SPAIN: Car distribution agreement. Termination respecting previous notice. Contractual clause excluding the clientele compensation.

Ignacio ALONSO | SPAIN | 2009-07-23

Ignacio ALONSO

View CV

The parties, DARIO RODRÍGUEZ RAMÓN, S.A. (Distributor) and FABRICACIÓN DE AUTOMÓVILES RENAULT ESPAÑA S.A. and RENAULT ESPAÑA COMERCIAL, S.A. (Principals) had signed a car distribution contract in January, 1st 1991. In this document the parties agreed upon the possibility of unilateral termination by a one year’s previous notice to the other party with the exclusion of the clientele compensation. RENAULT (Principal) had respected this previous notice in order to terminate the agreement. The Distributor sued then the Principal asking for a clientele compensation due to the duration of the agreement and based on an analogous interpretation of the Agency Act which foresees a specific compensation in these cases (one month of remunerations for every year of duration of the agreement with a maximum of six months). The agreement was terminated in June 1996 with effects in June 1997.

First Instance Court in a judgment of April 1st 2001 considered that the agreement was, in fact, an agency agreement and condemned RENAULT to the payment of 1.7 M€ and a compensation for the business lost after the termination.

The Provincial Court of Almería (in a judgment of September 13th 2002) modified the nature of the contract, stating that it was in fact a distribution contract and not an agency one. The Provincial Court considered the faculties the Distributor had in order to resell and to manage its own business, the benefit obtained by the difference in the purchasing price and the reselling price and the assumption of the risks of the business. The fact that the Principal had a special supervision on the Distributor’s activity and that the contract had a maximum resale price for the cars has not been considered an essential element in order to consider it as an Agency one. The Provincial Court has also partially accepted the arguments of the Principal and condemned RENAULT only to the payment of some damages due to the fact that the Distributor was not able to attend the demand for the distribution of cars because of the unjustified delay in the delivery.

In this sense, the Provincial Court has also examined the notice clause (one year) included in the contract and the clause excluding the clientele compensation (clause 11 of the contract). The Court decided that those clauses were admissible and valid provided that the party terminating the contract did not abuse of its rights and according to the general principles of good faith.

For this reason, the Court also examined if the termination respected these principles and considered that the activity of the Distributor was not satisfactory to Renault because the number of cars sold was less than the annual objective and was lowering every year and the market penetration index was under the national and regional average. Also the spare parts market was, in general terms, under the fixed objectives . This situation was not accepted by RENAULT as it was clear in the correspondence between the parties. All these elements examined, Provincial Court considered that the termination of the agreement could not be considered as abusive or against good faith and, therefore, the clientele compensation was not due.

The Supreme Court in the judgment of January 21st 2009 has regarded the agreement as a distribution one with no doubt: the distributor purchases and resells the cars on his own account.

This said, the Supreme Court has considered that there was no reason to the automatic analogous application of the Agency Act. On the contrary, the Court states that the point is to determine whether or not the termination provoked damages to the Distributor or whether or not, the compensation was justified by an unfair enrichment of the Principal with the possibility, if it was the case, of applying the criteria of the Agency Act as an orientation. The Court has clearly stated that the party asking for that compensation has to prove the increase of the clientele and the potential future benefit for the Principal. According to this criteria, Ordinary Courts have to balance all the circumstances, particularly the integration of the distributor in the distribution network in order to fix the compensation.

With regards to the clientele compensation, it is also relevant to consider the importance and the reputation of the Principal, the cost of the advertising campaigns and the fidelity to the brand (particularly in car distribution) which produce higher benefits for the distributors. For these reasons the clientele cannot be easily considered belonging to the distributor and in case the distributor asks for a compensation, the increasing of the clientele has to be proved: the distribution contract does not imply automatically a clientele compensation in case of termination of the contract unless the distributor proves that the clientele is due to or has sensibly increased thanks to his activity and that the Principal will benefit, after the termination of the agreement, of such clientele and of the clients network created by the distributor.

The Supreme Court has finally confirmed that the contractual exclusion of the clientele compensation by respecting the agreedprevious notice was admissible in a distribution contract (this clause is not contrary to the law, the moral or the public order and it does not imply an abuse of one party to the other), differently to the Agency Agreements Act where this compensation is compulsory and cannot be excluded by the parties.



Ignacio Alonso, IDI Country Expert for Spain.



Print this article