The Maritime and Commercial High Court of Copenhagen, Denmark, has ruled that a supplier may claim damages as a consequence of a distributor's non-fulfilment of its minimum purchase requirements - but the parties must clearly state this in the agreement.
In an exclusive distributor agreement, the exclusive distributor is often obligated to fulfil minimum purchase requirements. If the distributor does not fulfil these requirements, it will be considered a breach of the agreement. However, the question is also whether the supplier may claim compensation for its loss of gross margin if the exclusive distributor fails to fulfil the minimum purchase requirements. Recently, the Maritime and Commercial High Court decided on this question.
The supplier and the exclusive distributor had agreed on minimum purchase requirements. These requirements were specified in an appendix to the agreement. It was also stated that the supplier could terminate the agreement at a reduced notice if the exclusive distributor was in breach of the minimum purchase requirements.
For some time, the exclusive distributor had not purchased the agreed minimum quantities. When the agreement expired, the parties discussed whether the supplier was entitled to damages for loss of gross margin as a consequence of the exclusive distributor's non-fulfilment of the minimum purchase requirements. The gross margin was estimated at approx. EUR 700,000.
The dispute was brought before the Maritime and Commercial High Court in Copenhagen, which found that the appendix to the agreement stipulating the detailed requirements for minimum purchase was not sufficiently binding for the exclusive distributor's non-fulfilment in itself to form the basis of the supplier's claim for damages.
The Court thus found that the supplier could have claimed damages if the appendix had been of a more binding nature.
It must therefore be concluded that if a supplier is to be able to claim damages for loss of gross margin as a consequence of an exclusive distributor's non-fulfilment of the minimum purchase requirements, this must appear explicitly from the agreement - if not, it cannot be expected that a Danish court will award damages to the supplier.
Peter Gregersen, IDI agency & distribution country expert for Denmark