Concept and Definition of Procurement Debt
The procurement debt is a term from contract law and refers to a special type of obligation in which the debtor undertakes to procure a specific item or object and deliver it to the creditor. In contrast to generic obligations and specific obligations, procurement debt particularly characterizes the risk and scope of the debtor’s duty to perform with regard to an item to be delivered, which is neither individually designated nor already owned or possessed by the debtor.
Systematic Classification
Procurement debt is systematically grouped with specific obligation and generic obligation, but occupies a special position. While a specific obligation requires a particular, concretely determined item, and a generic obligation requires an item defined by general characteristics, in the case of procurement debt, the performance obligation concerns an item that must first be acquired or manufactured by the debtor.
Distinction from Specific and Generic Obligation
- Specific obligation: The debtor owes an individually specified item (e.g., exactly the painting by artist XY).
- Generic obligation: The debtor owes an item determined by general characteristics from a category (e.g., a car of brand A, type B, year C).
- Procurement debt: The debtor is obliged to procure an item, which is neither in his possession nor ownership, from a specified source or the general market and deliver it to the creditor.
Legal Principles
Procurement debt is not explicitly regulated in the German Civil Code (BGB). It arises from the interpretation of the obligation and the circumstances of the individual case. Essential provisions to be considered in connection with procurement debt are found in the general provisions of contract law as well as in sales law (§§ 241 et seq., 433 et seq. BGB).
Legal Nature of Procurement Debt
Procurement debt is classified as an obligation to produce a result, not merely to make an effort. This means the debtor is liable for actually procuring the owed item—regardless of whether this can be done with reasonable effort. The scope of this procurement obligation may be limited or extended by contractual agreement and the parties’ interests.
Typical Areas of Application
Procurement debt is often found in the following fields:
- Commercial Sale: The seller undertakes to procure specific goods which are not yet in his possession.
- Construction Contract: The contractor undertakes the obligation to procure specific building materials or components and to install them.
- Supply Agreements: Within the framework of master supply agreements, the supplier agrees to procure ordered goods in a timely manner.
Duties and Liability Issues in Procurement Debt
The main liability in procurement debt is the successful transfer of the agreed item to the creditor. The precise scope of this duty and the standard of liability are central issues concerning procurement debt.
Performance Risk and Impossibility
The debtor in a procurement debt generally bears the so-called procurement risk. If the procurement of the agreed item becomes impossible without the debtor’s fault (e.g., due to a general market failure), the duty to perform may cease (§ 275 BGB). However, it is not sufficient that the item is difficult to procure or involves increased effort; the debtor must exhaust all reasonable possibilities.
Liability for Failure to Procure
If the debtor fails to meet the obligation to procure the item, he is liable to the creditor for damages in accordance with general rules. The assessment primarily depends on whether the debtor is at fault for non-procurement and whether all reasonable procurement efforts have been made.
Special Cases: A distinction is made between
- Concrete procurement debt: The obligation relates to an item that can be identified on the market (for example: “a brand-new car of model X”).
- Abstract procurement debt: The obligation applies to an item that must still be purchased or manufactured, with procurement not limited to fixed supply sources.
Notification Obligations
If unforeseen procurement difficulties arise during performance, the debtor has a contractual ancillary obligation to inform the creditor without delay. This enables the creditor to waive performance or seek alternative solutions.
Practical Significance and Typical Issues
Procurement debt plays a significant role, especially in business life. It allows for flexible deliveries and relieves warehousing costs. In practice, disputes often arise over the scope, limits, and termination of the procurement obligation, particularly concerning delivery delays, market changes, or unexpected price increases.
Risk Allocation
The allocation of procurement risk is central to the legal assessment of performance disruptions. Clear contractual regulations can help avoid uncertainties and subsequent legal disputes.
Standard Contract Clauses
In General Terms and Conditions (GTC), procurement risk is often regulated or limited. However, such clauses are subject to substantive review under §§ 305 et seq. BGB and are void in cases of unreasonable disadvantage to the creditor.
