1. Overall
This chapter deals primarily with the buyer's obligation to pay the agreed consideration, and the seller's sanction possibilities in case of buyer's default.
Most of the provisions are common to the two standards and these are the ones we discuss in this article.
However, NS 8412 contains two provisions (33.2 and 35) which are specifically adapted to the particular application of this standard, namely manufacturing and assembly.
The special feature of 33.2 is that the payment obligation is divided and linked to the different phases of the manufacturing process with/without assembly. The peculiarity of 35 is that NS 8412 assumes a closer interaction between buyer and seller since the product to be manufactured according to the buyer's specifications may also be assembled. Delays with the buyer can therefore have consequences for the seller in terms of cost and time. In some cases, the buyer will be entitled to a deadline extension for their benefits, and this is what is regulated in 35.
Although NS 8412 paragraph 33.2 regarding billing rate mm is structured differently than NS 8411 paragraph 31.2, we treat both together. We also briefly write about the buyer's claim for deadline extension in NS 8412 paragraph 35 of this article. Only a few cases are dealt with, and it is natural to treat this provision together with the provisions of the standards on buyer's participation (paragraph 8 of the article).
2. Rule mirror
3. Purchase price
Purchase price is defined as agreed consideration excluding sales tax. In the two standards it is aimed here at the agreed remuneration.
The agreed remuneration can be understood as the originally agreed, but not necessarily. Often there are changes, adjustments, additions or other things along the way that cause the purchase price to decrease or increase. In the standards of contract law, the contract amount remains the same and is used as the basis for a account invoicing and daily allowance basis. All changes are billed on a separate invoice series.
NS 8411 contains no provisions stating anything about how such a situation should be handled, whereas NS 8412 has an elaborate provision on this in paragraph 37.4. This regulates, among other things, the adjustment of remuneration in the event of changes. You can find more about this in the article collection for the special provisions of NS 8412, and it can be found here.
We troublesome this question partly to show that “purchase price” can be thought to be handled differently in the two standards, and because it may be relevant to think through this question if the parties decide to agree on a daybreak in the event of a seller's delay.
Our recommendation is that the parties set a daily allowance on the basis of the originally agreed purchase price, and do not allow for interpretations that lead to the daily allowance base being adjusted up/down depending on the development of remuneration during the contract period.
Furthermore, it follows from the second paragraph of the provisions of the Standards on the purchase price that if the latter shall: “to be determined by number, measure or weight” it is the quantities at the time of the transition of the risk to the buyer that should be taken as a basis. This follows from Section 46 of the Purchase Act to which the provisions refer.
In case of consignment purchase, the starting point will be that the seller unloads the goods at the designated unloading place. Once this is done, the risk passes to the buyer, and the seller is entitled to the remuneration that the delivered quantities imply.
In the case of pick-up, the quantities will normally be at the time when the goods have been prepared for the buyer to load them onto their means of transport.
In any case, determining the purchase price by number, measure or weight assumes that the parties have agreed unit prices.
4th. Price regulation
DIt follows from NS 8411 paragraph 30.2 and NS 8412 paragraph 32.2 that the purchase price is indexed only when specifically agreed.
If the parties agree on index regulation, one must also agree on which index to use.
It is also necessary to agree on the date from which the price regulation will apply and when it will cease. In the second paragraph of NS 8411 paragraph 30.2 and NS 8412 paragraph 32.2 it is recommended to use the index number “for the month in which the offer is dated” and “the index number for the month in which delivery takes place”.
However, agreement negotiations can take time and there may therefore be situations where it is more natural to use the time of final agreement as a starting point for indexing.
In terms of the duration of index adjustments, a provision that one considers “the month in which delivery takes place” provide a good balance when you have partial deliveries.
In manufacturing purchases where you first pay an installment at the start of production, we consider it natural to index up to the month in which the seller is to start production.
The same applies when the seller is to assemble and then invoices the next instalment in connection with the delivery of the product to the buyer. If the seller does not assemble, this will be the time of the second and last installment when the product is only manufactured and delivered to the buyer.
