B2B agreements with foreign entities in Poland are an increasingly common form of cooperation between business operators and contractors from other countries. Concluding B2B agreements with foreign contractors is becoming common practice among entrepreneurs operating in industries such as IT, consulting, marketing and recruitment. This type of cooperation offers great potential for development, but also involves significant legal risks in B2B agreements.
We have extensive experience in analysing B2B agreements with foreign entities – we have reviewed and evaluated hundreds of such documents, which has allowed us to identify the most common problems and challenges that companies encounter in practice. This article is based on this knowledge and aims to help entrepreneurs avoid common mistakes and protect themselves against the legal risks arising from international business cooperation.
Of course, every B2B contract with a foreign entity is different, and its wording may vary significantly – these guidelines are general in nature and cannot replace an individual analysis of a specific document. Therefore, each contract should be considered separately, taking into account the specific nature of the cooperation and the applicable regulations in B2B contracts in Poland.
It is also worth remembering that there are no ‘non-negotiable’ agreements. Although foreign entities often present ready-made draft B2B contracts, this does not mean that the contractor must accept them unconditionally – lack of consent does not preclude the conclusion of a contract on more balanced terms. So how can you protect yourself in a B2B contract with a foreign company in Poland?
Excessive scope of the contractor’s liability in a B2B contract with a foreign company in Poland
One of the most serious problems that can be encountered in a B2B contract with a foreign entity in Poland is the excessive scope of the contractor’s liability.
Many B2B contracts with foreign companies are concluded on the basis of a sole proprietorship (in Polish: “JDG”), which according to Polish law does not have a separate legal personality or assets separate from those of the owner.
In practice, this means that when concluding a B2B contract with a foreign company, the person running a sole proprietorship (i.e. the entrepreneur) is liable for the debts of their company with all their assets, i.e. both those used in business activities and personal assets that are not used for business purposes. As a result, creditors have the right to pursue claims from both components of the assets, i.e. both the company’s assets used to conduct business activities and personal assets, such as real estate or savings in a private account. Furthermore, the entrepreneur’s liability is not limited in time, which means that it applies to both current liabilities and those that will arise in the future as a result of business activities.
Consequently, a B2B contract that does not limit the contractor’s liability to a specific amount or completely omits this issue may be particularly dangerous for the entrepreneur, exposing them to significant financial and legal risks.
Example contractual provision:
‘The Service Provider shall be liable for, and shall indemnify and hold harmless the Client against, all Losses resulting from any breach of this Agreement by the Service Provider or the Consultants, whether arising from a third-party claim against the Client or otherwise.’
An example of a solution limiting the contractor’s liability in a B2B contract concluded with a foreign company may be to limit this liability to a specific amount, for example, to the amount of the last three invoices issued by the contractor. This means that even if the damage exceeds the value of these invoices, the contractor will only be liable up to this fixed amount. However, according to Polish case law, it is crucial to describe such provisions precisely in the contract in order to avoid any doubts as to their interpretation and to ensure clarity of the rights and obligations of the parties.
Another solution is to conclude a civil liability insurance contract, the purpose of which is for the insurer to pay out funds in the event of damage covered by the policy. In this case, too, it is extremely important that the contract precisely defines the moment and scope in which civil liability insurance can be used, and that the policy reflects the scope of the contractor’s obligations and the content of the B2B contract with the international company.
Excessively broad right of termination by the principal in a B2B contract in Poland
Our practice shows that in B2B contracts, many foreign contractors reserve the right to unilaterally terminate the contract at any time, without cause, with a short notice period (e.g. 7 days) or even with immediate effect.
Example contractual provision:
“The Client may terminate this Agreement at any time, for any reason or no reason, with immediate effect, by providing written notice to the Service Provider.”
This type of contractual provision is extremely disadvantageous for the contractor, as it does not give them any guarantee of stability in the cooperation. Even if the B2B contract with a foreign company is performed properly, the contractor may be deprived of their source of income overnight. Importantly, in many cases – as in the provision analysed above – the client does not even have to justify their decision. It is sufficient for them to unilaterally terminate the contract and effectively deliver the notice of termination.
In such a situation, the contractor is not entitled to any claims, as the principal is acting in accordance with the provisions of the contract, in which the parties granted him full and unrestricted rights to terminate the contract. From a legal point of view, this solution may be formally correct, but from the point of view of the contractor’s interests, it is completely one-sided.
