In the automotive and mobility sectors, as well as across other industrial fields, just-in-time delivery contracts are prevalent. The prices of parts and other delivery conditions are regularly governed by long-term framework agreements. In the recent past, increased energy costs, inflation and geopolitical crises (including the COVID-19 pandemic, the war in Ukraine and the Middle East conflict) have led to cost increases suppliers want to pass on to their customers (at least in part) through price adjustments.

If a supplier's request is not met or if no agreement is reached in the relevant negotiations, the risk of a delivery suspension often arises. This can directly lead to production stoppages and severe financial losses, affecting all levels within a multi-tiered supply chain. It is therefore advisable for potentially affected companies to prepare at an early stage to enable rapid, purposeful reactions in case of an emergency.

Starting Point: Contractual Situation

The starting point for assessing the situation and identifying possible actions is reviewing the current contractual framework, which forms the basis of each supply relationship.

The supplier should therefore first carefully determine whether a specific delivery obligation (individual order, purchase order) or a contracting obligation – possibly arising from a framework agreement – exists at all. It is possible that the (framework) agreement contains a provision whereby the supplier can demand a price adjustment under certain conditions. Alternatively, under certain circumstances, invoking a disruption of the basis of the transaction (Section 313 of the German Civil Code (BGB)) may also be considered.

The customer should evaluate the supplier’s arguments for a price adjustment request considering the specific circumstances, particularly in relation to whether the supplier is genuinely obligated to deliver under the existing terms. Adhering to the principle pacta sunt servanda (agreements must be honoured), existing contracts must be honoured.

Strategic Considerations in the Run-up to theCconclusion of the Contract

Strategic planning to handle cost increases or react to potential delivery suspension threats should be integrated into the negotiation of (framework) supply contracts. Particular attention should be paid to those suppliers with whom there is a special dependency relationship with regard to the company's own production – whether due to lengthy certification processes or the unavailability of alternative suppliers.

At this stage, the supplier should work towards including explicit options for price adjustments in the (framework) contract in the event of cost increases. In this context, it may also be considered to include force majeure provisions that provide for a right of the supplier concerned to adjust prices. In connection with price adjustment clauses, the requirements of the Price Clause Act and – in the case of an agreement within the framework of general terms and conditions (GTC) – the control of GTC must always be observed. This also applies – in a weakened form – in the B2B area, ensuring that any provision does not unfairly disadvantage the contractual partner. Such a disadvantage may arise, for example, if the price adjustment clause not only allows the supplier to compensate for cost increases but also to increase its profits unilaterally.

During contract negotiations, the customer should first ensure that the (framework) contract contains provisions that are as clear as possible regarding the supplier's specific delivery obligations. In cases involving directed part awardings it might also be advisable in individual cases to conclude direct supply contracts with the tier 1 and tier 2 suppliers (suppliers of directed parts), to ensure contractual supply claims exist vis-à-vis both stages of the supply chain (vis-à-vis the tier 1 supplier for delivery to the customer and vis-à-vis the supplier of directed parts for delivery to the tier 1 supplier). Alternatively (i.e. without the customer having its own claim for delivery against the set-part supplier), it is possible for the customer to be entitled to enforce the Tier 1 supplier's claim for delivery against the set-part supplier in court if necessary. This entitlement can either be granted to the buyer through a tripartite agreement with the Tier 1 supplier and the directed part supplier, or by giving the buyer enforcement rights in its supply contract with the Tier 1 supplier (i.e. without the involvement of the directed part supplier) (arbitrary legal standing).

The choice of contractual partners on both sides of the supply chain impacts jurisdiction, document service, and enforcement, which should ideally be addressed directly in the (framework) supply contract.

Finally, it can be beneficial to include further agreements in the (framework) contract as a precaution – in particular, on the assertion of rights to refuse performance and rights of retention, as well as on force majeure and the procurement risk along the supply chain.

Buyer Options for Action

Enforcement of the delivery claim

If the supplier has a delivery obligation but is nevertheless threatening to stop delivery, the customer then has various options for enforcing its delivery claim:

Rejection of any price adjustment demands

As a first step, it is usually advisable to reject the supplier's (unfounded) price adjustment request and to insist on continued delivery. Such a rejection is more likely to be successful the stronger the customer's own arguments are and the weaker the supplier's justification is.

Negotiations with the supplier

If the relationship with the supplier has not yet been definitively damaged, negotiations may be possible, particularly if the buyer has a strong interest to maintain the supply relationship and the supplier’s reasons are not entirely without merit.