In the case of assembly, the third and final installment is paid when the product is assembled and approved to be taken over after a takeover transaction. In such cases, it is natural to index the last installment up to and including the month the product was taken over.
By the way, we refer to NS 3405 and the supervisor of NS 3405 which concerns precisely index regulation.
5. Collateral
The traditional starting point is that the buyer pays for the construction product or product when taking over, but in practice the buyer receives a payment deferral.
Accordingly, the seller will be able to claim security for legal settlement, and it is in such cases that the provision of collateral in the standards is applicable.
The provisions of NS 8411 paragraph 30.3 and NS 8412 paragraph 32.3, respectively, are somewhat different. The explanation, of course, is that one regulates the purchase of generic construction products, while the other regulates manufactured products and assembly where this is agreed.
The differences between these are primarily about the timing of when the security should be provided.
In NS 8411 paragraph 30.3, the rule is that the security must “could be documented (...) by pick up the construction goods or when the goods are to be shipped from the seller”.
In NS 8412 paragraph 32.3, the rule is that the security must “be present no later than 14 days after the conclusion of the contract” unless otherwise agreed.
NS 8411 paragraph 30.3 is silent on the consequence that the buyer does not document his security, while NS 8412 paragraph 32.3, second paragraph states that the seller is not obliged to take action until the security has been presented.
In our view, it is not doubtful that the seller can refuse delivery (or outshipment) to a buyer who does not document the collateral in NS 8411 cases.
This lack of security in violation of the agreement has sometimes created some challenges in contracting matters. The starting point is that both the builder and the contractor are obliged to provide security for their contractual obligations, and this must be provided no later than 14 days after the conclusion of the contract.
It follows further from the standard provisions of, for example, NS 8405 and NS 8407 that the contractor is obliged not to start the execution until the security has been received. The builder, in turn, is not obliged to pay installments until the contractor's security is received.
In some cases, one of the parties has failed to provide the security attached to the agreement, and without consequence this has had any consequences. The builder has paid installments even if the contractor's security has not been provided, or the contractor has started his works without having received the builder's security.
Then the construction project has developed in an unintended way, and so the party that has not received the other party's collateral has made this an issue. This is so that it has been stated that one can withhold one's own benefits until the security is presented.
Subject to the fact that each case must be considered separately, we would like to point out that in such situations it is very easy for a court to conclude that the claim for a security has been waived by inaction or indecisive conduct.
This is stated so that the seller is careful to react if the buyer does not provide the agreed security as agreed.
By the way, we have written a separate article on the conclusion of agreements through indecisive behavior and inaction that you will find here.
6. Payment
6.1 Billing
In both standards, the rule is that invoices should be specified and documented in such a way that the buyer can check these against what has been delivered.
The standards also contain rules on bill workers that impose special requirements on the seller to be able to document what is required for his works. These rules can be found in NS 8411 paragraph 31.1, second paragraph and NS 8412 paragraph 33.1, second paragraph.
In paragraphs 31.1, third paragraph and 33.1, third paragraph, of the two standards, a provision is made that invoicing shall preferably take place using EHF or equivalent.
6.2 Billing rate and payment deadline
At this point, the standard contracts are different.
Nevertheless, we have come to grips with what the rules are based on in our treatment of index regulation. The principle is that when invoicing manufacturing purchases, the seller is entitled to claim 1/3 of the purchase price in connection with the start of production and the rest upon delivery. If the product is to be assembled, the seller may invoice an additional 1/3 upon delivery at the place of assembly, and the remainder after takeover, cf. NS 8412 paragraph 33.2.
In NS 8411 paragraph 31.2, the rule is that the seller can invoice “on delivery” where applicable, for each partial delivery where this has been agreed.
Unless otherwise agreed, the payment deadline shall be 28 days for the purchase price, cf. NS 8411 paragraph 31.2 and NS 8412 paragraph 33.2.
On the other hand, the payment deadline is 14 days when invoicing the first instalment before the start of production in the case of manufacturing purchases and, correspondingly, when delivering the product at the assembly site, cf. NS 8412 paragraph 33.2.
7. Buyer's right of retention
It is a fundamental principle that each party may withhold a proportionate share of its performance in the event of breach of contract with the counterparty.
