Distribution agreement or agency agreement: find the differences

By Published On: 21-02-2012Categories: Statements & current affairsTags: ,

Court of The Hague

The court in The Hague recently ruled whether there was a distribution agreement (this could be a franchise agreement, for example) or an agency agreement. Under Dutch law, the distinction between a distribution agreement (franchise agreement and an agency agreement) mainly lies in the fact that an agent mediates purely on behalf of his principal (client) in the conclusion of the agreements between the principal and the customer, while a distributor (franchisee) on the other hand, purchases products in its own name and for its own account and risk and then resells them. 

The distinction is very important in connection with numerous legal obligations that apply to an agent, where they do not automatically apply to a distributor (franchisee), unless the franchisee and franchisor have arranged this in their franchise agreement. If there is mediation between the agent (this can also be a franchisee) and, as stated above, the principal (client, the company in question) and the consumer, under certain circumstances there is also a claim to legal goodwill upon termination of the contract. the contract between the agent and the principal. This is fundamentally different with a distribution agreement, where this legal right is absent. When the distribution agreement or agency agreement is terminated, other rights and obligations arise for the parties. Incidentally, in practice it appears that the systems can also go together. For example, there is a franchise agreement with agency elements or vice versa. This is very well possible, although the franchisee / agent and the franchisor / principal must make various choices with regard to their contract options. The choices are thereby limited, since not all agency provisions can be set aside by law, if this were desirable at all. In this case, the court ruled that there was a distribution agreement, which can have various consequences for the parties in the eventual settlement of their relationship in the long term.

Mr Th.R. Ludwig  – Franchise attorney

Ludwig & Van Dam Franchise attorneys, franchise legal advice Would you like to respond? Mail to ludwig@ludwigvandam.nl

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