Picture this: You are a Dutch retailer who discovers that a key supplier has been dumping chemical waste, directly violating the sustainability standards in your supplier code of conduct. You want to claim damages for the reputational harm, but the supplier pushes back, claiming they never explicitly signed that specific document. They argue it was just “guidance,” not a binding contract.
Who is right?
This scenario is becoming increasingly common. As supply chain management shifts from simple logistics to complex ecosystems of sustainability and ethical compliance, the Supplier Code of Conduct (SCoC) has moved to centre stage. But for many businesses, a critical question remains: are these documents merely aspirational wish lists, or are they legally biting contracts?
In this guide, we explore the legal status of supplier codes of conduct under Dutch law. We will examine when they are binding, how they interact with contract law, and what practical steps buyers and suppliers can take to protect their interests.
What is a Supplier Code of Conduct?
A Supplier Code of Conduct is a set of rules and principles that a company expects its suppliers to adhere to. It acts as a bridge between a company’s internal values and its external supply chain operations.
These codes can take various forms. Some are industry-specific (such as those in the textile or electronics sectors), while others are company-specific documents drafted by the purchasing organisation. In some cases, they are based on international standards like the ILO conventions or the UN Guiding Principles on Business and Human Rights.
Common topics covered include:
- Labour conditions: Prohibition of child labour, fair wages, and safe working environments.
- Environmental standards: Waste management, carbon footprint reduction, and raw material sourcing.
- Anti-corruption: Rules regarding bribery, gifts, and fair competition.
- Privacy and data security: Handling of sensitive information in line with regulations like GDPR.
It is crucial to distinguish between voluntary “soft law”—guidelines that encourage good behaviour—and binding contractual agreements. While a code might start as a policy document, the way it is introduced into the business relationship determines whether it transforms into a hard legal obligation.
Legal Significance and Sources
Under Dutch law, the legal force of a supplier code of conduct is not black and white. It depends heavily on how the code is incorporated into the relationship between the buyer and the supplier.
Contractual Effect
The most straightforward way a code becomes binding is through contract law. If a code is explicitly attached to a contract and signed by both parties, it has the same force as any other clause. However, problems arise when the inclusion is implicit.
Reasonableness and Fairness (Redelijkheid en Billijkheid)
Article 6:248 of the Dutch Civil Code (Burgerlijk Wetboek – BW) is a cornerstone of Dutch contract law. It states that an agreement has not only the legal effects agreed upon by the parties but also those arising from the law, custom, or the requirements of reasonableness and fairness. This means a supplier might be bound by a code even without a wet signature, if adhering to such standards is considered standard practice in that specific sector.
General Terms and Conditions
Often, companies attempt to incorporate codes of conduct via their General Terms and Conditions (GTC). Under Article 6:232 BW, a counterparty is bound by GTCs even if they haven’t read them, provided they were given a reasonable opportunity to do so. However, if a code is buried within complex GTCs without proper reference, its enforceability can be challenged.
Industry Custom and Traffic Views
If a specific code is widely used and accepted within a branch (e.g., the construction or food sector), it may be considered “customary law.” In ECLI:NL:CBB:2015:285, the Trade and Industry Appeals Tribunal ruled that consumers (and by extension, professional parties) may expect an entrepreneur to adhere to a code if they have committed to it, treating non-compliance as a misleading trade practice.
Sectoral Legislation
In specific industries, legislation adds another layer of enforcement. For example, the Wet oneerlijke handelspraktijken landbouw (Unfair Trading Practices in Agriculture Act) sets mandatory standards that may overlap with private codes of conduct.
Key Legal Insight: A code of conduct is not automatically binding. Its power is derived from the contract, general terms, or the overarching principle of reasonableness and fairness.
When is a Code of Conduct Binding?
Determining whether a supplier is legally on the hook requires a close look at the facts. Here is how a code transitions from policy to obligation.
Explicit Inclusion
The gold standard for enforceability is explicit reference. This includes:
Requiring a separate signature acknowledging receipt and compliance.
Referring to the code in the main purchasing agreement.
Attaching the code as an annex.
Implicit Effect
Binding effect can be assumed if parties have a long-standing trading history where the code was consistently part of previous agreements. Furthermore, simply referring to a code on a website might be sufficient if the supplier is a professional party and the reference was clear during negotiations.
Knowability (Kenbaarheid)
For a code to be binding via General Terms and Conditions, the user (the buyer) must offer the supplier a reasonable opportunity to take note of them. If a buyer suddenly enforces a code that was never shared, the supplier can argue they are not bound by it.