NS 8411 paragraph 31.3 and NS 8412 paragraph 33.3 deal precisely with this situation and where it is stated that the buyer may withhold”as much of the purchase price as is necessary to secure a specified claim” in case of breach of contract by the seller.
Some examples can be mentioned.
If the buyer gets less delivered than agreed, and invoiced, he can withhold a proportionate share of the purchase price.
If there are defects in the construction goods or the product, the buyer may withhold such a large part of the consideration that he has reasonable assurance that a third party can remedy it if the seller objects.
If there is a day mulch situation, the buyer may withhold an amount equal to the total daily mulch requirement with the addition of compensation if this can be claimed in addition.
8. Buyer's Involvement
Both standard contracts provide for buyer's participation obligation, see NS 8411 paragraph 32 and NS 8412 paragraph 34.
Buyer's shopping obligations are primarily regulated elsewhere in the Standards.
As an example, mention is made of the buyer's obligation to produce the agreed design documentation that the seller needs to start production, cf. NS 8412, paragraph 19.2, or the buyer's obligation to inform the seller of any challenges faced by the carrier upon delivery at the construction site, cf. NS 8411 paragraph 12.1.3 and NS 8412 paragraph 11.2.1.3.
The second paragraph of NS 8411 paragraph 32 and NS 8412 paragraph 34 respectively describes a situation in which the buyer is obliged to determine something about the “form, purpose or other characteristics” of the subject of the contract after the conclusion of the contract, and where there are also agreed times for when such decision must be made.
When this is the case, but the buyer does not comply with his duty, it follows from the third paragraph of the provisions that the seller may “determine (...) if he has reasonable grounds to assume what the purchaser wants”.
However, before the seller acts, the buyer must be notified and informed of what the seller has chosen, and then the buyer must be given a deadline to correct. If the deadline is not met, the seller can deliver what he himself has decided and the delivery will then be considered legitimate.
The consequence of such delivery is that the seller has fulfilled his part of the agreement, and the buyer is obliged to pay the agreed consideration.
As indicated in the last paragraph of paragraph 1, we would also write a little here about the buyer's right to a deadline extension in NS 8412 paragraph 35. This is despite the fact that NS 8411 does not contain a corresponding provision.
In manufacturing purchases, the buyer must primarily contribute with the provision of production bases, and situations may arise along the way where questions arise as to whether the buyer hinders the seller's progress. This is different when buying off-the-shelf goods, where the buyer mostly has no other task than to pick up the goods, or pick them up.
In any event, NS 8412 paragraph 35 states that the buyer may be entitled to an extension of the deadline if the buyer is delayed with his deliveries as a result of the seller's circumstances (letter a) or as a result of force majeur (letter b). If the Buyer wants to request an extension of the deadline, the Buyer must follow the same notification procedure as the Seller when the Buyer requests an extension of the deadline. These rules have been dealt with in an article on the seller's right to an extension of the deadline and which are contained in the collection of special provisions for NS 8412. The article in question exists here.
9. Sanctions in case of breach of contract by the buyer
The provisions on seller's sanctions in case of buyer's breach of contract can be found in NS 8411 paragraph 33 and NS 8412 paragraph 36.
The provisions refer, in essence, to the provisions of the Purchase Act.
The most frequent is that the buyer pays after maturity and then the seller gets the right to late interest, cf. the law on late interest that exists here.
As mentioned earlier, the seller is entitled to the payment of 1/3 of the purchase price at the start of production in NS 8412 contracts. In NS 8411 contracts, the parties may have agreed that the buyer should provide security before building materials are dispensed or shipped from seller.
If the buyer fails to pay or provide security, the natural sanction is that the seller does not implement or deliver/send. The right to withhold own benefits follows partly from the standard contracts' own provisions, and from Section 10 of the Purchase Act
Chapter VII of the Purchase Act, to which the provisions of the Standard Contracts refer, exists here.
This chapter contains rules on the seller's right to “demand fulfilment, elevation and indemnification” as set out in the first paragraph of paragraphs 33 (NS 8411) and 36 (NS 8412) of the standard contracts
We will not go into more detail on these rules.
