Distribution Agreement Termination Compensation

17 Sep Distribution Agreement Termination Compensation

If both parties have fulfilled their obligations under the treaty and are satisfied with the performance of the other party, the cancellation agreement may include a settlement clause exempting the parties from their obligations and obligations under the treaty, subject to the conditions of the applicable law. The applicable law and the competent court may derogate from that of the main contract. After 10 years, the contract was terminated by the contracting authority, the contracting authority having decided to stop the sale of EasyresearchTM and instead focus on other products. The dealer claimed compensation of approximately 20MNOK, without success. His appeal was rejected by both the Municipal Court and the Court of Appeal. Both courts based their decision on the text of the agreement, which limited the right to compensation to the continued sale of the EasyresearchTM product. The implementation of a cancellation contract is one of the methods used to terminate a contractual relationship between the parties. The advantage over a unilateral declaration of termination by one of the parties is that it ensures that the rights and obligations of the parties are fulfilled under or in connection with the contract, and that it also regulates the post-contractual relations between the parties. Convinced that the notice period of only two months is not contrary to the principle of good faith, Ear brought an action against GP to claim damages caused by this situation. In addition, no courtesy compensation is due if the distributor has terminated the distribution contract himself, unless such termination is justified by reasons that the supplier must defend (e.g. B a breach of the exclusivity granted to the distributor by the supplier). Due to the limited jurisprudence of the Federal Court, there is legal uncertainty as to what “significant expansion” means. Two factors seem to prevail: on the one hand, the absolute number of customers and, on the other hand, the turnover achieved with these customers.

The customers present at the beginning of the distribution relationship must be compared to the customers at the end of the contract. The difference must be positive. In summary, the distributor did not provide evidence of its damage caused by the early termination of the distribution contract or, at the very least, to provide sufficient information to enable the judge to assess the damage suffered. Consequently, the action for damages was dismissed in its entirety, irrespective of the fact that the Court of Appeal had previously found that the distribution contract had been terminated by the supplier in breach of contract. On 3 January 2018, the Federal Court adopted a new judgment on the termination of an exclusive distribution contract (judgment 4A_27/2018). The decision focuses on the evidence of damages related to the early termination of a distribution contract. In addition, proof of the annual net profit linked to a right to compensation for goodwill is examined in accordance with Article 418 J of the Swiss Code of Obligations (“OR”). The new decision is of great interest, especially since decisions of the Bundesgericht on allocation are quite rare.

4- Be careful in creating clauses regarding compensation. Distribution channels and methods are changing. Products change. Businesses are changing. And the relationship between the parties who enter into a contract is often very different from the one they have when a contract is terminated. . . .