The Role of Professionalism
Dutch courts expect more from professional parties (B2B) than consumers. A professional supplier is expected to understand that large corporate clients often mandate sustainability standards. If a code is standard in the market, a supplier cannot easily claim ignorance.
Checklist for Binding Effect
- Is the code mentioned in the primary contract?
- Was the text provided to the supplier before or during signing?
- Is compliance with such codes standard practice in this specific industry?
- Has the supplier acted in accordance with the code in the past?
- Does the code conflict with other agreed terms?
Summary: A code is binding if explicitly agreed upon, accepted via General Terms and Conditions, or if it forms part of the reasonable expectations within a long-term commercial relationship or industry sector.
Defences Against a Code of Conduct
Just because a buyer waves a code of conduct document does not mean the supplier is defenceless. There are several grounds on which a supplier can resist enforcement.
Lack of Knowability
If the buyer failed to provide the text of the code or make it easily accessible before the agreement was concluded, the supplier may argue that the conditions are not applicable.
Not Standard Practice
If the code imposes extreme requirements that are entirely unusual for the specific sector—and were not explicitly negotiated—the supplier may argue that they did not consent to these specific terms.
Unreasonably Onerous (Onredelijk Bezwarend)
Under Article 6:233 BW, a clause in general terms and conditions is voidable if it is “unreasonably onerous” to the other party. If a code of conduct shifts disproportionate risk to the supplier (e.g., unlimited liability for minor environmental infractions of sub-suppliers), a judge might annul that specific clause.
Unacceptable Consequences
A supplier may argue that enforcing the code in a specific instance would be unacceptable according to standards of reasonableness and fairness (Article 6:248(2) BW). For example, if a buyer demands immediate termination of a contract due to a minor administrative breach of the code, a court might find this disproportionate.
Vague Formulation
Courts dislike ambiguity. If a code uses vague language like “suppliers must do their best to be sustainable,” it is difficult to enforce legally. A supplier can defend themselves by arguing the obligation was too indefinite to be binding.
Vague Formulation
Courts dislike ambiguity. If a code uses vague language like “suppliers must do their best to be sustainable,” it is difficult to enforce legally. A supplier can defend themselves by arguing the obligation was too indefinite to be binding.
Summary: Suppliers can defend themselves if the code was not properly disclosed, contains unreasonably onerous terms, creates unacceptable consequences under reasonableness and fairness, or if the language is too vague to constitute a legal obligation.
Consequences of Violation
If a code is found to be binding and a violation is proven, the legal consequences can be severe.
Damages (Schadevergoeding)
Even without a specific penalty clause in the contract, a buyer can claim damages under Article 6:74 BW (breach of contract) or Article 6:162 BW (tort/unlawful act).
- Breach of Contract: If the code is part of the agreement, violating it is a failure to perform.
- Tort: Even if not contractually bound, acting in a way that violates unwritten rules of proper social conduct (which a widely accepted code might represent) can be a tort.
Burden of Proof
The burden lies with the buyer (the claimant). They must prove:
- The Breach: That the supplier actually violated the specific rule.
- The Damage: That the buyer suffered financial or reputational loss.
- Causal Link: That the breach caused the damage.
Force Majeure (Overmacht)
Can a supplier claim force majeure? Under Article 6:75 BW, a failure cannot be attributed to the debtor if it is not due to their fault. However, for professional suppliers, courts are strict. If a supplier violates a labour code because their own sub-supplier used child labour, Dutch courts often view this as a commercial risk inherent to the supplier, meaning force majeure will not apply.
Mitigation (Matiging)
Under Article 6:109 BW, a judge has the power to mitigate a claim for damages if awarding full compensation would lead to clearly unacceptable results (e.g., the bankruptcy of the supplier for a minor error). However, this is applied restrictively.
Calculation Example:
A clothing brand recalls a batch of shirts because the dye used by the supplier violated the environmental standards in the Code of Conduct. The damages claim could include:
- Cost of the recalled goods.
- Logistics costs for the recall.
- Lost profits from missed sales.
- Reputational damage (though harder to quantify).
Summary: Violating a binding code can lead to claims for damages based on breach of contract or tort. The buyer must prove the breach and damage. Suppliers have limited scope for force majeure, but judges can mitigate damages in extreme cases.
Consumer Protection
While this article focuses on B2B relationships, the “shadow” of consumer protection looms large over supplier codes.
Unfair Commercial Practices
As seen in ECLI:NL:CBB:2015:285, if a company publicly claims to adhere to a code of conduct (e.g., “We only buy Fairtrade”), consumers rely on this. If the supply chain does not actually meet these standards, the company is engaging in misleading commercial practices. This creates pressure up the chain: buyers must enforce codes on suppliers to avoid liability towards consumers.