Summary
Procurement debt is an important form of performance obligation in contract law, where the debtor bears the risk for the successful procurement of the agreed item. The assessment and handling of procurement debts place high demands on contract drafting and risk allocation, making clearly defined contractual terms essential for the existence, proof, and limits of each procurement obligation. A thorough understanding of procurement debt is necessary for managing numerous business contracts to effectively avoid liability risks and legal uncertainties.
Frequently Asked Questions
What are the typical legal consequences of a procurement debt in case of non-performance?
In the event of non-performance of a procurement debt, the debtor is in default if he fails to perform the agreed service on time, although it could basically be procured on the market. Under the conditions of §§ 280, 281 BGB, the creditor may claim damages in lieu of performance. The peculiarity of procurement debt is that the debtor is obliged to procure the performance not only from his own stock, but from any possible sources, in particular from the open market. Only when procurement is objectively impossible (e.g. market failure, not just a temporary shortage), does impossibility under § 275 BGB arise, which releases the debtor from the obligation, but under certain circumstances, pursuant to § 326(1) BGB, also releases the creditor from the obligation to counter-perform. In case of damage, the creditor may also conduct a cover purchase and assert the difference between the agreed and the new price as damages.
What duty of care applies to the debtor in a procurement debt?
The debtor of a procurement debt must, beyond simply providing goods from his own stock, take all reasonable steps to procure the owed performance from the market. This includes, in particular, careful market observation, selecting reliable suppliers, and timely ordering with due consideration for customary delivery periods. It must also be assessed whether alternative procurement at reasonable terms is possible. The debtor cannot claim increased effort as an excuse as long as it remains within economically reasonable bounds. The obligation ends only if it is objectively impossible, that is, if the performance truly cannot be procured on the market at all.
How does liability in procurement debt differ from other types of obligations?
Liability in procurement debt is generally stricter than with a generic obligation but less strict than with a specific obligation. For a generic obligation, the selection and segregation of the item already specifies and limits liability (§ 243 (2) BGB), whereas in the case of procurement debt, the obligation to procure continues even after selection, until objective impossibility occurs. Debtors of procurement debt are liable for the so-called procurement risk, including cases where their own inventory or supply chain fails, as long as there is still market availability elsewhere. Conversely, if there is genuine market impossibility, they are released from further liability.
When does objective impossibility of performance exist in procurement debt?
Objective impossibility in procurement debt exists when the goods or services to be delivered are absolutely and generally no longer available on the market. This does not include mere difficulties, delivery shortages, price increases, or individual procurement issues of the debtor. Impossibility is generally only assumed when the item cannot be procured worldwide or at least nationwide for an extended period, such as if all production facilities are destroyed or the relevant item is banned. Temporary problems or particular contractual obstacles, like insolvency of a pre-supplier, are generally insufficient.
What cooperation duties apply to the creditor in procurement debt?
In procurement debts, the creditor may also be required to cooperate. These include, for example, timely and complete provision of any agreed prepayments or technical information, and possibly obligations to provide information about specifics of the owed performance. If these obligations are breached, the debtor may raise objections under the law of delay (§ 293 et seq. BGB) in case of non-procurement and may thus be released from liability for damages. The exact extent of cooperation duties depends on the nature of the obligation and the contractual arrangements.
How can parties contractually shape or limit procurement risk?
The parties may expressly include provisions in the contract affecting or limiting procurement risk. Such provisions may include agreements on specific sources (source-of-supply obligations), maximum prices, delivery periods, or termination clauses in the event of proven impossibility. Clauses covering hardship, force majeure, or liability for higher force can also be included. In this way, the risk of procurement debt can be specifically allocated and made more calculable for both contracting parties.
Who bears the burden of proof in a dispute over the impossibility of procurement?
In case of dispute, the debtor bears the burden of proof that procurement of the owed performance was in fact impossible for him. He must set out and prove in detail that he exhausted all reasonable efforts and relevant supply sources without success. Mere assertions or general references to delivery difficulties are not sufficient. The creditor, in contrast, need only show that the duty existed and was not fulfilled; if the debtor contests the possibility of procurement, he has the full responsibility of demonstrating and proving genuine impossibility.
