SPAIN: Sub-distribution agreements – Unilateral Termination by the principal with short notice and no indemnities as agreed in the contract.

Ignacio ALONSO | SPAIN | 2008-12-15

Ignacio ALONSO

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The parties were Mr. Pedro Antonio (sub-distributor) and «Refrescos Envasados del Sur, S.A.» (RENDELSUR) (main distributor). Both parties had agreed in 1998 a sub-distribution contract for some products of Coca-Cola for which RENDELSUR had the distribution for the area of West Andalusia. The subdistributor had a limited area of activity in the city of Jerez de la Frontera and only with some specific clients nominated by RENDELSUR. In this contract, the parties included a clause permitting the unilateral termination with a previous notice of seven days with no indemnity.


RENDELSUR decided to terminate the sub-distribution agreement by giving to the sub-distributor the previous notice of seven days. The sub-distributor then claimed against RENDELSUR asking for an indemnity of 119.000 euro for the investments made and labour expenses, a second indemnity to be specified for moral damages and non obtained benefits and a third one of 45.000 euro for some dues amounts.


First Instance Court decided against sub-distributor arguing that the termination of the contract was decided according to what the parties had agreed: the previous notice was respected and no indemnity was due.


Provincial Court of Seville (Audiencia Provincial), in a decision of February 7th 2001 revoked the First Instance Court decision based mainly in an analogical interpretation of the Agency Act. This Court settled:


  1. Although the Agency Act is not directly applicable to distribution contracts, it has to be considered in order to interpret and integrate them.
  2. The termination of a distribution agreement can never be abusive and a seven-day period of previous notice is clearly abusive. According to this court, this clause was included in the contract because to the dominant position of the main distributor who imposed his criteria when negotiating the contract.
  3. To terminate a two-year agreement by giving a seven-day previous notice was contrary to the good faith, even if this respected what had been agreed by the parties,
  4. Considering that the annual net gains of the sub-distributor were of 72.000 euro for all the duration of the contract, a fair and prudential indemnity according to the Court were of 36.000 euro.


The Supreme Court (Sentencia number 652/2008) revoked the decision of the Provincial Court and confirmed the First Instance Court decision. The Supreme Court settled that the Agency Act can integrate distribution contracts when there is no provision in them concerning the termination of the relationship but Agency Act cannot be analogically used for the interpretation of a distribution agreement in a general way, particularly, what is foreseen for clientele indemnity in the Agency Act cannot be used as a general rule for distribution agreements. For this reason the clientele compensation of the Agency Act cannot be automatically or identically used for distribution agreements.


On the other hand, the Supreme Court has not considered contrary to the good faith, the law, the uses and the public order a termination notice of seven days with no indemnities. According to the Supreme Court a contract agreed by two independent undertakings, with good knowledge of the market in which they intervene, cannot be considered necessarily a result of a dominant position of the main distributor. For this reason it was not possible to conclude that the seven-day previous notice was an abusive clause. For this reason the Supreme Court settled that for distribution and sub-distribution contracts it must prevail and has to be respected what has been freely accepted by the parties.



Ignacio Alonso, IDI Country Expert for Spain.



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