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Distribution law firm in the Netherlands

Distribution contracts in Netherlands law

Are you looking for a Distribution law firm in the Netherlands? Do you have the intention to enter into a distribution agreement in the Netherlands?

A distribution agreement under Dutch law is defined as a commercial agreement under which a supplier or manufacturer of products agrees that an independent third party will market and sell these products. The distributor buys the products on its own account and trades under its own name.

It’s important to understand the legal requirements and obligations involved. While there are no specific provisions for distribution agreements in the Dutch Civil Code, they are primarily assessed on the principles of reasonableness and fairness. This means that parties are free to agree on the scope of the agreement, but there are statutory limits based on EU Competition law.

When forming a distribution agreement in the Netherlands, it’s crucial to ensure that both parties fully understand their obligations and responsibilities under Dutch law. This includes setting out clear terms for payment and remuneration, as well as establishing reasonable notice periods for termination of the agreement. Additionally, it’s important to avoid common pitfalls when closing a distribution agreement, such as failing to provide sufficient information or limiting the distributor’s ability to sell products within a certain geographic region or customer base.

By understanding these key factors, you can ensure that your Dutch distribution agreement is fair, reasonable, and legally binding under Dutch law. Our Distribution law firm in the Netherlands has the experience and specialist knowledge that you may require in the field of distribution and will gladly set out the most important aspects under Dutch law.

What Choices Do Suppliers Have for Distribution in the Netherlands?

Suppliers enjoy a wide latitude in the Netherlands when it comes to forming business relationships. They can opt for distribution agreements, where the distributor independently resells goods, or choose commercial agency agreements, appointing sales representatives. Franchising, private label agreements, trademark licensing, and joint ventures are also popular choices.

How are Distribution Relationships Regulated?

In the Netherlands, general contract laws and case law oversee distribution agreements. Notably, EU Directive 86/653/EEC is pivotal for commercial agents, mandating rules such as minimum notice periods and goodwill indemnity upon contract termination. The Dutch Franchise Act, effective from 2021, imposes specific conditions for franchise relationships.

What are the Rules for Terminating Distribution Agreements?

Termination rights can be complex. For fixed-term agreements, premature termination is exceptional and subject to conditions like mutual consent, fairness, or unforeseen circumstances. Indefinite-term agreements, on the other hand, are inherently more flexible but may require serious grounds or compensation for termination.

Notice periods vary with the contract duration, extending from three months to two years. For commercial agency agreements, notice periods range from four to six months, depending on the length of the agreement. The essence is to allow the other party adequate time to seek alternatives.

Is Compensation Required on Termination Without Cause?

Regular termination of distribution agreements usually carries no compensation rights for the distributor. Exceptions occur if investments were made based on an expectation of continuation. If a commercial agency agreement is terminated, the agent may be entitled to a goodwill indemnity, with additional compensation if the termination disregards an agreed notice period.

Can Distribution Rights or Ownership be Restricted from Transfer?

Non-transferability clauses are generally upheld in Dutch courts, making them a reliable tool for suppliers to control the distribution chain.

In essence, Dutch law provides substantial freedom but also safeguards to maintain a balanced and fair business environment for all parties involved in distribution relationships.

Key Takeaways Regarding Dutch distribution law

  • There are no specific formal requirements for concluding Distribution Agreements in the Netherlands, but it is recommended to have a written agreement for evidentiary purposes.
  • The principles of reasonableness and fairness are applicable to Dutch Distribution Agreements, even if the parties have entered into a written agreement.
  • The Distributor’s freedom to agree on the scope of the Distribution Agreement is subject to statutory limits based on EU Competition law.
  • The primary obligations of the Distributor include distributing the products, providing relevant market information to the Principal, safeguarding the Principal’s interests, and maintaining confidentiality. The Primary obligations of the Principal include delivering products, supporting the Distributor, and granting agreed rebates.

