When the contractual object changes materially during the performance of a supply agreement. through substitution, specification drift, regulatory reclassification. Alternatively. Partial non-delivery. the jurisdictional framework that originally governed the contract may no longer map cleanly onto the dispute that actually arises. The key risk is not simply one of performance failure: it is that the court or arbitral tribunal seised of the case may apply a different legal system than the parties anticipated. Invalidate governing-law or forum clauses on the basis that the transformed subject matter falls outside their scope. Alternatively, apply mandatory rules that override party autonomy altogether. Identifying this risk early – ideally before signing and certainly before a change order is issued – is the foundation of effective supply-chain legal management.
Why Object Change Creates a Jurisdictional Problem
Jurisdiction in cross-border supply contracts is typically established in one of three ways: an express choice-of-court or arbitration clause. A statutory default rule tying jurisdiction to the place of delivery or the supplier's domicile. Alternatively, a treaty framework such as the Brussels I Regulation (Recast) within the EU. All three anchors are sensitive to changes in the contractual object.
Express forum clauses and scope ambiguity. A clause that identifies the courts of a particular seat or an arbitral institution usually does so by reference to "disputes arising under or in connection with this Agreement." If the object of the agreement changes substantially. for example. A contract for the supply of standard machine parts evolves mid-performance into a contract for bespoke software-embedded assemblies. a respondent may argue that the new obligations constitute a separate contract not covered by the original clause. Courts in multiple European jurisdictions have entertained such arguments, with outcomes that depend heavily on whether the change was documented as a variation, an addendum, or merely a course of conduct.
Statutory default rules and the place of delivery. Where no express clause exists, or where the clause is found unenforceable, most systems fall back on statutory default jurisdiction rules. Under EU rules, the relevant connecting factor for goods contracts is typically the place where the goods were or should have been delivered. If a change in specification also changes the agreed delivery location – as frequently occurs when alternative sourcing is arranged during disruption – the jurisdictional default shifts accordingly. A supplier based in one member state who agrees to reroute delivery to a warehouse in a different jurisdiction may inadvertently alter the court that has default jurisdiction over any resulting dispute.
Regulatory reclassification and mandatory-law overlay. A change in the physical or compositional nature of the supplied goods can trigger reclassification under customs tariff headings. Product safety directives. Alternatively, sector-specific regimes (medical devices, dual-use goods, food contact materials). Once a product moves into a regulated category, mandatory rules of the jurisdiction of importation or use attach automatically, regardless of the governing-law clause in the commercial contract. This is not strictly a jurisdiction question in the procedural sense. However, it has the same practical effect: the law that governs obligations. Liability caps. Additionally, remedy mechanisms may change without either party having formally amended the contract.
The Supply-Risk Dimension: When Does the Object Actually Change?
Supply risk in this context refers to the scenario where an intermediate or upstream disruption forces a substitution. a different raw material. An alternative component, a changed manufacturing site. Alternatively, a modified specification accepted under commercial pressure. From a legal standpoint, the critical question is whether the substitution constitutes a novation of the original object, a variation within the scope of the original agreement, or a breach giving rise to remedies.
Novation versus variation. A novation replaces one obligation with another and, in many legal systems, requires the consent of all parties and the extinction of the original obligation. If a substitution is characterised as a novation, the original jurisdiction clause may be treated as extinguished along with the original obligation. Leaving the parties without an agreed forum for the very dispute the substitution generated. A variation, by contrast, modifies the original obligation while leaving the contractual framework – including its forum clause – intact. The distinction is often fact-specific and turns on how the parties documented the change and what language they used.
Practical signals that a change is legally significant. Not every specification amendment creates a jurisdictional risk. The risk is elevated when: the changed goods would have been classified under a different HS code at the time of contracting. the amended specification brings the goods within a regulatory regime not applicable to the original goods. the delivery logistics change in a way that alters the statutory connecting factor. or the commercial value of the changed object significantly exceeds or falls short of the original. Suggesting that the economic deal itself has changed.
Force majeure and frustration as triggers. In many supply disruptions, the supplier invokes force majeure or argues that the original obligation is frustrated and replaced by a commercially reasonable substitute performance. Both doctrines interact with jurisdiction in a subtle way: if a court finds that the original contract was frustrated. It may treat any subsequent supply arrangement as a new contract, potentially without any of the original protective clauses. This is a particular risk in long-term framework agreements where the parties have become accustomed to operating informally.
How Different Legal Systems Handle This Risk
English law. Under English law, the courts apply a purposive approach to interpreting the scope of arbitration and jurisdiction clauses, generally construing them broadly unless the language is clearly limiting. The English courts have repeatedly held that a claim arising from a substituted or modified supply falls within a clause covering disputes "arising out of or in connection with" the agreement. Even if the specific goods were not contemplated at the time of signing. However, where the parties have entered into a materially different commercial arrangement without formal documentation, the court may find a separate implied contract governed by different terms.
