In a recent court ruling of the Netherlands Commercial Court (Court of Amsterdam 5 July 2023, ECLI:NL:RBAMS:2023:4109), Duomed, a distributor of medical solutions and clinical services in the Netherlands, took legal action against Fujifilm, a company involved in the marketing and distribution of medical devices. The case revolved around the termination of their long-standing distribution agreement. This article will delve into the key facts of the case, the court’s decision, and the implications of this ruling on long-term distribution agreements.
Duomed had been a distributor of Fujifilm’s medical devices since 1978. Over the years, the distribution agreement was periodically renewed, transitioning from indefinite contracts to fixed-term agreements starting in 2013.
In December 2023, Fujifilm informed Duomed of its decision not to renew the distribution agreement, marking the end of their long-standing partnership. Duomed was informed of Fujifilm’s decision only three weeks before the expiration date. Fujifilm’s decision raised significant concerns for Duomed, given the abrupt nature of the termination and its impact on existing customers.
The Court’s Decision
The court ruled in favour of Duomed, citing Fujifilm’s failure to provide an unequivocal and timely warning about its intention not to renew the distribution agreement. Fujifilm could not suffice by relying on the express stipulation in the fixed-term contracts, which stated that “neither party shall be entitled to a new agreement”. The court argued that Fujifilm’s conduct did not take into account Duomed’s legitimate interests and, as a result, ordered Fujifilm to continue the distribution agreement for an additional six months.
Legitimate interests of the other party
The court emphasized the importance of a party’s duty to let its conduct be determined by the legitimate interests of the other party in a long-term contractual relationship. Fujifilm’s failure to provide timely and clear notice of its intention not to renew the agreement was considered a breach of this duty.
This ruling suggests that the court may apply principles related to the termination of long-term contractual relationships to consecutive fixed-term contracts, especially when it comes to the duty to consider the legitimate interests of the other party.
The court’s decision aimed to provide Duomed with a reasonable period to ensure a smooth transition for its existing customers and mitigate the impact of the end of the distribution relationship. Such considerations highlight the court’s focus on fairness and reasonableness in contractual disputes.
Parties entering into fixed-term contracts should be mindful of their obligations and communication when considering termination. A failure to do so may result in legal consequences and additional obligations.
The Duomed vs. Fujifilm court ruling serves as a reminder of the importance of transparency and fairness in contractual relationships, especially in cases involving the termination of long-standing agreements. The ruling underscores the court’s commitment to ensuring that parties act in good faith and consider each other’s legitimate interests, even in fixed-term contracts. Parties to such agreements should be cautious and seek legal advice when navigating termination or non-renewal discussions to avoid legal disputes. You are most welcome to contact Angela Schwegler in case of any questions (firstname.lastname@example.org).