Formation Requirements of Distribution agreements under Dutch law

When it comes to the formation of Distribution Agreements in the Netherlands, there are no specific formal requirements to take into account, as stated in the pre-existing knowledge. However, for evidentiary purposes, it’s recommended to set out the agreement in writing.

When negotiating a Distribution Agreement, key provisions such as territorial limitations and minimum sales quotas should be carefully considered. It’s crucial for parties to ensure that their contractual requirements comply with regulatory standards and legal implications.

Additionally, commercial considerations must also be taken into account during negotiations. Parties must collaborate to identify each other’s needs and objectives while ensuring that the agreement aligns with their respective business goals.

Disclosure obligations should also be discussed during the negotiation stages in order to avoid any future misunderstandings or disputes.

When forming a Distribution Agreement in the Netherlands, parties must pay close attention to both legal and commercial considerations. Regulatory compliance is crucial when drafting an agreement that complies with Dutch law. Careful consideration of key provisions, careful negotiation strategies, and detailed disclosure obligations can help prevent misunderstandings between parties involved in Distribution Agreements.

Next up, we’ll explore information obligations under Dutch law for these agreements.

Information Obligations in the Netherlands

No specific information obligations are required by law for parties entering into a Distribution Agreement in the Netherlands. This means that there are no legal requirements for parties to disclose certain information before concluding an agreement. However, it is important to note that parties should still exercise transparency and good faith when negotiating and finalizing the terms of their agreement.

When it comes to limitations on the geographic region in which the Distributor may sell products or the customers to which they may sell them, EU competition law plays a significant role. Such limitations are admissible only under specific requirements which need to be assessed in each individual case.

Additionally, agreements regarding the amounts of products the Distributor must source from the Principal are subject to EU competition law as well: contractual provisions requiring distributors to source 80% or more of their demand in products solely from the Principal may only be agreed upon for five years.

The remuneration of distributors consists primarily of profit generated through purchasing and selling products at a higher price with a rebate. However, according to freedom of contract principles, parties can agree on additional remunerations such as minimum monthly payments.

With these aspects in mind, it is important for parties entering into distribution agreements under Dutch law to avoid pitfalls such as including very short notice periods for termination and determining compensation due in such cases.

Pitfalls to Avoid when closing a distribution agreement under Dutch law

Avoiding pitfalls is crucial when closing a distribution deal in Dutch law. Even if the parties have agreed to provisions in writing, they can still be deemed contrary to the principles of reasonableness and fairness. In such cases, judges can order compensation payments to be made as necessary.

Enforceability challenges may arise from notice period considerations when terminating a distribution agreement. If the notice period is too short, it may be seen as unfair and unreasonable by a judge who could then require compensation payment to be made by the party ending the agreement.

Additionally, competition law limitations must also be taken into account when determining the scope of a distribution agreement. Non-compete obligations can only be agreed upon in writing if they are limited to one year and essential for protecting transferred knowledge or know-how. Minimum sales quotas may also be imposed on distributors; however, if these quotas are set too high, they may constitute de facto non-competes and violate fair competition laws. Resale price restrictions must also adhere to certain requirements under Dutch law so that they do not operate as disguised fixed prices.

When it comes to remuneration options for distributors, there are no statutory rules that dictate specific payment amounts. Instead, profits generated from purchasing products with rebates and selling them at higher prices serve as remuneration. However, parties can agree on additional forms of remuneration such as minimum monthly payments within their written agreements.

Ultimately, understanding these potential pitfalls is crucial for creating valid distribution agreements under Dutch law while ensuring compliance with all legal requirements related to notice periods and competition laws.

Moving forward, it’s important to understand how parties can determine what aspects are covered in a distribution agreement under Dutch commercial law – specifically regarding limits on geographic regions where distributors sell products or customers whom they sell them too – which we will explore next.

Scope of a Distribution Agreement in the Netherlands

To understand what you can and cannot agree to in a distribution deal under Dutch law, it’s important to consider the scope of the agreement. While parties are generally free to agree on the terms of their Distribution Agreement, there are statutory limits that need to be taken into account.

