DISTRIBUTION AGREEMENTS – Goodwill indemnity: rejected, lack of evidences. Termination of long-term agreement without previous notice: indemnity calculated according to monthly average net benefit deducing financial, transport, personnel and general expenses.
The Spanish Supreme Court has examined in a Judgement of October 8, 2013 a long-term non-written distribution agreement in which there was an exclusive distributor (Dimac) and a German fish food Supplier (Sera GmbH) for the northern area of Spain (Catalonia, Basque Country and Galicia). The relationship lasted since 1988 and was terminated by the Supplier Sera in 2008 without any previous notice.
In its claim, the distributor asked for an indemnity of 273.057 euro because of the lack of any previous notice, and 546.114 euro for goodwill compensation (clientele). First Instance court rejected both claims: in order to consider goodwill compensation the distributor should have proved the clients and the future possible benefit for the Principal; and indemnity for the lack of previous notice was not accepted because this was not an automatic compensation but needed the damages to be proved and the distributor did not produce any evidence. High Court confirmed First Instance judgement.
Concerning goodwill compensation (clientele) the Supreme Court has accepted that it was not due because it was not proved which clients were produced by the distributor and could still produce benefits to the Supplier after the termination of the agreement.
Concerning the termination without previous notice the Court has established that, in fact, the lack of this previous notice in the termination of a distribution contract does not automatically imply damages compensation (in analogy with article 29 of the Agency Agreements Act). Nevertheless, the Court has clarified that this interpretation does not avoid that in long-term agreements (more than 20 years in this case) previous notice was needed according to good faith and loyalty in the commercial relationships. This means that the previous notice is normally required for these agreements in order to permit distributors to reorganise their commercial activity after such a long period and except if there is a reasonable motivation to not to send it.
The Court concludes that damages suffered because of the inexistent previous notice are not only those really produced (such as not amortized investments made by the distributor, for instance) but can also include the benefits not received during that period. And for this particular circumstance the Court revoked both previous judgements.
In order to calculate the benefits the distributor should have obtained during the previous notice period (considering the duration of the agreement the notice should have been sent six months before its termination) the Court has considered what it should reasonably have happened if the previous notice was given correctly. Then, the Court has granted to the distributor an amount of six-months benefits calculated on the monthly average net benefit during the last five years, calculated not only as the difference between the purchase price and the reselling price but deducing financial, transport, personnel, and general expenses. The amount of 273.057 euro demanded was therefore reduced to 65.444.
AGENCY AGREEMENTS – Expenses for promotion should be carried out by the Agent unless differently foreseen in the agreement.
The Spanish Supreme Court, in a judgement of November 28, 2013 has studied an agency agreement in which the Agent received from the Principal some amounts for the necessary expenses to be carried out for the organization by the Agents of some events.
Article 18 of the Spanish Agency Agreement Act states that the Agent will not have right to be reimbursed for the expenses of his professional activity, unless there is an agreement in a different sense.
Supreme Court decided that this is a rule governing the relationship between the Agent and the Principal concerning the expenses on promotion in the Agent activity. The Court has decided that, except if it was agreed in a different way by the Principal and the Agent, this one will not have the right to be reimbursed for the expenses of his professional activity and, in consequence, the Principal will not be obliged to pay them. And the reason to this is because these expenses are at the agent’s charge (except if agreed in a different way) according to Article 18.
Therefore, if the Principal anticipated the payment of these expenses and there is not an agreement on this subject, the Agent is obliged to pay these expenses back. The independence of the Agent as entrepreneur justifies this general rule if the parties have not agreed differently.
Ignacio Alonso , IDI agency & distribution Country Expert for Spain.