Formal notice letter

If a solution cannot be reached, or if the supplier persists in its delivery threat, an extrajudicial formal notice may be advisable, possibly as an early parallel measure alongside negotiations.

Application for a temporary injunction

Finally, it is advisable to consider the possibility of enforcing delivery claims by way of interim relief (i.e. applying for a temporary injunction) while negotiations with the supplier and, if necessary, formal notification are ongoing. If a temporary injunction is granted, an obligation to continue delivery – for a limited period of time – would then be pronounced or the supplier's corresponding obligation would be established. If the supplier then fails to fulfil this obligation, a penalty payment (up to EUR 25,000) or – alternatively – a penalty of imprisonment can be applied for to enforce the claim.

To obtain a preliminary injunction, there must be a right to obtain an injunction (contractual right to continued delivery) and a reason for obtaining an injunction (urgency). If granted, a temporary obligation to continue delivery could be established, with potential penalty payments (up to EUR 25,000) or imprisonment in cases of non-compliance. To secure an injunction, the applicant must demonstrate the right to an injunction (contractual right to continued delivery) and the urgency of the situation, typically substantiated with documentation or affidavits. The required urgency may be given in particular if the delivery stop leads to an existential threat for the affected company or if unreasonable or disproportionate financial disadvantages (i.e. very high and irreparable damage) are imminent.

If the matter is particularly urgent, a well-prepared application can enable the court to issue a decision within a few days without a hearing. The hearing and inclusion of the opposing party, as required by the Federal Constitutional Court, can also be ensured under certain conditions prior to the proceedings by the possibility of replying to an out-of-court written warning, so that no further hearing is then required in the court proceedings.

Ultimately, past experience and court rulings indicatethat an application for a temporary injunction in the event of a (threatened) delivery stop can be quite promising if it is carefully prepared and the further proceedings are closely monitored.

Subsequent appeal of a possible price adjustment

If, in individual cases, the claim for delivery cannot be enforced at all or at least not in time for reasons of time and/or economic efficiency, it may be preferable under certain circumstances to initially give in to the supplier's pressure and carry out a demanded price adjustment. Under certain conditions, the customer then has the option of retrospectively correcting this price adjustment.

The contract amendment obtained under threat of a delivery stop may be subject to appeal as an unlawful threat if the supplier's legal position was no longer tenable (Anfechtung wegen arglistiger Täuschung). If, in this case, the customer declares appeal of the adjustment agreement within one year, it will be considered void from the outset.

Supplier Options for Action

Options for Enforcing the Price Adjustment

If the contractual situation does not involve any obligation to deliver and/or any obligation on the part of the supplier to enter into a contract, the supplier can, if necessary, suspend supplies This gives the supplier a certain amount of leeway in negotiations to enforce a desired price increase in return for continued delivery and the conclusion of agreements to this effect.

If the supplier is obliged to supply the customer but the (master) supply agreement explicitly provides for the possibility of price adjustments, the supplier can assert this claim, if necessary in court. Without a corresponding contractual provision, an adjustment of the contract in accordance with the principles of frustration of contract (Störung der Geschäftsgrundlage) or a termination of the (master) supply agreement can be considered if the respective legal requirements are met. With regard to a (framework) supply contract as a so-called continuing obligation, a right of termination may exist even without an express contractual provision if the obligation is of unlimited duration and the parties have not contractually excluded the right of termination.

However, a certain amount of caution is required when assessing the contractual and legal situation. If there was actually no objectively or subjectively justifiable basis for the announcement of a delivery stop, a price adjustment that may have been made can, under certain circumstances, be challenged by the customer and thus reversed.

Preventive Defence Against an Application for a Temporary Injunction

If an application by the customer for the enforcement of possible delivery claims by way of temporary legal protection is anticipated, there is also the possibility of filing a so-called protective brief (Schutzschrift) with the central protective brief register as a precautionary measure. The court seised would then have to take such a protective brief into account before issuing a decision.

Outlook

This analysis shows that no “one-size-fits-all” approach exists for addressing cost increases or potential delivery suspensions. Although certain guidelines apply, their specific application depends on case-by-case evaluations.

Nevertheless, the same or similar questions often arise in this context, especially with regard to the specific contractual situation and the nature of the supplier relationship or related forecasts. Since economic challenges and potential delivery stops often come with significant time pressure, establishing a standardized process or “checklist” to address typical issues is advisable.