Portuguese law and the EU framework. Portugal applies EU private international law rules for civil and commercial matters, principally the Brussels I Regulation (Recast) for jurisdiction and the Rome I Regulation for choice of law. Under Rome I, a change in the object of a supply contract does not automatically invalidate a governing-law clause. However. Mandatory provisions of the law of the country of delivery or the consumer's habitual residence can override it. Portuguese courts have jurisdiction by default when goods are delivered in Portugal. Additionally, this default applies even if the contract nominates a foreign court. If the clause is found to be unfair under consumer or SME protection rules. a consideration relevant where the buyer is a small or medium enterprise.
Civil law systems generally. Many continental European systems apply a doctrine analogous to the English concept of novation under their civil codes. Additionally. Are readier than common-law courts to treat a substantial object change as giving rise to a new contract. This increases the risk that the forum clause from the original agreement will be held inapplicable. Practitioners advising clients under French, German, Spanish, or Italian law should document every material change with an explicit confirmation that the original agreement – including its dispute resolution clause – continues to apply.
What to Check Before a Change Order Is Issued
Review the scope language of the forum clause. Confirm that the clause covers not only "this Agreement" but also "any variation, amendment, or addendum thereto." If it does not, redraft before signing the change order.
Confirm that the clause survives termination or substitution. Many standard-form supply contracts include a survival clause for dispute resolution provisions. Verify that it is present and that it covers the scenario of partial performance followed by substitution.
Document the change as a variation, not a new agreement. Where the parties intend to stay within the original contractual framework, the change order should state explicitly that it is a variation of the original agreement. That all terms of the original agreement remain in force except as expressly amended. Additionally, that the dispute resolution provisions in particular are unaffected.
Check for regulatory reclassification. Before accepting a substitute product, verify its classification under applicable customs, product safety, and sectoral regulatory regimes. A change in classification may trigger mandatory-law obligations in the jurisdiction of importation that cannot be overridden by contract.
Consider a confirmatory arbitration or jurisdiction agreement. Where the object change is significant enough to raise genuine doubt about whether the original clause covers the new situation. The parties can enter into a short standalone submission agreement confirming that any dispute arising from the varied performance will be resolved in the agreed forum under the agreed law. This eliminates the scope ambiguity without requiring a full renegotiation of the contract.
Map the delivery-location change. If alternative sourcing requires delivery to a different jurisdiction, assess whether that change shifts the statutory default jurisdiction. If it does, either update the forum clause or – at minimum – document the parties' agreement that the original clause remains operative.
Limitations of Pre-Contractual Due Diligence
Even well-drafted contracts cannot fully eliminate jurisdictional uncertainty when the object changes substantially. Courts retain the power to characterise arrangements based on their economic substance, not merely their formal documentation. Where a supply relationship has evolved over time through a series of undocumented amendments, a court assessing jurisdiction will look at the entire course of dealing, not just the written contract. This means that internal correspondence, purchase orders, delivery notes. Additionally. Informal exchanges can all become relevant to the jurisdictional analysis. and can cut against the party relying on the original clause if that party's own conduct suggests it treated the changed supply as a separate arrangement.
Additionally, the mandatory-law dimension cannot be contracted away. If the changed goods fall within a category subject to strict liability, mandatory warranty regimes, or sector-specific dispute resolution mechanisms in the jurisdiction of use, those rules apply regardless of what the contract says. Parties should treat the mandatory-law overlay as a fixed constraint and plan their commercial arrangements around it rather than assuming it can be excluded by choice-of-law drafting.
Practical Takeaways for Cross-Border Supply Chains
Audit your change-order process. Many supply-chain disruptions are managed operationally without legal input at the moment the change is agreed. Establishing a process that routes material object changes through legal review – specifically to check jurisdictional and governing-law implications – is one of the most cost-effective risk-management steps available.
Treat the forum clause as infrastructure, not boilerplate. The dispute resolution clause is the legal mechanism that determines where and how rights are vindicated. When the commercial deal changes, the clause needs to be re-examined with the same attention as price, specification, and delivery terms.
Build jurisdiction-survival language into master agreements. For ongoing supply relationships governed by a master agreement or framework contract. Include explicit language stating that the jurisdiction and governing-law provisions survive any variation in the object, quantity. Alternatively, specification of goods supplied under the agreement.
Seek specialist advice when classification changes. Regulatory reclassification is a specialist area intersecting trade law, product regulation, and private international law. It should not be assessed solely by the commercial or supply-chain team.
If you are facing a supply-object change in an existing cross-border contract and need an assessment of the jurisdictional implications. Contact us at info@ferrazwhitmore.com or visit our contacts page to arrange a consultation with our team.
Disclaimer: This article is provided for general informational purposes only and does not constitute legal advice. The analysis reflects general principles of private international law and cross-border supply regulation as they commonly apply in European jurisdictions; it is not a substitute for jurisdiction-specific legal advice tailored to the facts of your particular situation. No attorney-client relationship is created by reading or relying on this content. Ferraz & Whitmore assumes no liability for actions taken or not taken on the basis of this material. Readers should consult qualified legal counsel before making decisions in connection with specific contracts or disputes.