SPAIN: Distribution agreement – Unilateral termination of a non-written agreement by the principal with short notice given to the distributor.

Ignacio ALONSO | SPAIN | 2008-11-17

Ignacio ALONSO

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The parties, MILA POBLET, S.A. (Distributor) and AUTOMÓVILES UTILITARIOS, S.A. (Principal) had agreed a non-written agreement in 1989. This agreement had an indeterminate duration and was the continuation of a previous relationship between the same Principal and Mr. M. -the sole administration of MILA POBLET- as agent since 1966.


By an oral communication in April 23rd 1997 and confirmed by a letter sent in May 7th of the same year, the Principal decided the immediate termination of the exclusive distribution agreement. The Principal had granted to the Distributor the possibility of continue the relationship as sub-distributor.


The First Instance Court accepted that the non-written agreement was a distribution one and that the termination was decided by the Principal with a fair previous notice and the Distributor had not the right to the clientele compensation because the Principal will not benefit of the clientele obtained by the agreement: (i) the Principal had not announced his intention to directly sell his products to the final clients in the area of the exclusivity, and (ii) the Principal had not denied to the Distributor the possibility of acting as sub-distributor and still selling the products buying them directly from the new distributor.


The Provincial Court of Barcelona in a sentence of November 13th 2000 revoked the First Instance Court decision because it considered that, according to the Supreme Court case-law, the Agency act can inspire the termination of distribution contracts. For this reason, this court considered that the termination notice was not fair due to the short term, and admitted the clientele compensation based on the gross margin of the distribution in the last five years.


The Supreme Court in the commented sentence of March 26th 2008 confirmed the decision of the previous Court and reaffirmed its position on the distribution agreements and the analogous application of the Agency Act.


Concerning the previous notice given by the Principal to the Distributor, the agreement did not include any special time. Therefore, the Supreme Court considered that although the delays mentioned in the Agency Act (article 25.2) were not automatically applicable to the exclusive distribution agreements a verbal communication in April 23rd and a subsequent confirmatory written communication in May 7th deciding the immediate termination of the agreement were not enough for a contract from 1989 to 1997.


Concerning the clientele compensation and the analogous application of Article 28th of the Agency Act, the Supreme Court considers that this Article it is not automatically applicable to a distribution contract. Nevertheless, in several decisions the Court has been favourable to the application of this disposition to the distribution contracts when it has been proved the creation of a clientele that could be exclusively benefited by the Principal. The possibility of a compensation for the clientele is therefore admitted for the distribution contracts according to the nature of this kind of contracts, the unfair enrichment theory and according to the good faith principle. For this reason, if the increasing of the clientele and the beneficial effects for the Principal have been proved, it will be possible the analogous application of the idea inspiring Article 28th of the Agency Act. And this will be the case not only if the Principal decides to sell products directly to final consumers but also when the Principal nominates a new distributor who will receive the clientele created by the previous distributor.



Ignacio Alonso, IDI Country Expert for Spain.



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