These standardized management contracts for the supply and receipt of electricity or natural gas offer a structure similar to that of master`s contracts for OVER-the-counter derivatives published by the International Swaps and Derivatives Association Inc. (ISDA). The agreements and the EFET library associated with it, with additional documentation, are currently the industrial standards applied throughout Europe to the trade in physical energy and gas. EFET has commissioned legal opinions on the applicability of general power and gas agreements for many European countries, which are available to EFET members. The applicability of the general terms of sale of EFET in each country may vary according to local laws and customs. A list of countries and the cost of obtaining such legal advice are available on the EFET website (www.efet.org). The EFET agreement is a compensation-master contract that can cover an unlimited number of trades defined as „individual contracts.“ Each contract includes the economic conditions of each trade (for example. B start and end date, delivery plans, contract capacity and quantity, price and total cost). In any event, the general agreements set out the concept of a single agreement on the document at an early stage (point 1.1), which means that all transactions are interdependent and that a failure in a transaction is considered a default for all transactions covered by the agreement, as well as the promotion of regulatory measures allowing the free flow of electricity and gas in a balanced risk environment. EFET has also established standard legal documents for the energy trade. The main benefits of using these documents are a reduction in trading time when few or no changes are made and the standardization of documentation in this market. The general agreement contains a number of standard conditions for delivery conditions, payments, delivery defects and completion. These conditions apply to any underlying transaction.
Usually, buyers and sellers who use the EFET agreement develop their own „home view“ on the terms of their election paper, based on their market position. One of the most important issues to consider in developing such a position and in negotiations with counterparties is the credit risk and credit support that the parties are willing to accept or demand. Parties who do not have a credit or guarantee of a parent company are generally required to use commercial banks. Changes to the standard text should be made to the election newspaper and not to the main part of the general agreement. The general agreement consists of 23 sections and an electoral ballot (similar to an ISDA master-convention plan) in which the agreed complements and amendments to this general agreement are made.