Procured framework agreement means exclusive right for consultant
The Nordic Welfare Centre (NVC) concludes a framework agreement with a company for the delivery of services for a fixed period of time in accordance with the Public Procurement Act.
During the contract period, NVC purchases services covered by the framework agreement from suppliers other than the company with which the agreement was entered into. However, it considers that it has the exclusive right to provide the services and therefore brings an action against NVC.
The Supreme Court, after interpreting the framework agreement, finds that it confers the exclusive right to provide the services covered.
The Nordic Welfare Centre (NVC) is an institution within the Nordic Council of Ministers’ welfare sector.
NVC holds a contract for a framework agreement – that is, an agreement in which the terms are largely predetermined rather than negotiated between the parties – for the supply of services linked to, inter alia, marketing.
Idermark and Lagerwall Reklam AB (the consultant) win the procurement and subsequently enter into an agreement with NVC.
The agreement is concluded for a period of just under four years and entails an obligation for the consultant to deliver all the services requested by NVC during the contract period.
However, it does not provide any guarantees to the consultant regarding order volumes from NVC.
After some time, it appears that NVC ordered services of the same kind as those covered by the agreement from suppliers other than the consulting company.
Since the consultant is of the opinion that the contract entails an exclusive right for them to deliver the services in question, NVC’s conduct is considered a breach of contract.
It therefore brings an action against NVC in the District Court (TR) with a claim for damages for non-payment.
The question to be answered by TR is therefore whether the framework agreement confers an exclusive right on the consultancy to deliver the agreed services to NVC during the term of the contract.
No direct regulation of the issue can be found in the Public Procurement Act (LOU), which is why the court instead interprets the agreement as such.
As a preliminary point, TR states that contracts must primarily be interpreted in accordance with the will of the common party – that is to say, the meaning intended by the parties at the time of the conclusion of the agreement is given.
As the court does not consider that the evidence presented in the case indicates that there was any common will to the parties, the express content of the agreement is instead looked at.
The question of exclusive rights is not directly regulated in the text of the contract.
What the court notes, however, is that the agreement represents a clear imbalance to the consultant’s detriment if given the meaning advocated by NVC.
Such an interpretation would mean that NVC would unilaterally decide which services – if any – are to be purchased during the term of the contract.
A possible outcome would thus be that the consultant would not receive any orders at all from NVC.
According to TR, a contract to that effect would constitute an unreasonable regulation of the interests of the parties and it is therefore found that the framework agreement confers an exclusive right on the consultancy firm to provide the covered services.
Court of Appeal
The Court of Appeal (HovR) sees no obvious answer to the question of possible exclusive rights and therefore seeks guidance in the preparatory work for LOU.
According to the travaux préparatoires, such issues are primarily to be regulated in individual framework agreements.
The court therefore proceeds to interpret the agreement.
HovR points out that it is more difficult to establish a common will of the parties in the case of framework agreements, as there is hardly any scope for the parties to negotiate contractual terms.
The consultant has presented some evidence regarding the parties’ contact prior to the conclusion of the contract.
However, HovR does not consider the evidence to be strong enough to draw any firm conclusions regarding the joint will of the parties regarding the exclusive right to deliver the services.
Further, the court finds nothing to suggest existing industry practice or past practice between the parties that could indicate what usually applies in similar cases.
In summary, the court does not see the evidence in the case as strong enough to draw any conclusions as to whether the consultant had exclusive rights.
Since it is up to the consultant to prove that the agreement must be given the meaning they advocate, there is no exclusive right why NVC wins the case.
The Supreme Court
Nor does the Supreme Court find that the issue is directly regulated by law, which is why it instead interprets the agreement itself.
As a preliminary point, the Court argues that contracts can generally be assumed to serve a sensible function and constitute a reasonable regulation of the interests of both parties.
The right therefore takes that assumption as a starting point when interpreting the contract.
HD notes that the framework agreement entails far-reaching obligations and costly commitments for the consultant.
They are obliged to provide quotations for all the assignments requested by NVC, to keep their delivery capacity intact throughout the term of the contract and to ensure a stable and long-term relationship with regard to prices and deliveries.
This indicates, according to HD, that the agreement should be considered to imply exclusive rights as a different interpretation would be an unreasonable regulation of the parties’ interests.
In addition, the agreement contains a provision according to which NVC has the right to withdraw during the contract period with a notice period of twelve months.
The Court considers that such a provision would be meaningless if NVC were nevertheless free to purchase services from any supplier during the term of the contract.
Furthermore, the Court notes that, in the context of the procurement, NVC stated that framework agreements are to be concluded with only one supplier who shall have NVC as one of its highest priority customers throughout the duration of the contract.
Even such a wording suggests, according to the Court, that the agreement must be interpreted in the opinion of the consultant.
In summary, the HD finds that the preponderance of evidence suggests that the framework agreement entails exclusive rights, which is why the consultant wins the case.