Beverage Procurement Obligation

Beverage Procurement Obligation

The beverage procurement obligation is a legal term that plays a central role in commercial tenancy law, particularly in connection with the operation of restaurants, bars, and catering businesses. It describes the contractual obligation of a tenant or operator to procure beverages exclusively or to a certain extent from a specific supplier, usually the landlord or an affiliated brewery. Contractual beverage procurement obligations have a long tradition, especially in German law, and are the subject of extensive case law.

Concept and Structure of the Beverage Procurement Obligation

Definition

The beverage procurement obligation is a legally binding agreement that is usually stipulated in leases for catering premises or supply contracts, also known as a ‘brewery tie.’ The agreement generally stipulates that the operator of a catering business sources specific beverages, often beer products and non-alcoholic refreshments, exclusively from a specific supplier.

Typical Contractual Constellations

Typically, the beverage procurement obligation is an ancillary agreement to a main lease or tenancy contract. However, it can also appear in independently concluded procurement agreements or as part of a package deal (e.g., in the context of brewery financing). The binding obligation may cover the entire range of beverages or be limited to specific product groups.

Legal Basis and Classification

Contractual Framework

The beverage procurement obligation is subject to general principles of contract law, especially those pertaining to continuing obligations (§§ 241 ff., § 311 BGB). Legally, it is classified as a continuing obligation or long-term service relationship. The main contract (e.g., restaurant lease) and the procurement obligation are often interpreted as a legal unit, even if they are formally set up as separate contracts.

Competition and Antitrust Law

Agreeing on a beverage procurement obligation can raise questions under competition and antitrust law, particularly according to § 1 GWB (Act Against Restraints of Competition) and Art. 101 TFEU (Treaty on the Functioning of the European Union). Contracts of this type are legally categorized as vertical agreements, which are generally permissible as long as they do not constitute an impermissible restraint of competition and remain below antitrust thresholds.

Brewery tie contracts are also sometimes subject to specific antitrust exemptions under the so-called Vertical Block Exemption Regulation (Regulation (EU) 330/2010). It is crucial that there is no market foreclosure or unreasonable restriction of competition.

Standard Terms and Content Control

Provisions on beverage procurement obligations are regularly used as general terms and conditions (§ 305 BGB) and are therefore subject to review under §§ 307 ff. BGB. An unreasonable disadvantage to the obligated business, such as through surprising clauses or excessively long contract periods, can render the procurement obligation invalid.

Typical Content and Structure of Beverage Procurement Obligations

Scope

• Exclusivity: The procurement obligation is often limited to certain beverage categories (e.g., beer or non-alcoholic beverages).
• Minimum Purchase Quantity: Minimum purchase obligations may be agreed for specific periods.
• Exclusivity Obligation: Procurement from third-party suppliers is contractually prohibited.

Duration

Beverage procurement agreements are usually concluded for several years, sometimes linked to the term of a lease or tenancy agreement. Disproportionately long durations, which may result in economic dependency, should be viewed critically and are examined by courts in light of §§ 138, 242 BGB (immorality, good faith).

Compensation

Beverage procurement obligations are often accompanied by investment grants, loans, provision of furnishings, or discounted prices from the supplier. These economic advantages must be considered in the legal assessment.

Case Law and Special Features

Federal Court of Justice (BGH)

The BGH has repeatedly confirmed the validity and boundaries of beverage procurement obligations but has emphasized content control and compliance with antitrust regulations. In particular, very long commitments (over 5 years) or disproportionate burdens on the operator raise legal concerns that may render the obligation invalid.

Immorality and Disadvantage

A beverage procurement obligation can be considered immoral (§ 138 para. 1 BGB) if it results in de facto stranglehold of the operator, especially when contract period, procurement volume, and penalties are disproportionate to the advantages granted.

Termination and End of Contract

Early termination of a beverage procurement obligation is only possible for good cause (see § 314 BGB). Such cause may be given, for example, if the beverage supplier is not capable of performance or commits substantial breaches of contract.

Special Features in the Hospitality and Brewery Sector

Brewery Tie

Especially in the brewery industry, the beverage procurement obligation is traditionally structured as a ‘brewery tie,’ often linked to substantial pre-financing and the granting of tangible assets. The primary concern is to protect one’s own sales channels and secure a stable customer base.

Geographical and Material Scope

The beverage procurement obligation may pertain to individual catering businesses as well as larger sales regions. The legal assessment depends, among other factors, on the market power and mutual dependencies of the contracting parties.

Tax and Business Management Aspects

Beverage procurement obligations also have tax and accounting implications, especially when investment grants or bonuses are provided by the supplier. These benefits must be recorded as business income and included in the profit and loss account.

Summary and Practical Significance

The beverage procurement obligation is an essential tool for sales channel binding in commercial catering law. It is regulated in complex ways and subject to a wide range of legal requirements, from content control to antitrust exemptions. Operators and contracting partners should thoroughly assess the legal implications of such arrangements to avoid risks such as immorality, antitrust violations, or economically disadvantageous long-term commitments.

Literature and Further Information:

• BGH case law on brewery tie and beverage procurement contracts
• Guide: The New General Terms and Conditions Law in the Hospitality Sector
• Guidelines on the Application of the Block Exemption Regulation (Vertical BER)

(This article serves for general information and does not replace individual legal advice.)

