Bonus invoice after completion: judge clarifies contract

In a recent case, the court considered the interpretation of contracts. The parties were disputing whether the supplier owed a bonus invoice charged by the customer. Both the court and the court confirmed that the supplier was liable to pay the bonus invoice. The ruling provides a good example of how courts apply the rules of interpretation developed in case law. In this case, there was no written signed contract, but the agreements were inferred from how the parties behaved, what the parties communicated by e-mail and how they implemented those agreements.

The dispute

There was a business arrangement between the two parties whereby a supplier supplied a buyer with meat and meat products for the benefit of healthcare facilities. Since 2015, the buyer charged the supplier a so-called bonus invoice of 1.5% of the annual turnover achieved by the supplier through the buyer in the relevant year. In 2020, the buyer terminated the cooperation with effect from 2021. It also charged a bonus invoice for the year 2020. The supplier left this invoice unpaid.

The supplier believed that the customer was not entitled to the bonus because no bonus was ever agreed for 2020. Moreover, the supplier argued that the parties had intended the size of the bonus to depend (also) on continuation of the cooperation. There was thus a dispute about the interpretation of the agreement. The buyer therefore went to court to enforce payment of the bonus invoice.

Judgement of the court and court of appeal

The court upheld the customer’s claim and ruled that it could be deduced from the totality of the facts and circumstances that the parties had made an agreement that the supplier would pay the customer for the year 2020 a bonus of 1.5% on the turnover realised by the supplier through the customer. The supplier appealed against this judgment.

The court of appeal followed the district court in its judgment. The court of appeal ruled that the district court had correctly applied the so-called Haviltex yardstick in its judgment. This Haviltex yardstick implies that, when interpreting an agreement, it comes down to the meaning that the parties, in the given circumstances, could reasonably attribute to each other’s statements and to what they could reasonably expect from each other in this respect, whereby the circumstances of the specific case are decisive.

The court found that from 2015 to 2019, a bonus of 1.5% on the turnover achieved was granted annually to the buyer. Although the buyer claimed that this percentage was negotiated annually, the court concluded that there was no evidence that the amount of the bonus was conditional on the cooperation continuing. The court inferred from e-mail correspondence between the supplier and the customer that the 1.5% bonus agreement was more or less standard. The e-mail correspondence on the bonus factor contained as subject “Bonus 2020” which, for the court, was an indication that the customer itself also assumed that the bonus agreement also applied for 2020.

Continued

Further, the e-mail correspondence also agreed on whether the 1.5% bonus would be settled directly on the invoices. This was also initially implemented by the supplier by deducting 1.5% from the January 2020 invoice. At the customer’s request, it was then agreed that the bonus would be settled in one lump sum at the end of the year.

Following the buyer’s announcement that the cooperation might be terminated, there was no discussion by the supplier that the bonus arrangement would lapse if the buyer did terminate. This too suggests that whether the bonus was granted did not depend on it or was later made dependent on it.
In short, the court of appeal, like the district court, thinks that it has been established that the parties also agreed for the year 2020 that the customer would receive a bonus of 1.5% of the annual turnover achieved by the supplier through the customer.

Conclusion

The ruling provides a good example of how courts apply the interpretation rules developed in case law and confirms the importance of the parties’ intentions and the circumstances under which the agreements were made. Be aware that binding agreements can be made even outside a signed agreement. To avoid conflicts over the interpretation of agreements, it is advisable to draw up clear contracts and properly record how binding agreements are made even outside the contract.

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