performance of the supply may not be entrusted.

This means that the acquisition of the object of the contract from a source different than the supplier’s manufacturing is allowed only with the prior consent of the recipient expressed either in the contract or upon its conclusion. The consent expressed after the conclusion of the contract signifies de facto an amendment to the contract. Therefore, the consent should be expressed in the same form as the contract, i.e. if the contract is made in writing, then the consent should also be given in writing.

A supply contract may provide for a contractual penalty for nonperformance.

In addition, the provisions of the Civil Code (kc) regulating liability for damages (Article 471 kc and following) including consequential impossibility of performance (Article 475 and Article 495 kc), the rebus sic stantibus rule (Article 3571 kc), and contractual penalty mitigation (Article 484(2) kc) also apply to a supply contract.

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