Setting a price in a European contract
Updated: Sep 29, 2020
It is common to want to fix a price for goods. It provides you and your customers with certainty and means that you avoid disgruntled business partners who find out that one of their competitors got a better deal.
There are two major issues to watch out for:
Price fixing is a classic example of anti-competitive behaviour. The bigger your market share, the greater the impact that this price fixing will have on the market - and the more likely this your activities will be scrutinised by competition law authorities in Europe.
Price determination or unfair contract terms
Where a price is set by someone in a contract (without the other person having any ability to negotiate), the person who set the price must be able to justify how that price was reached.
This obligation is known as price determination under French law but the same broad principle applies under English law. If a price cannot be justified, it is likely an unfair contract term.
This legal requirement has become necessary as a result of some unscrupulous people taking advantage of a weaker party.
This law has become bolstered in France by reforms to the Civil Code. It is particularly important for "standard terms" or "framework agreements" which are a single master agreement that governs all subsequent purchase orders. They are very common in the fashion industry.
To put yourself in the best possible position for the future, make sure you retain all emails and other documents which set out how the price was calculated such as market studies.
To find out more contact Rosie Burbidge, Intellectual Property Partner at Gunnercooke LLP in London - firstname.lastname@example.org