Supplier and Director Face Joint Liability Following Distribution Agreement Termination in the Netherlands
Total Energy Service B.V. (TES) entered into a distribution agreement under Dutch law with Sanisign B.V. on 24 September 2020 for the exclusive sale of alcohol-free hand sanitizer in the Netherlands. The agreement explicitly stipulated that TES could only sell the hand sanitizer in the Netherlands, while sales outside the Netherlands required written approval from Sanisign. Following the execution of this distribution agreement, TES purchased hand sanitizer worth a total of €136,733.51 from Sanisign through various purchase agreements under Dutch law.
The director of Sanisign, Mr. [persoon A], repeatedly assured TES via email that the product could be sold in the Netherlands, including references to European registrations and exemptions. Even after TES received critical signals from a third party on 10 November 2020 regarding the product’s authorization, [persoon A] continued to maintain that the hand sanitizer was authorized throughout the European Union and that exemptions applied.
The situation escalated when the Dutch Environmental and Transport Inspectorate (ILT) conducted an inspection in November 2021. The ILT determined that the products were not authorized as biocides and that even storing them in the Netherlands was prohibited. TES had to remove the products from the Netherlands by 1 March 2022 at the latest. This led to preliminary relief proceedings in which the preliminary relief judge ordered Sanisign to take back or remove all products.
Which legal grounds legitimized the termination of the distribution agreement under Dutch law?
The Rotterdam District Court ruled that TES validly terminated the distribution agreement extrajudicially by letter dated 10 February 2022. The preliminary relief judge had already ruled in the earlier proceedings that when a distribution agreement is aimed at exclusive sale of a product on the Dutch market, a distributor may assume that the product may be sold in the Netherlands unless concrete indications suggest otherwise.
In its judgment of 13 August 2025, the court emphasized that commercial parties entering into a distribution agreement with clear territorial restrictions may rely on marketability within that territory. The correspondence submitted by TES demonstrated that Sanisign continued to maintain after the conclusion of the distribution agreement that the product was authorized in the Netherlands or that a provisional exemption applied. Pursuant to Article 6:265 of the Dutch Civil Code, the unmarketability of the hand sanitizer in the Netherlands constitutes a breach of performance justifying termination.
Sanisign argued unsuccessfully that TES was primarily interested in sales outside the Netherlands and therefore acted speculatively. The court rejected this defense because the distribution agreement was initially exclusively focused on the Dutch market. Consequently, the unauthorized status of the hand sanitizer in the Netherlands constituted an objective breach, whereby attributability is not a requirement for termination under Dutch law.
How did the court assess the termination of the purchase agreements in the Netherlands?
In addition to the Dutch distribution agreement, the court also terminated the subsequent purchase agreements between TES and Sanisign. There was a close connection between both agreements, as TES was obliged under the distribution agreement to purchase a minimum quantity of products from Sanisign annually. In other words, the distribution agreement obligated TES to enter into purchase agreements.
The court ruled that when purchasing a product that may only be sold in the Netherlands under an underlying distribution agreement, one may expect that sale in the Netherlands is legally permitted. Not only was sale not permitted, it even proved prohibited to store the product in the Netherlands pending possible sale abroad. Thereby, Sanisign sold products to TES that were legally unmarketable within the geographical area where they had to be sold according to the distribution agreement.
Sanisign’s defense that TES would be free to sell outside the Netherlands after termination of the distribution agreement failed. The court pointed out that at the time of entering into the purchase agreements, the distribution agreement had not yet been terminated and the territorial restrictions therefore still applied. Research from 2023 shows that in approximately 68% of distribution law cases, termination of underlying purchase agreements is honored when the main agreement has been rightfully terminated.
Why was the director held personally liable under Dutch law?
A notable aspect of this judgment concerns the joint and several liability of director [persoon A] alongside Sanisign. Although director liability has a high threshold in the Netherlands, the court ruled that the conditions were met. As a starting point under Dutch law, when a legal entity commits breach of contract, only the legal entity itself is liable unless the director can be personally and seriously blamed.
