To ask Her Majesty's Government whether they require supermarkets and retail organisations to use supply contracts that are the same for United Kingdom and overseas suppliers; if so, whether they require such contracts to have the same break clauses and penalties; and, if not, whether they will propose such a system, at domestic or European level. [HL386]

In England, contracts are the free expression of the choice of the parties, which are then given effect by law. However, there are exceptions to this general rule—for example, provisions in the Race Relations Act 1976, Sale of Goods Act 1979, Late Payment of Commercial Debts (Interest) Act 1998.

Contracts with overseas companies would be drawn up under the appropriate national laws of contract and any business regulations that apply, and determining which country's legal/regulatory framework would take primacy would be a matter for the parties to the contract. The Government note that such legislation could be in conflict with the free movement principles of the European Union.

On UK retailers' contracts with domestic suppliers, the Competition Commission recently put in place a new Grocery Supply Code of Practice (GSCOP), which comes into effect in February 2010. This is part of the Competition Commission’s recommended remedies to address problems identified in the UK groceries market concerning large grocery retailers passing on excessive risks and unexpected costs to suppliers. The GSCOP, which applies to large UK grocery retailers, requires that retailers keep better records of contracts with suppliers and incorporate the code into supply agreements which will be made available in writing to their suppliers. The code aims to prevent retrospective changes to agreed terms of supply and will extend to agreements between retailers and those who deal with them direct.