The Court was asked for a decision in a dispute about the termination by a Dutch Supplier of an exclusive Distribution Agreement with its Distributor in Germany. Parties had entered into a Distribution Contract already in 1971. The Distribution Contract provided for a notice period of three (3) months. In April 2008, the Dutch Supplier had terminated the contract with due observance of a notice period of eight (8) months. The German Distributor did not accept the notice period observed and claimed for damages over a period of 18 months that the contract, in the Distributor’s opinion, should have been continued.
Notwithstanding the fact that the Dutch supplier had observed a longer notice period than provided for in the contract, it was ruled by the District Court that this notice period was unacceptably short according to the principles of reasonableness and fairness when considering the relevant circumstances of the case. The relevant circumstances in this case were that at least 30% of the Distributors turnover was derived from the sales of the Suppliers products, the relevant market in Germany had been fully built up by the Distributor since 1971 requiring substantial marketing investments and that people had been employed by the Distributor solely for taking care of the sales of the Suppliers products in Germany. Next thereto, the long duration of the relationship was obviously of relevance.
Having taking the above circumstances into consideration, the District Court ruled that a notice period of two (2) years should have been observed by the Supplier when terminating the contract, notwithstanding the contractually agreed notice period of three (3) months and notwithstanding the fact that the Supplier had already observed a longer notice period of eight (8) months. As a consequence, the Supplier was found liable for the damages incurred by the Distributor for the remaining 14 months that the distribution relationship should have been continued.
This judgment shows that under Dutch law one cannot always rely on a contractually agreed notice period and that such a contractual provision can be set aside by the principles of reasonableness and fairness if so justified by the specific circumstances of the case.
Jaap van Till, Agency & distribution country Expert for Netherlands