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Contracting in cannabis (I)

Updated: Aug 9, 2023

To achieve the purchase, sale or resale of cannabis (products), cooperation with trading partners is unavoidable. The arrangements for cooperation are usually set out in a written agreement. But if an agreement to trade cannabis (products) is concluded, is such an agreement enforceable? This question was submitted to the District Court of Northern Netherlands on January 5, 2022. The answer, and its implications for the cannabis industry, are outlined below.


The facts


The defendant is a coffee shop owner in the Netherlands. The sale of cannabis products is for the time being (i.e., until the closed coffeeshop chain experiment in which the defendant is participating starts) tolerated by the municipality according to the applicable tolerance policy. This means that the defendant is allowed to have a trading stock of 500 grams in his coffee shop. This trading stock is replenished several times a day through the proverbial back door of the coffee shop.


The defendant uses plaintiff 1 and 2 to replenish his trading stock. During a conversation between defendant and plaintiff 1, which conversation was recorded by the latter, agreements are made about the delivery by the latter of various joints and spacecakes. In exchange for the delivery, plaintiff 1 receives a compensation of at least € 3.700,- per month until the closed coffeeshop chain experiment starts. In addition, plaintiff 1 receives a bonus at the start of the experiment. The defendant allegedly made similar agreements with plaintiff 2.


Almost immediately after the agreements were made, the defendant does not fulfill its agreements (including the payment in the amount of € 3.700,-). Plaintiff 1 and plaintiff 2 claim fulfillment of the agreement allegedly reached. The defendant disputes the formation of the agreements. To the extent that it would be assumed that the two agreements were indeed concluded, they would not be enforceable due to being contrary to public order and morality.


The realization


Under Dutch law, a contract is concluded by offer and acceptance. Whether an offer was made and accepted depends on what the parties mutually declared and inferred from each other's statements and behavior, in accordance with the meaning they were reasonably entitled to ascribe to it in the given circumstances.


In the opinion of the District Court of Northern Netherlands, the transcripts submitted of the recorded conversation between defendant and plaintiff 1 show that defendant made an offer, which offer plaintiff 1 accepted. In short, an agreement was reached between defendant and plaintiff 1.


No agreement was allegedly formed between defendant and plaintiff 2. The realization is, in the opinion of the District Court of Northern Netherlands, insufficiently substantiated.


The court makes a small comment with regard to the agreements made: not all the agreements mentioned are sufficiently definable. The defendant never attached a concrete amount to the bonus owed. Therefore, the payment of the bonus cannot be enforced.


Enforceability


The question that remains is whether plaintiff 1 can enforce the agreement or whether the agreement is void. For this, it must be examined whether the agreement is contrary to morality or public policy in its content or purport.


It is established that the parties' actions violate the Dutch Opium Act. This alone does not make the contract null and void. It depends on: 1) the interests protected by the violated rule, 2) whether fundamental principles are violated by the violation, 3) whether the parties were aware of the violation of the rule, and 4) whether the rule provides for a sanction.


The District Court of Northern Netherlands rules that the contract between defendant and plaintiff 1 is void. It takes into account that: 1) the purpose of the Dutch Opium Act is to protect public health and social safety, 2) fundamental principles (public health and social safety) are violated by the breach, 3) the parties were, according to the transcript, aware of the breach, and 4) breach of this particular section of the Dutch Opium Act is punishable by imprisonment or a fine.


Want to know more?


In the cited ruling, the agreement between the parties on the supply of joints and space cakes was declared null and void, with all its consequences. But what does this ruling mean for dealers in other cannabis products? Is the cited ruling cause for panic? Feel free to contact one of our lawyers.


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