Geographic limitations on where the distributor may sell products and who they may sell them to, as well as minimum sales quotas, are subject to EU Competition law.

Non-compete obligations can only be agreed upon in writing if they are indispensable for protecting know-how transferred by the supplier, limited to the point of sale from which the buyer has operated during the contract period, and last no longer than one year. Additionally, while maximum resale prices can be suggested or imposed by contract parties, disguised fixed prices are not allowed.

In addition to these restrictions, there are also certain obligations that both parties must uphold. Distributors must distribute products diligently while safeguarding the interests of their Principal and maintaining confidentiality. Principals must support distributors with marketing materials and grant them any agreed upon rebates.

Remuneration arrangements vary but usually consist of profits generated from purchasing goods at a rebate from the Principal and selling them at a higher price. With these considerations in mind, it’s important for parties entering into a Distribution Agreement in the Netherlands to carefully weigh their options before finalizing terms.

Moving forward with understanding what is expected in terms of scope for your distribution agreement under Dutch law will provide clarity about what you should expect regarding distributor’s obligations under Dutch Law such as providing relevant market information or applying reasonable efforts when delivering all products ordered by Distributor among other things.

Distributor’s Obligations under Dutch law

You absolutely need to understand the obligations that are expected of you as a distributor under Dutch law if you want to avoid any legal disputes or complications down the line. The table below outlines some of the primary obligations that you, as a distributor, must fulfill under Dutch law:

Marketing strategiesYou must distribute the products and provide relevant information about the market, potential customers, and product requirements to the principal.
Sales targetsWhile there are no specific sales quotas required by statutory law, principals may impose minimum sales quotas on distributors. This may constitute a non-compete clause if it can be shown that in your circumstances, purchasing competing products above this level would not be feasible.
Product liability and Intellectual propertyIn distributing these products, you have an obligation to maintain confidentiality regarding trade secrets and intellectual property rights of the principal while also ensuring that all safety regulations are met.

In addition to these obligations, there are certain limitations on your freedom to agree on the scope of distribution agreements based on EU competition law. For example, if you sign an agreement with a very short notice period for termination or compensation due upon ending such an arrangement with your principal company when selling their products in the Netherlands – this is deemed contrary to principles of reasonableness/fairness.

It’s important for distributors like yourself to know how dispute resolution works under Dutch law as well as renewal negotiations between parties involved in distribution arrangements, so everyone can benefit from continued success without worrying about legal issues arising unexpectedly.

Moving forward into our next topic section, we will discuss the Principal’s Obligations under Dutch Law.

Principal’s Obligations under Dutch Law

Understanding the obligations of principals under Dutch law is crucial for a successful distribution partnership. As a principal, you’ve got several primary obligations toward your distributor.

Firstly, you must make reasonable efforts to ensure that all products ordered by the distributor are delivered on time and in good condition.

Secondly, you are expected to support your distributor with marketing materials and other business-related requirements.

Lastly, it’s important to grant the agreed rebate to the distributor as per the terms of the agreement.

In addition to these primary obligations, you should also be aware of your liabilities under Dutch competition law. Any restrictions placed on your distributors regarding geographical regions or customer segments need to be carefully evaluated against EU regulations on vertical restraints. Similarly, any contractual provisions related to minimum sales quotas must not run afoul of competition law implications.

When drafting a distribution agreement with your distributor in the Netherlands, it’s essential to include clauses that cover marketing and advertising obligations as well as intellectual property rights. Additionally, termination compensation clauses should be carefully considered while keeping an eye out for contractual disputes that may arise during the course of the partnership.

The next section will focus on payment and remuneration of distributors in more detail.

Payment and Remuneration of the distributor

As a distributor in the Netherlands, your remuneration primarily consists of the profit you generate from purchasing products from the Principal with a rebate and selling them to your customers at a higher price. However, parties are free to agree on additional payment terms such as minimum monthly payments or a commission structure. Bonus incentives and profit sharing can also be included in the Distribution Agreement.

