In Spain, a distribution contract includes the identity of the parties and a rigorous description of the goods/services (for reasons related to guarantees and hidden defects) as well as the following:
Main obligations of the parties
Obligations of the distributor
- To pay the good/services purchased from the supplier according to the terms foreseen by the parties: determination of the method of payment, of the payment deadlines, of the payment guarantees, etc.;
- To comply with the obligation of a minimum purchase, if this term has been foreseen;
- To inform the supplier about product defects or about prejudice (damage) to the market in the supplier´s territory; and
- To respect the confidentiality of information exchanged between the parties.
Obligations of the supplier
- To deliver the goods according to the conditions laid down by the parties (delivery method, delivery times, etc.);
- To provide the distributor with samples of the product and technical assistance; and
- To train the distributor on marketing methods and product advertising techniques.
Exclusivity in the distribution relationship
It is possible and actually very frequent to provide for an exclusive distribution in two ways. First, the distributor is the only authorised seller of the supplier’s products in a particular territory (the provider may not sell its supplier in that territory). Second, the distributor is only authorised to sell the products of a given supplier. Please note that it is possible to consider a combination of these two techniques.
Protection of industrial and/or intellectual property of the supplier
It should be explicitly included that the supplier is the holder of the industrial and intellectual property rights, but it is also necessary that the supplier register the trade mark of all the goods being distributed in Spain.
Grounds for termination of the Distribution contract
Besides non-compliance with the obligations that the parties define as an essential cause of termination of the distribution contract (undoubtedly it is possible to negotiate the causes of termination), it is also important to address other elements regarding termination such as:
- Setting a notice period before considering termination or non-renewal of the contract and the form of notice (for example, via registered letter with acknowledgment of receipt);
- Returning the goods that were not sold at the time of termination;
- Payment of the amounts due and not paid yet; and
- Allowances in case of breach of contract or waiver of indemnities (to be exact, as provided by Article 28 of the Law on Agency contracts, when the law applies, it is not possible to forego the compensation for providing costumers).
The fact that half of international contracts are distribution contracts highlights the importance and the success of this means to internationalise trade by building up a local clientele thanks to a distributor’s network. Nevertheless, in order to address the essential clauses, to adapt to local practice and to optimize one´s export strategy, it is preferable to turn to a local law firm.
This article is not considered as legal advice