Supplier code of conduct: when is it binding under Dutch law?

A supplier code of conduct is binding under Dutch law only if it has become part of the contract: by signature, by an express reference in the purchase agreement, or through general terms and conditions that the supplier accepted. Without that, the code is in principle a policy document, although reasonableness and fairness (Article 6:248 of the Dutch Civil Code, BW) can give it some effect in a long-standing relationship.

Whether a breach leads to damages or termination therefore depends first on how the code was incorporated, then on how concrete its obligations are. This page explains both, the defences open to a supplier and practical steps for buyers and suppliers.

What is a supplier code of conduct?

A set of rules a company expects its suppliers to follow, often based on the ILO conventions, the UN Guiding Principles on Business and Human Rights or the OECD Guidelines. Typical topics are working conditions and child labour, environmental standards, anti-corruption and data protection under the GDPR.

The document itself says nothing about its legal force. Some codes are written as aims (“suppliers strive to…”), others as concrete obligations with audit rights and sanctions. That difference, and the way the code enters the relationship, decides whether it can be enforced.

When is a code of conduct binding?

When the parties agreed to it. In practice there are three routes, from strongest to weakest.

Express inclusion in the contract

The code is attached to the purchase or framework agreement as an annex, the agreement refers to it as binding, or the supplier signs a separate declaration of compliance. The code then has the same force as any other contract clause.

Through general terms and conditions

If the buyer’s purchasing terms declare the code applicable and those terms apply, the supplier is bound even if it did not read the code (Article 6:232 BW). The supplier can, however, annul a clause in general terms if it is unreasonably onerous or if the buyer did not give it a reasonable opportunity to read the terms (Article 6:233 BW). Between businesses, conflicting general terms are resolved under Article 6:225(3) BW: the first reference applies unless the second expressly rejects it.

Through reasonableness and fairness

Under Article 6:248(1) BW a contract also has the effects that follow from law, custom and reasonableness and fairness. In a long relationship in which the code was always applied, or in a sector where such codes are standard, a court may take it into account in interpreting the parties’ obligations. This route is uncertain; do not rely on it as a buyer.

What can a supplier argue against a code?

That it never became part of the contract, that a specific clause is unreasonably onerous, or that enforcement is unacceptable in the circumstances.

• Not agreed or not provided: the code was not attached, referred to or made available before the contract was concluded.
• Unreasonably onerous: a clause in general terms that shifts disproportionate risk, for example unlimited liability for minor breaches by sub-suppliers, can be annulled under Article 6:233(a) BW, unless the supplier is a large company excluded by Article 6:235 BW.
• Unacceptable in the circumstances: under Article 6:248(2) BW a contractual rule does not apply where that would be unacceptable by standards of reasonableness and fairness, for example immediate termination over a minor administrative breach.
• Çox qeyri-müəyyən: “suppliers do their best to work sustainably” is hard to enforce as a concrete obligation.
• Later versions: a clause that binds the supplier to “any future version” gives the buyer a one-sided right to change the contract and may be challenged.

What are the consequences of a breach?

If the code is binding and breached, the buyer can claim performance, damages and, for a serious breach, termination of the contract. The buyer must prove the breach, the damage and the causal link.

Damages for non-performance follow from Article 6:74 BW. If the code is not part of the contract, a claim can only be based on unlawful act (Article 6:162 BW), which requires more than breach of a private policy document.

The supplier can invoke force majeure (overmacht) under Article 6:75 BW only if the failure is not its fault and is not for its account by law, contract or generally accepted views. Failures by its own sub-suppliers will in most cases be for the supplier’s account. A court can reduce damages under Article 6:109 BW if full compensation would lead to clearly unacceptable consequences, but uses that power with restraint.

An example to illustrate: a clothing brand recalls a batch of shirts because the dye used by its supplier breaches the environmental standards in the agreed code. Its claim can cover the recalled goods, the recall logistics and lost profit; reputational damage is recoverable in principle but hard to prove.

How does consumer law affect supplier codes?

If a company tells consumers it complies with a code of conduct, failing to do so can be a misleading commercial practice. Under Article 6:193c(2)(b) BW this applies where the obligation in the code is concrete and verifiable, the trader indicates it is bound by the code, and the breach can lead the average consumer to a decision they would not otherwise have made.

The Trade and Industry Appeals Tribunal (CBb) held on 25 August 2015 (ECLI:NL:CBB:2015:285) that not every breach of a code is automatically misleading: the Authority for Consumers and Markets (ACM) must show that the breach could affect consumers’ decisions. Public sustainability claims must still be substantiated, which gives buyers a reason to enforce their codes down the chain.

For agricultural and food products, the Act on unfair trading practices in the agricultural and food supply chain (Wet oneerlijke handelspraktijken landbouw- en voedselvoorzieningsketen) adds mandatory rules that a buyer’s code cannot override.

Alıcı olaraq nəyi yoxlamalısınız?

• Whether the code is attached to or expressly referred to in every framework and purchase agreement.
• Whether you can prove the supplier received the code before the contract was concluded.
• Whether the obligations are concrete enough to enforce, with audit rights and reporting duties.
• Whether the sanctions are clear: remedy period, termination, and when a breach is material.
• Whether the supplier must impose the same obligations on its own suppliers.
• Whether your public claims about your supply chain match what you can verify.

Təchizatçı olaraq nəyi yoxlamalısınız?

• Which version of the code applies, and whether the buyer can change it unilaterally.
• Whether you can actually meet each requirement, or need a transition period.
• Whether your liability for breaches, including those by sub-suppliers, is capped.
• Whether minor breaches lead to a remedy period rather than immediate termination.
• Whether you document your own audits and sub-supplier checks.
• Whether your liability insurance covers breaches of contractual compliance commitments.

What can we do for you with a supplier code of conduct?

Bizim korporativ vəkillər act for buyers and suppliers in supply chain contracts.

• We review whether your code of conduct is validly incorporated in your contracts and general terms.
• We draft or adjust the code, audit clauses, sanctions and liability caps.
• We assess a concrete breach and the options for damages, suspension or termination.
• We negotiate the code on behalf of a supplier, including transition periods and caps.
• We conduct proceedings over a breach of the code before the district court.

xülasə

• A supplier code is binding when incorporated by signature, contract reference or accepted general terms (Article 6:232 BW).
• Reasonableness and fairness (Article 6:248 BW) can give a code some effect, but are an uncertain basis.
• Suppliers can challenge unreasonably onerous clauses in general terms (Article 6:233 BW) and unacceptable enforcement (Article 6:248(2) BW).
• A binding breach can lead to damages (Article 6:74 BW); force majeure for sub-supplier failures rarely succeeds.
• Breaching a code that a trader publicly commits to can be a misleading practice, if it affects consumer decisions (ECLI:NL:CBB:2015:285).

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