In the procurement world, I have heard many times many colleagues talk about contracts as if they are the only thing that’s is proof of a relationship. it almost sounds like if there is no contract signed, there are no obligations. On paper, its sounds logical, right ? no contract no commitment. In reality, especially in Europe, this assumption can be very costly. Most legal systems don’t require a formal contract to establish one.
The Illusion of safety :”We never signed Anything”
It is possible for companies to work together for years without a formal legal framework. Orders are placed through purchase orders. Prices are negotiated informally. Deliveries happen. Invoices are paid.
No signature. No official contract. No problem. Until the relationship stops.
That is usually when the legal questions begin. The uncomfortable truth is this: in many jurisdictions, a commercial relationship itself can create legal obligations, even without a signed master agreement.
The French Example: Established Commercial Relationships
In France, commercial law recognizes the concept of an “established commercial relationship” under the French commercial code. this in itself is not a problem, the problems start when this relationship abruptly stops and the buyer can be legally liable for this termination without proper notice.
The commercial relationship can be established by the following :
- Placing purchase orders regularly
- Worked with a supplier for several years
- Built a predictable business flow
If you stopped ordering overnight without reasonable notice, the supplier may claim damages. this is not a theoretical case, French courts have regularly enforced this principal.
So in practice, your purchase orders, emails, and recurring collaboration may already form a contractual framework, even if you never signed a formal agreement.
How does sufficient notice look like ?
Sufficient notice is not just a polite warning before stopping orders — it is the time a court considers reasonably necessary for a supplier to reorganize without suffering brutal financial damage, and in industrial procurement that period can be much longer than buyers expect. It depends on the length of the relationship, the stability of volumes, the supplier’s level of dependency, the degree of exclusivity, and above all the technical and capital intensity of what is being purchased.
If you have been buying complex forged components with 15-month lead times, where the supplier has committed raw material, built dedicated tooling, reserved capacity and holds months of safety stock for you, you cannot realistically stop overnight without consequences; the supplier may be left with unused steel, work-in-progress, finished goods and idle machines. The same logic applies in electronics with 52-week semiconductor lead times and binding forecasts. In those environments, notice periods granted by courts can stretch over many months — sometimes close to a year or more — simply because that is the time required to unwind inventory, reallocate capacity, recover investments or find alternative customers.
From a procurement perspective, this changes everything: switching suppliers is no longer just a commercial decision driven by cost savings, it becomes a structured exit strategy that must take into account production cycles, inventory rotation, investment recovery and real economic dependency.
Procurement Risk Management: What Should Buyers Do?
Procurement risk management does not mean you cannot change suppliers, it means you must do it strategically and with full awareness of the legal and operational consequences. Long-term collaborations should be formalized in clear written agreements, with defined termination clauses and realistic notice periods.
Buyers should avoid creating informal expectations that could later be interpreted as commitments, regularly assess dependency risks on both sides, and plan supplier transitions with structured and reasonable notice. Procurement is not only about negotiating the best price; it is about managing relationships responsibly and understanding the legal exposure that can arise long before — and long after a contract is signed.