The general rule for this kind of indefinite agreements permits the parties to freely and unilaterally terminate the agreement with no reason but giving a previous notice even when the agreement does not foresee it. The absence of this previous notice can be seen as an abuse of right or an unfair behaviour and although the termination of the agreement would be valid, the indemnity for damages could be demanded. Also in this sense, the Provincial High Court of Barcelona (Audiencia Provincial) in a Judgement of April 30th 2013 has also analysed the situation in a distribution agreement for indefinite duration. In that case, the parties had agreed a previous notice term in order to terminate the agreement that the Principal had respected. Nevertheless, the Court has stated that such notice was given only apparently because once the notice was sent, the principal took immediately the necessary steps in order to substitute the distributor. This behaviour has been considered contrary to the good faith and implied the, de facto, breaching of the contractual obligations and the damages indemnity.
Distribution agreements. goodwill (clientele) indemnity: acceptance, analogy with agency agreements and need of evidences.
The Provincial High Court of Zaragoza (Audiencia Provincial) in a Judgement of June 18th 2013 has confirmed that the goodwill indemnity (clientele) responds to an idea of material justice in order to compensate the damaged party at the occasion of the termination of a contractual relationship in which it has been developed an activity in benefit of the principal and the creation of a fond de commerce that will be lost for the Distributor but will continue to benefit the Principal. The duration of the distribution agreement is essential. Considering this duration and depending on the economic market concerned, the mere existence of the agreement could even have an incidence in the survival of the distributor’s company. In fact, these circumstances imply that it could be difficult to know who has generated the clientele and the fond de commerce: this will not only depend on the activity of the Distributor but also on the quality of the products, the speed with the replacements, commercial warranties, advertisings, circumstances that are usually are more connected to the Principal activity than the Distributor’s.
In distribution agreements the analogy with agency agreements has been accepted for goodwill compensation as inspiring principle. But obviously, such compensation is only acceptable when there is a loss of such clientele and fond de commerce as a consequence of the termination of the agreement and a subsequent benefit for the Principal. Nevertheless, this analogy cannot be applied automatically and particularly when there has been a default by the distributor. The case law is also clear when it requires that a plaintiff who seeks compensation for clientele should prove and quantify the effective contribution of customers and the potential use by the Principal.
Ignacio Alonso , IDI agency & distribution Country Expert for Spain.