A practical way to limit the above legal risk is to include a provision in the B2B contract with a foreign company stipulating that the principal may terminate the contract only after a specified notice period, for example one month. Of course, this period may be set at will and may also be longer, e.g. 3 or 6 months – this is a matter of negotiation between the parties. In such a case, the contractor gains time to prepare for the termination of cooperation and to look for new orders.
It is also possible to consider limiting the right to immediate termination of the contract to specifically indicated circumstances – for example, cessation of services for a specified period of time. However, it is crucial to describe these circumstances precisely. According to Polish case law, general terms such as ‘gross breach of contract’ or ‘any breach of the provisions’ may lead to overinterpretation and, as a result, enable the principal to terminate the cooperation for a trivial reason.
Insufficient definition of the nature of the contract as a B2B contract rather than an employment contract
In practice, it happens that B2B contracts concluded with foreign contractors – although formally defined as civil law contracts (“umowa cywilnoprawna”) – in fact meet the conditions applicable to an employment relationship. According to Polish case law, the key factor is not how a given contract is titled, but its actual content and the manner in which the contractor performs their obligations.
A practical example from Polish case law:
“If a civil law contract is dominated by elements characteristic of an employment relationship, such a contract should be considered an employment contract. In this case, its name is irrelevant (Supreme Court of Poland judgment of 8 November 2018, III PK 110/17).”
If a B2B contract with a foreign entity provides for:
- performance of work under the supervision and management of a superior (often specified directly in the contract),
- organisational subordination,
- fixed working hours,
- a single, predetermined place of work,
- as well as days off corresponding to statutory days off or code regulations,
there is a risk that such a contract will be considered by the court as an employment relationship, regardless of its name or form. Such a classification may result in serious legal and tax consequences, including arrears in social security contributions and the need to compensate for employee benefits.
Example contractual provision:
“The Contractor shall perform their duties under the direct supervision and instruction of the Client’s appointed Manager. The Contractor agrees to comply with the internal organisational structure of the Client and follow the work schedule established by the Client, including fixed working hours from 9:00 a.m. to 5:00 p.m., Monday through Friday. The place of performance shall be the Client’s premises or such other place as the Client may designate.”
It is also worth bearing in mind that foreign entities are often unfamiliar with Polish labour law regulations and are unaware that certain contractual provisions may lead to a B2B relationship being considered an employment relationship.
Therefore, a B2B contract with an international company in Poland should include provisions that explicitly exclude (or minimise) characteristics typical of an employment relationship in Poland, such as subordination, the obligation to work at specific times and in a specific place, and the obligation to provide services in person. In relation to Polish labour law regulations, It is also important to emphasise the contractor’s independence, their responsibility for the manner in which the order is carried out, their right to provide services to other entities, and their lack of entitlement to holiday leave or other employee benefits.
Imprecise wording of a non-competition clause in a B2B contract with a foreign entity
Provisions concerning non-competition (so-called ‘non-compete clauses’) are often found in B2B contracts concluded with foreign contractors in Poland. The purpose of these clauses is to protect the interests of the principal, primarily by preventing the contractor from cooperating with competitors or conducting competitive activities on its own account in a given sector.
However, a fundamental problem arises when the non-competition clause is formulated too generally or imprecisely. This may lead to litigation if the client considers that the contractor has breached the non-competition clause. It may also prevent the contractor from providing services after the end of the cooperation if the contract contains an unclear and broad non-compete clause.
Example contractual provision:
‘The Contractor shall not engage, directly or indirectly, in any activity that may be considered competitive with the Client’s business, during the term of this Agreement and for a period of two years after its termination.’
The above provision is poorly worded and, as a result, is extremely disadvantageous to the contractor for several reasons:
- first of all, it does not specify the scope of competitive activity, and therefore it is unclear to the contractor what professional activities may be considered competitive with the client’s business,
- it does not specify the territory covered by the prohibition, for example by limiting it to the local or regional market, which means that the prohibition can be interpreted very broadly and the principal may consider it to be globally applicable,
- the duration of the non-compete clause after the end of the contract is too long, for example, it is valid for two years, which in practice may prevent the contractor from conducting business activity, especially if the contractor operates as a sole trader and has no alternative sources of income.
