1. Overall
The rules on changes etc. can be found in Chapter IX of the Standard Contracts “Amendments, etc.”.
We can presumably establish that in this chapter we find most of the inequalities mellon NS 8411 and NS 8412.
We have dealt with the provisions common to both standards in an article located here The theme is cancellation and hardship.
The provisions that are the subject of this article, namely changes, buyer's failure to participate and prolonged interruption are not found in NS 8411.
Of the three topics, it is the rules on changes that are most comprehensive. The rules on amendments to NS 8412 are by far identical to the amendment rules in the standards of contract law at both the upper and subordinate levels. Accordingly, anyone familiar with the change regime in, for example, NS 8407 or NS 8417 will understand relatively easily the amendment provisions of NS 8412.
2. Overview of the rules
3. The right to impose changes
Until the product is delivered (possibly handed over after assembly), the buyer can “order the seller to make changes”, see paragraph 37.1, first paragraph.
An order for amendments may give the seller a claim for an extension of the deadline, cf. Clauses 37.4 and 11.4.1.1 (a), and a claim for additional compensation, cf. Clause 37.4.
It follows from paragraph 37.1, last paragraph that seller claims require “advance or guarantee” as a result of the change. A natural linguistic understanding of the term “advance” implies that the seller is not obliged to implement the modification works once the advance has been paid. The same applies in cases where the buyer has to provide a guarantee. This is also in line with paragraph 32.2, last paragraph, which states that the seller is not obliged to start design or manufacture until the agreed security has been provided.
The buyer's right to impose changes is limited in clause 37.1, second paragraph. First, the seller is not obliged to make changes if the nature of the performance is changed “to a substantial degree”. Secondly, the seller is not obliged if the change becomes “unduly burdensome (...) to perform”.
Since the seller can demand both an extension of the deadline and additional compensation, the seller's right to refuse will probably not be used very often. Professional, commercial actors usually have a desire to deliver to their customers, and this usually goes a long way.
The contract law standards have a corresponding provision that limits the right of the builder or the main/general contractor to impose changes on his contract counterpart. In these standards, the restriction is formulated by the fact that an amendment “must be in the context of the contract and not be of a substantially different nature from the originally contracted work”, see NS 8407 paragraph 31.1, third paragraph. We have written about changes in contract conditions and the article may be of interest in this context. The article can be read here.
Often, a contractor's contract work will involve several subjects, while a seller of a product to be manufactured normally practices one trade.
We will therefore assume that the list for opposing a change order from a buyer will be lower than is the case in a construction contract where the builder imposes a change on a general contractor.
If, in a manufacturing purchase, the seller has not had the need to contract other disciplines to manufacture the agreed product, and so obtain an order for a modification that requires one or more subcontractors from other disciplines, it is easy to imagine that the nature of the performance will be changed”to a significant degree”. In this case, the seller may object to the change.
However, this must depend on a concrete assessment. If the public law requirements for a product under manufacture change, the purchaser has an unconditional right to require adaptations, see paragraph 37.1, third paragraph.
The provision refers to NS 8412 paragraph 18.5.2 which is dealt with in a joint article on “Other requirements for the subject matter of the contract” that exists here.
4th. Change orders
In the interests of good order and tidiness, it is important that the buyer is clear to the seller that he wants to make changes.
In construction projects, one must realize that this is perhaps where the most conflicts arise between the parties. This means that the contracting authority fails to issue an amendment order to its contracting party, which then applies the rules known as irregular change orders. Such rules are also introduced in NS 8412 and we shall immediately return to these in paragraph 5.
This is stated in order to emphasize the importance that the buyer — when he has agreed that he wants a change — follows the rules on modification orders in NS 8412 paragraph 37.2.
When the buyer wishes to have something changed in his order for a manufacturing purchase, this shall be done in the form of a change order, and it shall be stated what the change is based on, cf. paragraph 37.2 first paragraph.
In the second paragraph, reference is made to NS 8412 paragraph 4.2 on notifications. We have written an article about this provision that exists here.
However, the point is that a change order should be in writing, it is sent electronically (e-mail) and it should be sent from the buyer's representative and to the seller's representative.
5. Irregular change orders
5.1 Seller's Activity Obligation
Irregular change orders occur when the seller believes that a change has been imposed by the buyer, or a buyer is responsible for, and without this having occurred in the form of a formal change order.
This can happen, for example, if the buyer submits sells a new or changed project basis without specifying whether there are changes, and if so, where they occur, and then the seller quality ensures the new one against the previous project basis.
When or if the seller discovers that changes have been made, the seller must notify the buyer in accordance with the provisions of NS 8412 paragraph 37.3 that he considers the new project basis to entail a change. Such notice shall satisfy the terms of NS 8412 clause 4.2, ref also what we wrote about clause 4.2 just above.
