The basics for a distribution agreement in the Netherlands are the same as in other countries. Only Dutch law has some aspects a manufacturer who distributes its product in Netherlands should deal with. At the outcome of a distribution contract, also in the Netherlands the goodwill acquired by a product can have a large value. Indeed, a distributor in the Netherlands that invests time and financial resources into the development, reputation, and marketing of a new product usually finds that his efforts are rewarded by increased goodwill toward the product, and thus increased sales turnover for the distributor.
Distributor’s obligations to deal with in Dutch distribution agreement
Some contractual provisions governing distributor responsibilities would include, for example, the distributor’s obligations to :
- maintain a competent and trained sales force in the Netherlands;
- maintain Dutch warehousing facilities and an inventory of products sufficient to meet anticipated customer demand;
- establish a promotional budget – often set as a percentage of gross sales — to be spent on advertising and sales promotion;
- use its best efforts to meet or exceed agreed sales targets;
- make an agreed level of “minimum purchases” of products from the exporter/manufacturer.
Exclusive distribution for the Netherlands or Europe?
Under Dutch law exclusive distributors benefit from protective legislation which, in certain circumstances, requires the exporter to make termination payments to the distributor for goodwill, unrecovered costs and investments, and lost profits. A U.S. exporter must therefore be aware of any costly compensation payments mandated by Dutch law, and will need to determine whether it can opt out from or limit such payments through choice of law clauses or other contractual provisions in a distribution agreement.
Compensation upon ending the distribution agreement
In order to protect the distributor from the eventual loss of goodwill, the distribution contract for the Netherlands (or Europe) can provide for payment of a compensating indemnity at the end of the contract. However, manufacturers are not always satisfied with such a solution, are consequently are not generally well disposed toward the insertion of such a clause in the distribution contract. It may however be advisable to insert a clause in the distribution contract with an arrangement in case the contract ends, especially if obligatory Dutch law is involved. By doing so the agreement limits the space for the Dutch Court to fill in issues the parties to the distribution agreement have not covered.
Dutch contract issue on distribution
it is always preferable for the distributor to envisage these various Dutch contract issues before accepting to contribute his time, efforts, and money in marketing costs so as to bring notoriety to a product or trademark unknown to the public in the Netherlands. Before committing yourself and investing one’s resources, it is often desirable to consult Dutch business lawyer specialized in distribution contract.
If you wish to enter into a Distribution Agreement, or require advice on any issues relating to distribution of goods and services in the Netherlands, please contact us