It is important to clearly outline the payment terms and remuneration structure in writing to avoid disputes in the future. Payment deadlines should be agreed upon and adhered to by both parties. In case of any disputes regarding remuneration, it is recommended to seek legal advice promptly.

In addition to payment terms, sales targets may also be included in the Distribution Agreement. The Principal’s support (in providing brochures, etc.) is crucial for achieving these targets. As a distributor, it is important to maintain confidentiality about all business matters related to the Principal’s products.

Moving on from payment terms and remuneration, let us now discuss the term of a distribution agreement.

Term of a distribution Agreement under Dutch law

Imagine having the freedom to decide on the length of time your business relationship with a partner will last, without any strict statutory rules dictating otherwise. In the Netherlands, parties are generally free to set out their own parameters for the term of their Distribution Agreement. They can agree on a fixed term or an indefinite term, or even a combination of both.

However, it’s important to note that if parties agree on a fixed term and continue performing the agreement after its expiration, it’s considered tacitly renewed for an indefinite period. Renewal options should be clearly stated in the contract to avoid any misunderstandings between parties.

When terminating Distribution Agreements of an indefinite term where no notice period was agreed upon, a reasonable notice period must be given. This notice period serves as compensation in time for the Distributor to prepare itself for the end of the agreement.

Several factors come into play when determining what constitutes a reasonable termination period: investment protection, result dependence, product dependency, and other circumstances specific to each case. It’s essential that these factors are taken into account to avoid potential disputes about compensation requirements and notice periods during termination.

Moving forward into our next section about ‘termination of fixed-term agreements’, it’s important to understand how such agreements differ from those without a pre-agreed timeframe.

Termination of Fixed-Term Agreements

If you’re in a fixed-term Distribution Agreement, it’s crucial to be aware of the specific rules and requirements when it comes to termination. Our Distribution law firm in the Netherlands will explain the most relevant aspects.

Such agreements end upon expiry of their term without prior notice, unless this results in an outcome that’s conflicting with the principle of reasonableness and fairness.

In case either party wishes to terminate the agreement earlier than its set term, they have to agree on such early termination at the time they enter into the agreement.

When a fixed-term Distribution Agreement expires, and both parties continue performing under the same terms as before, such an agreement is considered as tacitly renewed for an indefinite period.

If one party wants to terminate this renewed agreement, a reasonable notice period must be granted. This notice period serves as compensation in time for the Distributor to prepare itself for the situation where the Distribution Agreement ends.

The duration of this reasonable notice period depends on all circumstances surrounding each specific case.

If you’re entering into a fixed-term Distribution Agreement or are currently in one, make sure you understand its specific terms regarding termination and renewal beforehand thoroughly.

Once your agreement has expired or been renewed indefinitely, terminating it requires granting a reasonable notice period that accounts for all relevant circumstances.

Next up: understanding how termination works under indefinite-term agreements.

Termination of Indefinite-Term Agreements in the Netherlands

To end an indefinite-term Distribution Agreement, you must grant a reasonable notice period, which acts as compensation in time for the Distributor to prepare for the situation where the agreement ends – it’s like providing a cushion for their fall.

The notice period requirements are not specified by statutory law, but they should be considered as compensation to alleviate any negative effects of termination.

The reasonable notice period is determined by taking into account all circumstances of the specific case such as investments made, the underlying reason for termination, results of the Principal and Distributor, dependency of Distributor upon the product of the Principal, and more.

If no notice period was agreed upon, then the Distribution Agreement may only be terminated with a reasonable notice period. Termination without notice can only occur when there is an urgent reason that makes it impossible to continue the agreement.

It is important to note that if a notification period has been contractually agreed upon, this notification period will have to be taken into account. Nonetheless, specific circumstances can influence what is considered reasonable; such as those mentioned before or more depending on your unique situation.

