Under the new Decision on Determining Agricultural Products in the Sectors in which the Conclusion of a Contract between an Agricultural Producer and a Processor or Purchaser is Mandatory (hereinafter: the “Decision”), the agricultural products in the sectors for which the conclusion of a written contract between an agricultural producer and a processor or purchaser is mandatory have been specified.
This obligation applies to each delivery of products in sectors including, inter alia, cereals, fruit and vegetables, processed fruit and vegetable products, beef and veal, milk and dairy products, pork, apiculture products, and certain other products.
In practice, trade in these sectors has frequently been conducted on the basis of purchase records, delivery notes, goods receipt notes, and subsequently issued invoices, without a separately executed written contract for each delivery. Accordingly, the significance of this Decision lies primarily in the additional formalization of the commercial relationship.
The manner of documenting the transaction is thereby changed, since an invoice in itself confirms the calculation and the basis for payment, but does not necessarily govern all matters relevant to such relationships, including the subject matter and quality of the goods, quantity, delivery time and place, price or the method for its determination, payment deadlines, the manner of acceptance and handling of complaints, allocation of risk, as well as the consequences of non-performance.
The mandatory written form therefore assumes particular importance from the perspective of:
- the legal certainty of participants in the supply chain;
- evidencing the content of the contractual relationship in the event of a dispute;
- compliance with the rules governing the market in agricultural products; and
- regulatory and inspection oversight of trade and procurement.
For agricultural producers, this obligation may result in a clearer contractual definition of the conditions under which they deliver goods. For purchasers and processors, this entails the need to align existing procurement and purchasing models with the requirement that a contract be concluded in written form for each delivery of products covered by the Decision.
The obligations under the Decision apply only to products precisely identified by tariff codes in the annex to the Decision. This means that proper implementation in practice will require verification of whether the specific product being supplied falls within the list of products set out in the annex to the Decision.
From the standpoint of business compliance, market participants will need, in particular, to:
- review whether their existing procurement and purchasing models satisfy the written-form requirement;
- establish appropriate contractual templates for covered products;
- align contractual documentation with invoicing, goods receipt procedures, and internal records; and
- ensure that their commercial and operational teams act in accordance with the new formal requirements.
For additional information or consultations, the Tasić & Partners team is at your disposal.