Supply contract with a restaurant or hotel: what to write down and what the law says

A restaurant, hotel or guesthouse that regularly takes cheese, vegetables, honey or meat from a local producer must pay, and the producer must deliver, what was agreed. If the agreement is not written down, each side remembers it in its own way. Below is what is worth putting in the contract and what the law says when the contract is silent. This is not legal advice for a specific case.

In short

• A contract of sale needs no special form unless a law requires one (Article 67 of the Law on Obligations, Zakon o obligacionim odnosima, ZOO). A written contract is not required, but it is your proof.
• The parties can replace most ZOO rules with their own terms (Article 20), so what you write in the contract takes priority over those rules.
• If no price is set, a commercial sale is still valid: the buyer pays the price the seller usually charged or, if there is none, a reasonable price (Article 462, paragraph 2). If the contract is not a commercial one, a sale without a price that can be determined has no legal effect (Article 462, paragraph 1). So always write the price down.
• A buyer who receives goods must inspect them and tell the seller about visible defects within eight days, or without delay in a commercial contract. Otherwise the buyer loses the right (Article 481).
• Claims between legal entities from the sale of goods become time-barred after three years, counted separately for each delivery (Article 374). Other claims fall under the general ten-year period (Article 371).

Who it applies to

Any producer (farm household, sole trader, cooperative, company) that sells regularly to a hospitality business. ZOO has special rules for commercial contracts (ugovori u privredi). These are contracts that companies and other legal entities in business, and shop owners and other individuals who run a business as a registered occupation, conclude with each other as part of their business (Article 25). If the seller is a farm household, it is not certain that these rules, with their shorter deadlines, apply to it. So do not leave deadlines to the law: write them into the contract.

What to do

Put the following in the contract or in a written order form.

1. Parties and goods. Who sells, who buys and which products. A contract is concluded once the parties agree on the essential terms (Article 26).
2. Quantity. A fixed weekly amount, a range, or delivery "on order" with orders placed by a set day. If you deliver less, the buyer may cancel the contract only for the missing part, unless the agreed quantity forms a whole or the buyer has a justified interest in receiving all of it. In that case the buyer may cancel the whole contract (Article 492). If, between businesses, you deliver more goods of a given kind and the buyer does not refuse the surplus within a reasonable time, the buyer must pay for it at the same price (Article 493, paragraph 1). If the buyer refuses the surplus, the seller must compensate the buyer's damage (Article 493, paragraph 2). Agree how far a delivery may differ from the agreed quantity.
3. Quality. Describe it in measurable terms: variety, size, freshness, shelf life left at delivery, packaging, labelling, traceability documents. A defect also exists when the goods lack properties that were expressly agreed (Article 479).
4. Delivery. Day and hour, place, who transports the goods and who pays for transport. Without an agreement, the seller delivers within a reasonable time (Article 470) at the seller's seat or residence (Article 471). The seller pays the cost of handing over the goods, and the buyer pays for taking them away and all costs after handover (Article 474). The risk of loss passes to the buyer at handover (Article 456). For perishable goods, also write who signs for receipt.
5. Time as an essential term. If the goods are of use to the buyer only until a certain day (an event, a season), say so in the contract. The contract then ends by law once that day passes, unless the buyer asks for delivery at once (Article 125). Otherwise the buyer must give the seller an additional period before cancelling (Article 126).
6. Price and price changes. Write the unit price and how long it applies. A clause that lets one party set the price alone is treated as if it had not been agreed (Article 466). The parties may agree a formula, for example one linked to a published market price, because ZOO leaves most matters to the contract (Article 20). Also agree how far in advance a price change must be announced, for example 15 days. Changed circumstances do not by themselves give a right to a higher price, only a right to cancel, and only under strict conditions (Article 133).
7. Payment. The payment term in days from the invoice or from delivery, the payment method and the account. Without an agreement, payment is due on handover (Article 516), and with successive deliveries, on receipt of each one (Article 518). Write what happens if the buyer pays late. Default interest is owed by law, whether or not the seller suffered any loss (Articles 277 and 278). Its rate is set by a separate law, so check it with a lawyer or in the Službeni glasnik RS (Official Gazette of Republika Srpska). A contractual penalty cannot be agreed for money obligations (Article 270, paragraph 3).
8. Complaints and returns. The deadline and form of a complaint (in writing, by e-mail, with a photo), who inspects the goods and what happens to goods that do not match the contract: replacement, price reduction or cancellation (Article 488). The buyer's notice must describe the defect and invite the seller to inspect the goods (Article 484). A hidden defect must be reported within eight days of discovery, or without delay in a commercial contract, or the buyer loses the right. The seller is liable for defects that appear within six months of delivery, unless a longer period is agreed (Article 482). These rules do not let the buyer return goods just because they were not sold. If you agree to take back unsold goods, write down the conditions.
9. Duration and termination. How long the contract runs and the notice period. If one delivery is missed, the other side may, within a reasonable time, cancel the contract for future deliveries only if the circumstances make it clear that later deliveries will not be made either (Article 129). So write down how many missed deliveries give a right to cancel.
10. Disputes. The law asks the parties to try to settle disputes by agreement or mediation (Article 19). You can name a contact person on each side and the competent court.

Tips

• Issue an invoice or delivery note for each delivery. The buyer is a business and will ask for one. For fiscal receipts see "Fiscalisation in Republika Srpska: who issues fiscal receipts, farmer exemptions", and for choosing a legal form see "Farm household, sole trader or company: which form for agritourism in RS".
• Signed order forms and delivery notes showing quantity and date are proof of delivery. Keep them for at least three years, which is the limitation period between legal entities. If the seller is a sole trader or a farm household, the general ten-year period may apply, so keep them longer.
• Show the contract to a lawyer before the first large delivery.
• For sales directly to guests see "Selling your own farm produce directly in Republika Srpska: what needs no registration", and for work with travel agencies see "Working with travel agencies: contract, allotment, commission, cancellations".

Laws and sources

• Zakon o obligacionim odnosima (Službeni list SFRJ 29/78, 39/85, 45/89 and 57/89; Službeni glasnik RS 17/93, 3/96, 39/03 and 74/04), entry in the register of laws of the Official Gazette of Republika Srpska. Check the current version in the Službeni glasnik RS.