If the seller wants to claim that something is an irregular change and notify the buyer about it, then it is essential that the electronic notification is sent to the buyer's representative “without undue residence”.
If the seller fails to comply with the deadline, the seller risks losing his right to invoke the relationship as a change, cf. paragraph 37.3m, second paragraph. In this case, the seller must perform the works as if they were part of the original contract works, and without the possibility of claiming a deadline extension or additional remuneration.
We have written about what lies in the term “without undue residence” in the article “Right to deadline extension” which is also contained in the collection for special provisions of NS 8412. The article can be read here.
In short, some time is accepted to check if there is actually a change. In the example of the new project basis, time spent comparing new with old would represent a grounded stay. However, this has to happen fairly quickly after you get a new project basis, and you do not go on vacation a few weeks before checking. In contract terms, it is often said that it can take days, but not weeks or months before you notify.
Until the court clarifies, we believe that the most sensible thing to do is to apply the same practice in matters relating to the purchase of manufactured products, as in construction contracts with similar, restrictive deadlines.
However, NS 8412 is not as strict towards the seller as the construction contracts are towards the contractor.
It is clear from the last sentence of paragraph 37.3, second paragraph, that the seller can save himself at a deadline if he can be deemed to be the buyer “understood or had to understand that the injunction implied a change to the seller's contractual obligation”.
This safety valve is not included in the construction contracts, but we would like to emphasize that it is the seller who has the burden of proof that the buyer actually “understood or had to understand”. Such evidence can be demanding and we therefore recommend that you secure yourself and send the notification within a few days.
5.2 Buyer's Activity Obligation
When the seller's notice is received, it follows from paragraph 37.3, third paragraph that the buyer must respond to the seller “without undue residence”.
The content of the term “without undue residence” is the same for buyer, as for seller.
The consequence is also the same. If the buyer does not respond within the deadline, the seller's opinion that there is a change is taken as the basis.
In its response, the buyer must either accept that there is a change and then issue an amendment (letter a) or waive the injunction (letter c).
In contract situations, it is very often the case that the client refuses. One disagrees that this “something” represents a change. In this case, this must be communicated to the seller.
In this regard, note the last paragraph of NS 8412 paragraph 37.3 where it is stated that the seller is obliged to perform the work that the alleged change triggers. In other words, the seller receives a so-called “jumping obligation”, which we also know from the contract law, but the seller may require the buyer to provide security before the work is carried out. In that case, the amount of the security shall be set at a level which the change is “likely” to trigger in terms of additional compensation.
6. Remuneration adjustment and deadline extension
We have already mentioned several times that changes may give the seller the right to an extension of the deadline and additional compensation, respectively.
The provisions on this can be found in paragraph 37.4.
For the record, mention is made that a causal relationship is required between the amendment and the claims made. It is not without reason that a change has such a consequence. This needs to be considered concretely. With that said, all experience shows that the earlier changes are decided, the less likely it is that the change will require a longer manufacturing time, and vice versa.
When it comes to remuneration, most people would like to agree on a fixed price, but if they fail to do so, the modification works must be carried out at the expense of the documentation requirements that this entails, cf. NS 8412, paragraph 37.4, first paragraph.
Not all changes entail additional work. In some cases, a change may also result in the termination of works. If this is the case, the savings will benefit the buyer by reducing the purchase price accordingly, cf. NS 8412 paragraph 37.4, second paragraph.
7. Failure of participation and other circumstances on the part of the buyer
In purchases regulated by NS 8412, the seller will be dependent on the buyer to fulfill his obligations, and the seller will also be prevented as a result of other circumstances of the buyer's risk.
At the same time, the seller will be able to incur liability in case of delayed delivery of any day mulch where agreed.
Accordingly, it is important to have rules that, in part, give the buyer an incentive not to unnecessarily hinder or delay the seller, and similarly safeguard the seller's interests if he is hindered by circumstances for which the buyer has responsibility or risk.
These rules are found in NS 8412, paragraph 38, and it follows from the first paragraph that the seller may demand both an extension of the deadline and additional compensation to the extent that the buyer's failure to participate causes delay or additional costs.
It is important to note paragraph 38, second paragraph, which imposes on the seller the same type of notification obligation as in the case of irregular changes. The consequences of failure or late notification are that the seller cannot invoke the buyer's complicity failure at all. Except that the buyer understood or had to understand that the relationship involved a failure of complicity.
8. Prolonged interruption
If the seller's fulfillment is hindered by a force majeur event, and the obstacle was for such a long time that “the conditions of the agreement are substantially altered”, each party may claim relief from the agreement, cf. NS 8412, paragraph 40, first paragraph.
We have written about force majeur in a joint article on “hardship” that exists here.
It is worth noting that neither party can claim compensation from the other in such a situation, cf. NS 8412 paragraph 40, second paragraph.
