The termination of a distribution contract does not have its own legislation in Spain. According to jurisprudence and concretely as per the case of the Madrid Provincial Court of 20 February 2012, in this type of contracts «The dealer or the distributor acts in his name and on his behalf». In other words, the distributor buys merchandise at his own risk and resells it. His own remuneration comes from the price supplement on the original price.
Characteristics of the distribution contract
Several characteristics can be observed in this type of contract:
- It must be consensual and synallagmatic (bilateral) as it contain rights and obligations of each party.
- It can also include a «preference agreement in favour of the distributor» (a right of first refusal) either active, borne by the grantor, or passive, borne equally by both parties.
It is also important to highlight that a written contract is not a formal requirement although it is highly recommended in order to avoid possible future conflicts arising in case of termination of the contract.
The termination of a distribution contract
The distribution contract can have limited or unlimited duration and the consequence of its termination is that the relationship between the parties will cease to exist.
Because there is no legislation nor is there unanimous consent among the jurisprudence about the resolution of conflicts regarding the termination of distribution contracts, those must be addressed by the parties and their representatives. For this reason it is important to regulate and set up dispute settlement.
In this sense, the notice period contract clauses or exclusivity and non-jurisdiction agreements, inter alia, are fundamental.
The possible causes of termination of a contract are the following:
- Expiry of the period as per in the contract
- Failure to comply with the requirements of the contract
- Other possible causes: for example, the supervening illegality and impossibility of the object. It frequently occurs, and it is thus significant, that the parties decide to include causes of termination of the contract in the contract itself such as the failure to respect the accessory obligations which, if not previously established by the contract, will result only in the possible award of damages and interests.
For further information on trade contracts, do not hesitate to contact us.
This article is not considered as legal advice
Roxane Umba Wa & Nicolás Melchior