Article 7:6 BW
In consumer sales, parties cannot deviate from certain rights to the detriment of the consumer. While this directly applies to B2C, it influences B2B contracts. A retailer cannot accept a “defective” product from a supplier just because the supplier disclaims liability; the retailer is liable to the consumer and will seek recourse from the supplier.
Authority for Consumers and Markets (ACM)
The ACM monitors sustainability claims. If a supplier code is mere window dressing (greenwashing), the ACM can impose fines. This regulatory pressure makes the legal enforcement of these codes between buyer and supplier even more critical.
Summary: Consumer protection laws indirectly force companies to strictly enforce their supplier codes. Public claims based on these codes must be substantiated, or companies risk fines from the ACM and claims for misleading advertising.
Practical Tips for Suppliers
If you are a supplier presented with a Code of Conduct, do not just sign it blindly.
- Inventory Industry Standards: Know what is common in your sector. If a client asks for something standard, fighting it may cost you the deal. If they ask for something exotic, negotiate.
- Clarify Applicability: Ensure the contract states which version of the code applies. Avoid clauses that say “and any future updates,” as this gives the buyer a blank cheque to change rules later.
- Assess Feasibility: Perform a gap analysis. Can you actually meet the ISO standards or labour requirements they ask for? If not, discuss a transition period.
- Document Compliance: Keep records of your own audits and sub-supplier checks. This is your primary defence if a breach is alleged.
- Limit Liability: Try to negotiate a cap on liability regarding the code. Ensure that minor breaches do not result in immediate contract termination.
- Insurance: Check if your liability insurance covers breaches of “contractual representations” regarding compliance.
Summary: Suppliers should actively assess, negotiate, and document their compliance with codes of conduct. Limiting liability and ensuring clarity on which version of the code applies are crucial steps.
Practical Tips for Buyers
For buyers, the goal is to make the code enforceable and effective.
- Explicit Integration: Do not rely on website footers. Attach the Code of Conduct to the contract and have it initialled.
- Audit Rights: Include a clause that gives you the right to audit the supplier (or hire a third party to do so) to verify compliance.
- Reporting Obligations: Require the supplier to proactively report any breaches.
- Clear Sanctions: Define what happens if the code is breached. Is it a material breach justifying termination? Is there a penalty scheme?
- Chain Responsibility: Ensure the code obliges the supplier to pass these requirements down to their suppliers (cascading requirements).
- Exit Clauses: Ensure you can exit the relationship immediately if a severe violation (e.g., child labour) is discovered, to protect your reputation.
Summary: Buyers must make the code an explicit part of the contract, secure audit rights, and define clear sanctions for non-compliance. Ensuring the code’s requirements are passed down the supply chain is essential for risk management.
Conclusion
The days when a Supplier Code of Conduct was merely a piece of marketing collateral are over. In the current Dutch legal landscape, these documents are powerful instruments that can shift liability, determine damages, and define the validity of commercial relationships.
A code is legally binding when it is clearly incorporated into the contract or when industry practice and the principles of reasonableness and fairness dictate so. For suppliers, this means understanding exactly what you are signing up for. For buyers, it means ensuring your code is not just strict, but legally robust and properly integrated into your procurement process.
With the rise of ESG (Environmental, Social, and Governance) regulations and supply chain due diligence laws, the legal weight of these codes will only increase. Do not leave it to chance.
Next Step: Are your supplier contracts and codes of conduct legally watertight? Have your current agreements reviewed by a legal specialist to ensure you are protected against supply chain risks.
FAQ
What is a Supplier Code of Conduct?
A Supplier Code of Conduct is a set of standards and rules regarding how suppliers must behave, covering topics such as working conditions, environmental standards, anti-corruption, and privacy.
Is a Code of Conduct always legally binding?
No, a code is only binding if it is explicitly or implicitly made part of the agreement, via General Terms and Conditions, or if it applies through the principles of reasonableness and fairness (Article 6:248 BW).
Can I claim damages if a supplier violates the code?
Yes, a buyer can claim damages for a violation (Articles 6:74 and 6:162 BW), provided they can prove the damage, the violation, and the causal link. This applies even without a specific penalty clause.
When can a supplier defend against a code?
A supplier can defend themselves if the code was not made sufficiently known, is not standard in the industry, or if enforcing it would lead to unacceptable consequences under reasonableness and fairness.
What role does ‘knowability’ play?
The more widely known and distributed a code is within a sector, the more likely a judge is to consider it a binding norm between professional parties, even if not explicitly signed.