Distribution agreements under Dutch law
Category: Distribution agreements
Under Dutch law a distribution agreement is the contract an exporter has with a distributor.
The essential elements of distribution agreements under Dutch law are among others:
- the distributor’s territory
- exclusive or non-exclusive distribution rights of the distributor
- minimum performance requirements that the distributor must achieve
- products covered by the distribution agreement
- price and payment terms
- shipping terms; risk of loss
- term of the distribution agreement.
Dutch distribution law
In The Netherlands, there are generally three different kinds of distribution:
- exclusive distribution
- selective distribution, and
- franchise agreements.
Distribution can also take place through agents: this is a fundamentally different system.
Reasonableness and fairness under Dutch law
Dutch law does not provide for a binding legal system for the three mentioned distribution systems, but there is rather strict case law on some specific issues. The concept of “reasonableness and fairness” that permeates Dutch contract law, demands that parties to a contract treat each other in a reasonable and fair way.
This concept can be used to fill in possible issues that are not explicitly provided for in the contract. In extreme cases a court may even set aside a provision in a contract if the consequences of strict adherence to such provision are deemed to be unacceptable on the basis of reasonableness and fairness.
The Dutch Civil Code is based on the principle of contractual freedom: suppliers and distributors are only bound by the rules they agreed to between themselves. However, there are some mandatory rules regarding distribution agreements. Most of these derive from competition rules.
Termination of the distribution agreement
In most cases a distribution agreement will contain a termination clause that provides how (e.g. in writing) and when (e.g. after 5 years or after a termination period of 6 months) the distribution agreement can be terminated. In case of serious failure in the performance of the distribution agreement by one of the parties, the other party may have the right to terminate immediately, even if normally a termination period would be required.
Even if the distribution agreement is for an indefinite period and does not provide for termination, the distribution agreement may be terminated on the basis of Dutch case law. However, the supplier will be required to respect a reasonable termination period and grant compensation that is reasonable in view of the duration of the distribution agreement.
Therefore, if the supplier does not want to be confronted by surprises at the end of the relationship, he should make sure the distribution agreement contains rather detailed, strict but not unreasonable, provisions regarding termination.
Dutch lawyers specialized in distribution law in The Netherlands
The attorneys of our Dutch law firm, the Netherlands can assist you in all kinds of issues regarding distribution agreements when Dutch law applies. Regarding the complexity of Dutch distribution law, we advise you to contact a lawyer of Blenheim before entering into a distribution agreement. Our lawyers can assist you in assessing the distribution agreement based on Dutch law, draft a distribution agreement for you, assist you in the termination of the distribution agreement, et cetera.
If you have any queries with regard to distribution contracts inder Dutch law, please feel free to contact: