ECJ sets requirements for an “express” agreement within the meaning of the Late Payment Directive

“Payment terms” is the term used for contractual arrangements that deviate from the general statutory position on time for payment and under which the supplier grants its customer a specific period in which to pay. Such terms are of considerable importance in commercial practice since, as a rule, the price is payable immediately, i.e. concurrently with receipt of performance. The unilateral granting or contractual stipulation of a payment term therefore constitutes, in economic terms, a means of financing.

In its judgment of 6 February 2025 – C-677/22, the ECJ dealt with a contractually agreed payment period of 120 days. The case was based on a series of contracts for the supply of parts of machinery for mining between two companies incorporated under Polish law. In all contracts, the terms and conditions were unilaterally determined by the purchaser. This also included the setting of a payment period of 120 days. After the purchaser had paid all 354 invoices issued by the seller within 120 to 122 days of receipt, the seller claimed late payment interest for all invoices paid after the 60th day for the period between the 61st day and the date of actual payment. The seller argued that the 120-day payment period had been unilaterally stipulated by the purchaser in its model contract and that the seller had been forced to accept these terms due to the economic situation. The seller argued that this meant that it could not be assumed that such a contractual term was expressly agreed upon by the contracting parties within the meaning of Article 3(5) of Directive 2011/7/EU.

The key issue in the judgment

The judgment concerns Directive 2011/7/EU on combating late payment in commercial transactions (the “Late Payment Directive”). Article 3(5) of the Late Payment Directive stipulates that a contractually agreed payment period may not as a rule exceed 60 calendar days. An exception is only possible if the contract expressly provides otherwise and this is not grossly unfair to the creditor. The starting point for this judgment was the Polish implementing law for Article 3(5) of the Late Payment Directive. The referring court asked whether Article 3(5) of the Late Payment Directive should be interpreted as meaning that the express agreement of a payment period in commercial transactions can only apply to contracts whose terms were not unilaterally set by one of the contracting parties.

Assessment by the ECJ: an express agreement cannot automatically be assumed

The Advocate General took the view in his Opinion that “express” requires a clear and unequivocal stipulation. This can also be the case where the relevant terms have been laid down unilaterally, i.e. in general terms and conditions. According to the Advocate General, it is therefore not a prerequisite that the relevant contractual term has been negotiated between the parties. He argued that the objective of protecting the creditor is achieved through the additional requirement that the creditor must not be subject to gross unfairness.

The ECJ likewise regarded the requirements of an express agreement and the absence of gross unfairness to the creditor as cumulative conditions for the lawfulness of a longer payment period. Furthermore, according to the ECJ, the meaning and scope of the concept “otherwise expressly agreed in the contract” must be given an autonomous and uniform interpretation under European law.

The ECJ considered it problematic that the contractual term had been imposed unilaterally. It set its own standards for what constitutes an “express agreement”. In the Court’s view, it is necessary for the parties to express their concurrence of wills to be bound by the term setting a deviating period for payment. This goes beyond the mere reference to such a period in a contractual term. According to the ECJ, the parties may express this concurrence of wills either by individually negotiating the term or, in the case of pre-formulated standard contracts, by highlighting the term in question in the contract documents in order to clearly distinguish it from the other terms, thus making clear its nature as a deviation. This is intended to enable the other party to adhere to it in full knowledge of the facts.

For a term contained in pre‑formulated terms and conditions to qualify as an “express agreement” in this sense, it must be set off from the remainder of the text, for example by a border, bold type or similar methods, so as to make clear its nature as a deviation. Only in that case can the requirements of Article 3(5) of the Late Payment Directive also be satisfied by means of general terms and conditions.

At present, no impact on German law expected

In German law, the provisions of the Late Payment Directive have been implemented into general contract law in sections 271 and 271a of the German Civil Code (Bürgerliches Gesetzbuch ‒ BGB). These likewise provide that a payment period of more than 60 days is valid only if it has been expressly agreed and is not, having regard to the interests of the creditor, grossly unfair. Nevertheless, the ECJ’s decision is unlikely to have any or only a minimal impact on German contract law at present. The German legislature has, in addition, implemented the Late Payment Directive into the law governing general terms and conditions in section 308(1a) of the German Civil Code, transposing it more stringently than required by the Directive. Under that provision, a unilaterally imposed payment period of more than 30 days in general terms and conditions is, in case of doubt, to be regarded as invalid. Pursuant to section 310(1), first sentence of the German Civil Code, this provision also expressly applies to commercial transactions. Accordingly, where a term qualifies as a general term within the meaning of section 305(1) of the German Civil Code, i.e. it has been pre‑formulated by one party for a multitude of contracts and “imposed” on the other party when the contract is concluded, the strict rule in section 308(1a) of the German Civil Code applies in any event under German law.

Only if a payment period of more than 60 days stipulated in general terms and conditions is, in exceptional cases, permissible under section 308(1a) of the German Civil Code, i.e. where special circumstances displace the in-case-of-doubt rule contained in that provision, do the criteria established by the ECJ also need to be taken into account in contracts governed by German law.

Nonetheless, for some time now, European legislators have been planning to enact a late payment regulation. Article 3(1a) of the current draft provides for the possibility of extending the payment period in commercial transactions to up to 60 calendar days if this has been expressly agreed in the contract. The present ECJ decision could therefore become relevant to the application of the Late Payment Regulation, which will apply directly without the need for implementing legislation, if the current draft is adopted.