Termination Of A Distribution Agreement

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A distribution contract is a contractual agreement whereby a manufacturer or supplier allows an external supplier to sell/market its products to consumers in a given geographic area. We see daily the results of distribution contracts with branded products sold at sites located in two locations, although the manufacturer or supplier maintains a small centralized operation. Products on the market range from high-tech electronics to high-fashion products to simple household products. The distribution contract itself serves as a “behind-the-scenes” agreement between the supplier and the distributor, which then enters into contracts with retailers or organizations that are in contact with the general public. The distribution contract is generally defined by the global delivery agreement and deadlines, with the actual terms of the distribution agreement and exclusivity or non-exclusivity included in the contract. A common area of concern during termination is the status of the extended customer base or client lists and how this information is handled if there is no specific clause to address the issue. It is clear that both parties have a stake in maintaining control or financial relations with the companies in the end-to-end distribution chain. The supplier wants to preserve the expanded market obtained by the distribution contract and distributors often want to restrict the use of customer information by suppliers. It is important to report on what each party learns through its relationship with the other.

A contract is considered indefinite if it does not provide for a specific duration or if both parties continue to fulfill the fixed-term contract at the end of its term. The directive sets minimum deadlines for termination of indeterminate contracts based on the termination date; That is, one month for the first year of contract, two months for the second year and three months for the third year and subsequent years. Parties should not agree on shorter notice periods. Under the directive, agents are entitled to charge commissions on transactions concluded at the end of the transaction, provided that (i) the transaction is primarily due to the representative`s efforts during the period of the agency contract and that the transaction was concluded within a reasonable time after the end of the contract; or (ii) the third party`s order for a transaction that would normally give the agent the right to charge commissions during the term of the contract entered into by the client or agent prior to the termination of the contract. Section 113/3 of the CBT also follows the same conditions. Distribution agreements, like other commercial relationships, should not be unlimited. They should be able to continue to exist as long as both parties have an agreement and the agreement complies with applicable legislation, but also allow the parties to terminate the agreement if it no longer serves its commercial purpose.

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