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SPAIN: Four interesting case law on agency and distribution contracts.

Termination in agency contracts, goodwill indemnity applied to distribution and right of information.

Ignacio ALONSO - 15.11.17
Country expert - IDARB Arbitrator

Agency agreements: contract for a fixed period which continues to be performed after the termination.

Article 24 of the Spanish Agency Act foresees that in case an agency agreement continues to be performed after its expiry, it will be transformed into an agreement with indefinite duration.

In a case ruled by the Provincial Court of Pontevedra (Judgement of April 21, 2017 rec. 75/2017), the court considered this circumstance but did not accept that the agreement was transformed into an indefinite duration one because there was not a real continuity of the previous one.

In fact the Court considered that there were only two new direct orders «not enough to consider them as “ordinary orders” that continue to be performed by both parties and the subsistence of the agency agreement with an indefinite duration». The fact that the Agent also performed other activities such as orders related to the previous period, indirect arrangements, some discounts to clients for previous purchases or reimbursement of merchandises, did not change the opinion of the Court. These activities were not considered a continuity of the performance of the agency agreement and, therefore, its duration was not transformed into indefinite.

On the other hand, the Court did not accept that considering that the agreement was exclusive, the Agent had the right to the commission for all the clients within the territory and for the periods after its expiration. This possibility is admitted by the Agency act for exclusive agreements, but limited to the duration of them. Given that the agreement had terminated and had not been transformed into an indefinite duration one, the commission could not be granted.

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Agency agreements: goodwill indemnity can be validly renounced after termination

Provincial Court of Pontevedra (Judgement April 21 2017 rec. 75/2017) has analysed a case in which an agent transferred his agency agreement to a different company. In the transfer agreement, the parties accepted a new duration of 2 years and expressly stated that they had nothing to claim to eachother when the two years will expire, except the commissions matured during this new period.

Upon termination, the new Agent claimed for the goodwill indemnity considering also the previous agreement, but the principal opposed arguing that with the transfer the agent had renounced to claim anything different to commissions during the new term.

The Court accepted this argument considering that the goodwill indemnity is a right that can be validly renounced to after termination, or used as a part of the negotiation.

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Distribution agreements. Analogy with Agency agreements: goodwill indemnity calculated on net margins, previous notice; obligation to re-purchase the stock.

The Supreme Court (judgement of May 19, 2017 nº 317/2017, rec. 3085/2014) has accepted the analogy with the Agency Act not only to goodwill indemnity but also to the previous notice. Goodwill indemnity should be calculated in reference to net margins. On the other hand, re-purchase of stocks is not a natural element of distribution agreements, but should be considered according to the circumstances of the case.

This case involved a Distributor, Maffinter Med SL, and a Manufacturer Grebünder Martin GMBH & Co KG for sanitary products. The parties agreed orally an exclusive relationship; it has lasted for several years, with no limited duration and with no previous notice for its termination. The court has stated:

The clientele compensation is due independently of the products involved (maxillofacial sanitary products) because the parties did not prove that the marketing of such products was not only intended to public institutions through a public contest without the possibility of direct purchase by the responsible persons and it was not impossible that the commercial activity of the Distributor continues to benefit the Manufacturer because the fidelity of the clientele.

In a distribution agreement clientele should be calculated not on gross margins (difference between purchase price and resell price), but on the net margins (those gross margins minus the necessary expenses —personnel, transports, financial expenses, and general expenses—). In this sense, the Supreme Court confirms its previous judgement of March 1 2017 commented in a previous IDI newsletter.

The obligation for the Manufacturer to re-purchase the stock is not a natural element of the distribution contract and, therefore, in the absence of a specific pact, it will be necessary to integrate the agreement according to the good faith principle and the circumstances of each case. For this reason the Court has considered that the fact that the Manufacturer did not deny the obligation of the distributor to keep some stock, its long duration, the exclusivity, and the absence of an adequate previous notice to terminate the agreement, were reasons enough to recognise the obligation for the Manufacturer to re-purchase the stock, but at the purchase price and not at the resale price.

The analogy with agency act also obliges the Manufacturer to grant a previous notice enough for the Distributor to reorganize its activity, and therefore, at least six months previous notice for agreements lasting more than six years. In the absence of such notice, the Distributor has the right to receive an indemnity including damages and benefits not obtained during the period not covered.

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Agency agreements: Information to the agent and the preparatory measures.

Article 15 of the Agency Agreement, in similar terms to what is foreseen in article 12 of the Directive, grants the Agent the possibility of asking the Principal its accountancy and information in order to verify all the necessary to calculate the commissions due.

In a decision of May 3, 2107 [nº 146/2017, rec. 188/2017], the Provincial Court of Madrid stated that this right cannot be used as a part of a preliminary and preparatory measures (diligencias preliminares). The Court considered that although the Agent is entitled to ask such information to the Principal, the procedural way to do it is not this specific procedure but the ordinary one. Agency Act does not foresees in its article 15 (as it is done in other pieces of legislation for patents or industrial designs) this concrete way to obtain such information.

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