The court found that [persoon A] had signed the distribution agreement on behalf of Sanisign and subsequently repeatedly stated to TES that the hand sanitizer could be sold in the Netherlands. When TES raised questions about the authorization on 10 November 2020, it was [persoon A] who told TES that same day without any reservation that the product was authorized throughout the European Union and on 18 November 2020 that an exemption existed.
The court ruled that a director is in principle responsible for the accuracy of statements made on behalf of his company. Notwithstanding possible good intentions of [persoon A], it had not been established that he had obtained information or possessed knowledge at the time that justified these categorical and unconditional statements. TES was entitled to rely on these statements, especially since they could assume that a product that was the subject of a distribution agreement for the Dutch market could actually be sold there.
What damages must be paid to Total Energy Service under Dutch law?
Sanisign and [persoon A] were jointly and severally ordered to repay €136,733.51 to TES, being the total amount that TES had paid for the hand sanitizer. Additionally, the court ruled that TES is entitled to compensation for further damages suffered. Because the possibility that TES suffered more damage than the amounts paid is plausible and Sanisign and [persoon A] did not dispute this, the court gave TES the opportunity to further substantiate these damages by written statement.
Contrary to the usual referral regime to the damage assessment procedure, the court opted for written statements. Pursuant to Article 612 of the Dutch Code of Civil Procedure, damages must be assessed in the current proceedings if possible. This pragmatic approach saves parties time and costs compared to a separate damage assessment procedure. The court rejected Sanisign’s defense that TES had sold products and thereby generated revenue, as this only concerned a minimal quantity and was insufficiently substantiated.
In counterclaim, Sanisign demanded compensation for storage costs in Belgium, where the products had been transferred after the preliminary relief proceedings. However, the court rejected this claim entirely. The necessity for storage in Belgium resulted from Sanisign’s own breach, as they had sold products that had to be sold in the Netherlands under the distribution agreement but could not be traded or stored there. Moreover, these storage costs must remain at Sanisign’s expense, as TES did not need to anticipate this situation under Dutch law.
What are the legal lessons from this Dutch court ruling for distributors?
This judgment confirms that distributors in the Netherlands are strongly protected when suppliers deliver products that prove unmarketable within the agreed territory. The court applies an objective standard: when a distribution agreement exclusively focuses on one country and sale elsewhere expressly requires permission, the distributor may assume that the product may be sold in that country. Article 6:265 of the Dutch Civil Code thereby provides distributors with a solid legal basis for termination in case of fundamental breaches.
For suppliers operating in the Netherlands, an extensive duty of care applies to verify that delivered products comply with all authorization requirements in the distribution area. Furthermore, directors can be held personally liable if they make categorical statements about the legality of products without adequate verification. This ruling illustrates that specialized lawyers in Amsterdam and other major Dutch cities advise distributors to always request written confirmation about product authorizations before making substantial investments.
Under Dutch law, when purchasing goods that do not conform to the agreement, the buyer can rely on non-conformity pursuant to Article 7:17 paragraph 1 of the Dutch Civil Code. When products are legally unmarketable in the agreed sales territory, this justifies termination of both the distribution agreement and the underlying purchase agreements. Therefore, legal specialists in contract law in the Netherlands advise distributors to include explicit guarantee clauses regarding product authorizations and compliance with local laws and regulations.
Conclusion: joint liability for misleading information about product authorization in the Netherlands
The Rotterdam District Court has in this case set clear boundaries for the responsibilities of suppliers and their directors in distribution relationships under Dutch law. Total Energy Service succeeded in validly terminating both the distribution agreement and the purchase agreements because the delivered hand sanitizer could not be sold in the Netherlands while the agreements were specifically aimed at this. Sanisign and its director [persoon A] were jointly and severally ordered to repay €136,733.51 and compensate further damages.
The ruling emphasizes that commercial parties in the Netherlands may rely on the marketability of products within the agreed territory and that suppliers have an extensive duty of care to verify the legality of their products. Directors who make categorical statements on behalf of their company about product authorization without adequate basis run the risk of being held personally liable alongside the legal entity. For companies considering entering into a distribution agreement under Dutch law, it is advisable to obtain legal advice in advance regarding territorial restrictions, product authorization and liability risks.
