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Cancelling A Distribution Agreement

If the behavior of the parties indicates a distribution relationship (for example. B if exclusivity was agreed orally), this would mean that a distribution agreement could be implied and that termination clauses would be subject to the common law for implied contracts. This newsletter deals with the balance between distributor protection and contractual freedom in civil and common law jurisdictions and sets out some fundamental principles to be respected before triggering the termination of this distribution contract. Regardless of the type of distribution agreement to be negotiated, it is advisable to specify, during the preparation, what type of agreement will be concluded and to include in the agreement explicit provisions on termination. Distribution agreements may apply for a fixed or indefinite period and may or may not be exclusive. In the absence of a specified period of time, as described in the termination clause of the agreement, some states require up to 90 days` notice for the termination of a distribution agreement. The agreement may also require one of the parties to compensate the other for income lost as a result of the termination. A supplier wants to keep control of its distribution network, with the ability to redefine zones, change product offerings, prices and sales targets. Although the possibility of modifying these aspects of a commercial agreement may be incorporated into a distribution agreement, a distributor will generally object to any modification to the extent that it attempts to redefine the commercial agreement entered into by the parties at the beginning of the relationship.

A distributor will want to retain the flexibility to bring the best products to their customers, with a healthy profit margin, and if a supplier or distributor is looking for legal advice on entering into a new sales contract, early thinking focuses on customer-specific issues. . . .