In order to protect the interests of the contractor, the non-competition clause in a B2B contract should be clarified. In particular, it seems that:
- specify the types of activities or specific entities covered by the non-competition clause, e.g. ‘entities operating in the field of mobile app development for e-commerce platforms’, ‘company XYZ ltd and ZXY ltd.’,
- limit the non-competition clause to a specific geographical area, e.g. ‘within the territory of the European Union’,
- shorten the duration of the clause after the end of the contract, e.g. to 3 or 6 months,
- reserve remuneration for the non-competition clause applicable after the termination of the contract – in accordance with the case law of many countries (including Poland), the application of the non-competition clause after the termination of the legal relationship should be linked to appropriate compensation.
Imprecise definition of the scope of work in a B2B contract concluded with a foreign entity
Another common problem we encounter when analysing B2B contracts with foreign companies is the imprecise definition of the scope of work. This refers to overly general or vague wording, which means that the contractor does not fully understand what specific tasks they will be performing during the cooperation.
Such provisions carry serious legal risks. First of all, the principal may commission services that go beyond the actual scope of the B2B contract. In turn, if the contractor refuses to perform such additional services or performs them improperly, the client may terminate the contract, arguing that the contractor is not fulfilling its terms.
This situation is particularly risky when the client has broad rights to terminate the contract without major restrictions.
Furthermore, an imprecise scope of work makes it difficult to properly settle the contract and may give rise to disputes regarding the amount of remuneration for the services provided. The contractor may be obliged to perform additional activities without adequate compensation, which reduces the profitability of the cooperation.
Example contractual provision:
‘The Service Provider shall perform all IT-related tasks and duties reasonably requested by the Customer during the term of this Agreement, including, but not limited to, software development, system maintenance, troubleshooting, and any other tasks deemed necessary by the Customer.’
The best way to avoid problems related to an unclear scope of work is to describe and specify the contractor’s obligations in as much detail as possible. This is often done by attaching an appendix to the agreement that specifies the scope of services or projects and can be negotiated independently of the main content of the agreement. Such approach is widely recognized by Polish case law.
It is crucial for the contractor to be clear about the specific tasks they are expected to perform. Of course, it is impossible to describe every element of the cooperation in detail, especially in dynamic industries such as IT, so it is important to eliminate any possible ambiguities and define the rules for introducing possible changes to the scope of work.
Overly broad prohibition on disclosure of confidential information (NDA / ‘non-disclosure clause’)
In B2B contracts concluded with foreign companies, the contractor very often undertakes not to disclose any information related to the contract. In practice, however, the scope of such a clause is sometimes too broad and incompatible with the realities of running a business.
For example, the contractor should be able to provide their accountant with invoices received from the client, and thus information about their remuneration. An overly strict interpretation of confidentiality provisions could lead to an absurd situation in which the contractor cannot even provide the documents necessary for tax settlement.
A similar situation applies to legal advisers. If a party has concluded a contract or plans to conclude an annex amending its content, it should have the right to make the document available to its lawyer in order to obtain professional advice.
Example contractual provision:
“The Contractor undertakes to maintain strict confidentiality and not to disclose to any third party any information related in any way to this Agreement, including, but not limited to, its existence, terms and conditions, any payments made under it, and any business, technical, financial or other information received from the Client, whether in written, oral or other form.”
The solution to this problem is, first and foremost, to limit the scope of the confidentiality clause so that it does not cover all information without exception, but only that which is truly confidential (e.g. technological data, commercial know-how, trade secrets). Furthermore, an exception should be made for third parties to whom disclosure of information is necessary for the performance of legal obligations or the provision of services to the party (e.g. accountant, legal advisor). These persons should be bound by confidentiality obligations, which may arise from a separate agreement or a statutory obligation.
Conditioning payment of remuneration on payment by the end contractor in B2B contracts with foreign companies
Another problem that often arises in contractual practice is conditioning payment of remuneration on payment by the end contractor (the so-called ‘pay-if-paid’ or ‘pay-when-paid’ clause). Although it is used in commercial transactions, especially in international relations or subcontracting agreements, it can lead to significant legal risks for the contractor.
Example contractual provision:
“The Customer shall not be obliged to pay the Contractor any amount under this Agreement until it has received full payment from its customer for the relevant part of the services. In the event that the customer fails to make such payment, the Contractor acknowledges and agrees that it shall have no claims against the Customer under this Agreement.”