Frequently Asked Questions

Is a beverage procurement obligation generally legally permissible?

A beverage procurement obligation is generally legally permissible, provided there are no statutory prohibitions or immoral conditions. In practice, beverage procurement obligations are often agreed upon within the framework of lease or tenancy agreements, especially when renting restaurants, clubhouses, or event venues. Legal validity is determined in particular by the general civil law provisions, especially those of the German Civil Code (BGB). Of primary relevance are the rules on freedom of contract (§ 311, 305 ff. BGB) as well as the restrictions under general terms and conditions law. However, the obligation must not unduly disadvantage the contracting parties (§ 307 BGB), must be clearly and understandably agreed, and must not violate the principle of good faith (§ 242 BGB). In addition, antitrust regulations, specifically §§ 19, 20 GWB (Act Against Restraints of Competition), and any regional or industry-specific rules must be observed. If these requirements are met, beverage procurement obligations are regularly valid.

What are the limits on the duration of a beverage procurement obligation?

Regarding contract duration, beverage procurement obligations are subject to legal and judicial limitations. According to prevailing case law, especially that of the German Federal Court of Justice, such a commitment must not result in excessive and unreasonable contractual bondage. Typically, commitment periods of up to five years are considered permissible and regarded as standard in the industry. Longer contract periods may be permissible in individual cases, such as when the contract partner makes significant investments in return (for example, financing of equipment or renovations by the supplier), in which cases an individual assessment is required. However, if the duration exceeds ten years, this is usually considered disproportionate and may render the contractual commitment regarding the excessive period null and void (§ 138 BGB, immorality). An automatic renewal clause is legally permissible as long as the contract partner can terminate the contract in due time with reasonable notice.

What requirements apply to the drafting of a beverage procurement obligation in a contract?

For legal effectiveness, the beverage procurement obligation must be clearly, transparently, and understandably drafted. It is especially necessary that the contractual partner clearly recognizes which beverages and what quantities must be procured from which supplier. Vague or ambiguous wording may lead to invalidity or may, in case of doubt, be interpreted to the detriment of the user (supplier or lessor) (§ 305c BGB). In addition to the types of goods, price, price adjustment provisions, procurement modalities, and the duration must also be precisely regulated. The wording should also address possible exceptions (e.g., unavailability of specific items). If general terms and conditions are used, the strict requirements under §§ 305 ff. BGB must be observed, especially the transparency requirement and prohibition of surprising clauses.

What are the legal consequences of a breach of the beverage procurement obligation?

If the obligated party breaches a validly agreed beverage procurement obligation, this generally constitutes a contractual violation, entitling the supplier or landlord to claim damages (§§ 280 ff. BGB). Typically, contracts stipulate a contractual penalty (penalty clause) for such cases, which must withstand a reasonableness review under general terms and conditions law (§§ 307 ff. BGB). In addition, the supplier or landlord may demand fulfillment (performance claim) or, where applicable, terminate the contract for good cause. Compensation is generally measured by the difference between the contractually agreed quantity and the actual purchase, with the supplier’s saved expenses deducted. Additional lost profit may also be claimed in individual cases.

To what extent are beverage procurement obligations compatible with competition law?

Beverage procurement obligations can be problematic from a competition law perspective, especially in cases of dominant market positions or significant restrictions of competition. Under §§ 19 and 20 GWB, it is abusive if a dominant supplier exploits its position to unduly disadvantage customers or unfairly obstructs other competitors. However, such clauses are generally permissible as long as competition in the relevant market is maintained and no market foreclosure occurs. Particularly in cases of extensive procurement obligations imposed by large beverage companies or breweries that bind numerous catering establishments, antitrust review is carried out. In these cases, there may be restrictions or even invalidity of certain contracts if market access for other suppliers is unreasonably hindered. For purely local and small-scale supply relationships, the risk of antitrust inadmissibility is usually low.

Who bears the burden of proof in disputes over beverage procurement obligations?

In the event of a dispute, the party relying on the existence or breach of the beverage procurement obligation generally bears the burden of proof. For example, if the supplier wishes to claim damages for a violation, they must prove that a valid beverage procurement obligation existed, that it was breached, and what damage resulted. The obligated party (e.g., tenant) can, on the other hand, provide evidence that the requirements for the obligation are not met, for instance because the contract is invalid or an exception applies (e.g., delivery delay or impossibility of delivery). In litigation, the general rules on the burden of allegation and proof under civil law apply.

Can the obligated party exit the beverage procurement obligation early?

Early exit from a validly agreed beverage procurement obligation is generally only possible if provisions for termination (right of termination, special right of termination) are stipulated in the contract itself or if there is a legal ground for extraordinary termination (§ 314 BGB). Such a ground may exist, for example, if it is unreasonable for the obligated party to continue the procurement relationship, due to serious breaches of contract by the supplier (e.g., persistent delivery failures, price abuse, quality defects). Without such an important reason and without a contractual right of withdrawal, the contract remains binding until the end of the agreed term. An early exit without legal grounds can lead to substantial claims for damages or contractual penalties.