Distributor in The Netherlands entitled to goodwill compensation?

In The Netherlands the distribution agreement Contract in which a supplier grants a distributor (exclusive) right to sell supplier’s products in a certain region
» Meer over distribution agreement distribution agreement is not governed by specific rules. Therefore, the Dutch Civil Code (DCC) does not provide for a right for goodwill compensation at the end of a distribution agreement. The obligation to pay a compensation for goodwill should be established in the distribution agreement. However, the Court of The Hague provided a decision in which is ruled that specific circumstances can substantiate a claim for goodwill compensation. Dutch lawyer specialized in the distribution agreement Thomas van Vugt explains.

Compensation of goodwill in the distribution agreement?

Since the distribution agreement, contrary to the agency agreement, is not governed by specific rules in The Netherlands, the provisions of general contract law and case law govern the distribution agreement. In general, the parties may primarily mutually agree the content of a distribution contract. This means that the obligation to pay a compensation for goodwill must be established in the distribution agreement.

Goodwill compensation in The Netherlands

In The Netherlands goodwill compensation is allowed to a limited extent. In 1991 the Supreme Court ruled that compensation is implied in granting a notice period. This is based on the thought that investments made by the distributor will be compensated by means of the continuation of the distribution agreement for the term of the notice period. Therefore, without a proper notice period a distributor can claim compensation.

Dutch lawyer specialized in the distribution agreement

However, the Court of The Hague has ruled that specific circumstances – such as substantive investments that cannot be compensated by a notice period – can substantiate a claim for goodwill compensation. Under some circumstances a claim for compensation of the distributor may be awarded on the basis of reasonableness and fairness.