First of all, when such a clause is included in a B2B contract with a foreign company, the contractor has no legal or factual tools to expedite payment from the client’s customer, yet their remuneration depends on this payment. This certainly puts the contractor at a disadvantage.
What is more, for the contractor, this constitutes a transfer of the risk of the counterparty’s insolvency – the contractor, who has performed its service properly, remains without remuneration simply because the principal has not received payment from its customer. In practice, this means that the risk of a third party’s insolvency is borne by the contractor, even though they have no influence over it.
In a B2B contract with a foreign entity, we recommend completely eliminating clauses that make payment of remuneration dependent on the principal receiving payment from the end customer. However, if it is not possible to delete them completely, it is worth at least limiting their effects by specifying a maximum period after which the contractor will acquire an unconditional right to payment.
No regulation of days off in B2B contracts with foreign contractors
Many B2B contracts concluded with foreign companies do not contain any references to days off from providing services – both in the context of holidays and statutory days off from work applicable in Poland. In our experience, clients often report that the contractor has verbally agreed to grant such days off, but in practice these remain only informal declarations that are not reflected in the content of the contract.
This situation may be disadvantageous for the contractor, especially in the case of long-term contracts, as the lack of clearly defined rules regarding breaks in the provision of services may lead to excessive workload and uncertainty as to the right to rest.
However, it should be remembered that a B2B contract with a foreign company cannot meet the conditions of an employment contract, which is why provisions regarding days off should be formulated with great caution. In practice, it is advisable to avoid terminology taken from the Polish Labour Code, such as ‘holiday’, and to construct provisions in such a way that they differ as much as possible from labour law regulations.
Summary
What to look for in a B2B contract with a foreign entity in Poland? In order to effectively protect their interests, entrepreneurs should carefully analyse and negotiate the terms of contracts, striving for clear, precise and balanced regulation of specific issues. It is also worth remembering that a B2B contract should not be structured like an employment contract, and its provisions should emphasise the independence of the contractor.
Each contract should be considered individually, adapting its provisions to the specific nature of the cooperation and the applicable law. If you have any doubts or need to protect your rights, we recommend seeking professional legal assistance to help you avoid common mistakes and limit legal risks.
In what language should a B2B contract between a Polish entity and a foreign entity be drawn up?
Most often, B2B contracts with foreign entities are drawn up in English, as it is commonly used in international trade. In many cases, the agreement is also drawn up in two language versions. In this situation, however, it is necessary to determine which language version is binding in the event of a discrepancy in the interpretation of the provisions of the agreement or a dispute as to its performance. For example, it can be specified that the English version will prevail, even if a translation into Polish has also been prepared.
Can a foreign contractor ‘impose’ the law of their country as the binding law for the interpretation of a B2B contract?
A foreign contractor may try to ‘impose’ the law of their country as the binding law for the interpretation of the contract. However, this does not mean that it is always worth agreeing to this. Our experience shows that in many cases we have managed to negotiate Polish law as the binding law. The choice of foreign law often complicates the pursuit of claims in Poland and can significantly increase legal costs.
How to secure payments from a foreign contractor in a B2B contract?
A popular mechanism is milestone payments, i.e. settlements after completion of specific stages of the project. In addition, the contract may provide for:
– the right to suspend the performance of services in the event of a delay in payment,
– the possibility of terminating the contract if the contractor is in arrears with payment for a specified period of time,
– contractual penalties for late payment or bank guarantees ensuring the fulfilment of obligations.
Such provisions minimise financial risk and provide greater control over cash flow.
Can contractual liability be limited in a B2B contract with a foreign company?
Yes, in most cases it is not only possible, but even necessary. However, it should be borne in mind that such a provision should be explicitly included in the contract. Popular clauses limit liability to the value of remuneration (e.g. obtained over a period of several months) or exclude liability for lost profits.
What should you do if a foreign contractor requires very broad liability in a B2B contract?
In this situation, apart from making a business decision on whether to enter into the contract at all, the scope of liability in the B2B contract should be clarified. It is also possible to cover the contract with a civil liability insurance policy, as well as to indicate specific cases excluding liability or introducing mechanisms to minimise risk (e.g. service acceptance procedures, quality verification, phased payments).
How to regulate subcontracting in a B2B contract with a foreign contractor?
The contract should clearly specify whether the contractor has the right to use subcontractors, to what extent, and whether the client’s consent is required. It is also important to establish rules of liability for work performed by subcontractors.