To avoid disputes related to termination compensation and requirements in your Distribution Agreement, it’s recommended that all parties set out these obligations clearly in writing from the beginning.

Frequently Asked Questions

Are exclusive distribution agreements common in the Netherlands?

Exclusive distribution agreements are not common in the Netherlands due to market competition and legal implications. Contractual restrictions on sales performance and termination clauses must be negotiated carefully to ensure compliance with Dutch law.

Can a distributor sell competing products in addition to the principal’s products?

You may be tempted to sell competing products alongside your principal’s, but consider the legal implications. Sales strategy, market overlap, brand loyalty and pricing structure must be taken into account when negotiating contractual limitations.

What happens if a distributor breaches confidentiality obligations in the distribution agreement?

If you breach confidentiality obligations in a Distribution Agreement, the Principal may have legal recourse. They can terminate the agreement, claim damages, and enforce any non-compete clause or arbitration clause. Trade secrets must be protected.

Can a principal unilaterally change the terms of the distribution agreement?

A principal cannot unilaterally change the terms of a distribution agreement without legal implications and enforceability considerations. The distributor may have termination rights, remedies available, and jurisdictional issues to consider. This may also impact business operations and contractual obligations.

Is it possible for a distributor to terminate a distribution agreement without cause?

Terminating a distribution agreement without cause may have legal implications, impacting compensation and contractual obligations. Notice requirements should be followed, taking into account market competition. Dispute resolution and termination consequences should also be considered.

Dutch distribution law firm

You’ve now gained a comprehensive understanding of distribution agreements in the Netherlands. As you may recall, these agreements are primarily assessed on the principles of reasonableness and fairness, with parties being free to agree on the scope of the agreement within statutory limits based on EU Competition law. It’s important to note that when entering into a distribution agreement under Dutch law, there are certain formation requirements and information obligations that must be met. Additionally, both parties should be aware of potential pitfalls to avoid during negotiations. By understanding the scope of a distribution agreement, distributor’s obligations, payment and remuneration terms, as well as termination requirements for both fixed-term and indefinite-term agreements, you can ensure that your business relationship remains strong and successful.

Contact our Netherlands distribution attorneys

If you have any questions or require legal assistance about Dutch distribution law, please don’t hesitate to reach out to our knowledgeable and dedicated team at our Dutch law firm.  Our Dutch lawyers are committed to providing exceptional legal services and personalized attention to address your unique needs. You can contact us through our website, via email, or by phone. Our friendly and professional staff will be more than happy to assist you and schedule a consultation with one of our expert attorneys in the Netherlands, for example a Dutch litigation attorney or contract lawyer in the Netherlands in Amsterdam. We look forward to the opportunity to help you navigate the complexities of the legal landscape and achieve the best possible outcomes for your case.

Contact person: Remko Roosjen | attorney-at-law
Office number: +31 (0)20 – 210 31 38

The content provided on this legal blog is intended for general informational purposes only and should not be construed as legal advice or a substitute for professional legal counsel. While we strive to ensure the accuracy and timeliness of the information presented, we cannot guarantee its completeness or applicability to your specific circumstances. We encourage you to consult with a qualified attorney for advice regarding your individual legal matters. The content on this blog may be subject to changes or updates without notice, and we disclaim any responsibility for any errors or omissions in the information provided.

Remko Roosjen

Remko Roosjen

Remko Roosjen is a Dutch distribution law attorney and creates close working relationships with clients, providing pragmatic solutions across on all Dutch distribution law matters in the Netherlands. Remko is a co-founder of our Dutch Law Firm in Amsterdam. His specialist areas include the legal challenges when terminating a Dutch distribution agreement, (international) Commercial Disputes & Contracts, including civil litigation, arbitration and mediation. Remko is a sharp, creative attorney with extensive experience representing both plaintiffs and defendants. Visit Remko's profile via the website or via his LinkedIn Profile.