Delivery obligation?

Mr J. van Koetsveld – Franchise lawyer
Many customers, including franchisees, are of the opinion that there is a delivery obligation in the Netherlands, meaning that suppliers are obliged to deliver goods if an order is placed by a potential customer. More in particular, there would be an obligation to deliver if deliveries have already been made to the relevant customer for a longer period of time. In the following we will discuss whether this assumption is correct.

Within a franchise relationship, in which the franchisee can be regarded as a customer and the franchisor as a supplier, there is often a delivery obligation. This is particularly the case if there is an (exclusive) purchase obligation for the franchisee, in which case the franchisor is in principle obliged to deliver the franchisee’s orders. This situation changes when the franchisee fails to meet its obligations, in particular its payment obligations, towards the franchisor. This can eventually lead to a delivery stop or delivery that is only made against cash payment. 

In many cases, franchisees and franchisors will also purchase products from third-party suppliers. In principle, there is no delivery obligation on the part of those suppliers in that relationship. After all, the Dutch legislature assumes the parties’ freedom of contract, on the basis of which a supplier cannot be obliged to deliver its products to a customer. The foregoing is only different if there is a contractual relationship in which it has been agreed that the supplier will deliver to the customer during a certain period or if the supplier has a dominant position that can be qualified as such under competition law. However, this is only the case in exceptional cases. 

Even if there is a long-term distribution or purchase relationship, there is in principle no continuous delivery obligation. Recently, the President of the Court in Leeuwarden expressed his opinion on this in summary proceedings. In this case there was a trading relationship of approximately thirty years, in which the claimant purchased hundreds of branded bicycles from the supplier every year. Agreements had been made between the parties regarding the discounts that the buyer received on the basis of the number of bicycles purchased. When selling to consumers, the customer used lower selling prices than the competition. In this connection, the supplier had received criticism from various customers and a large customer had announced that it would no longer purchase bicycles from the supplier if the supplier continued to supply the claimant. This resulted in the supplier terminating the distribution relationship on April 27, 2001 as of September 1, 2001, which termination was subsequently suspended until December 1, 2001. In interlocutory proceedings the customer is claiming continuation of the trade relationship.

The President of the Court is of the opinion that the agreement between the customer and the supplier can, in principle, be terminated. After all, the parties never intended that the agreement as a whole could not be terminated. Furthermore, the President is of the opinion that 

“Even if it follows from the nature of a specific agreement that it can in principle be terminated without further ado, the requirements of reasonableness and fairness in connection with the concrete circumstances of the case may entail that termination only leads to termination of the agreement if a sufficient compelling grounds for termination exist.” 

The President is of the opinion that the pressure exerted by the other customers on the suppliers is so commercially risky for the supplier that it has a legally respectable and sufficiently weighty (commercial) interest in terminating the agreement with the claimant. However, a reasonable notice period must be observed. In the present case, the President considers a notice period of six months reasonable, which period the supplier has complied with. The claims of the claimant, the buyer, are therefore rejected. It is remarkable in this respect that a different assessment might well have been possible on the basis of competition law grounds.
Based on the foregoing, it must be concluded that there is generally no delivery obligation and that a long-term delivery agreement can, in principle, be terminated with due observance of a reasonable term.
Mr J. van Koetsveld is a lawyer in Rotterdam. The law firm Ludwig & Van Dam is specialized in franchising.

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