Termination Of The Distribution Agreement

Under Turkish law, Article 123 of the Turkish Commercial Code (“TCC”) [3], which governs the agency relationship, provides that the parties may agree on a non-competition clause after the cessation of competition, provided that the agent is adequately compensated. The competition agreement must be in writing and a written document containing the provisions of the contract and signed by the contracting entity must be given to the representative. Such an agreement can only be concluded for a maximum period of two years from the date of termination and should be limited to the geographical area or group of customers entrusted to the agent and the type of goods covered by the commercial agent contract. Council Directive 86/653/EEC[4] (“Directive”) also contains similar provisions, with the exception of the payment of appropriate compensation to the intermediary, but allows national law to impose other restrictions. A common issue when terminating is the status of extended customer or customer lists and how this information is handled when no specific clause addresses the issue. It is obvious that both parties have a legitimate interest in maintaining control or financial relations with the companies in the final distribution chain. The supplier wishes to maintain the expanded market obtained by the distribution contract and distributors often wish to limit the use of customer information by the supplier. It is important to consider what each party learns because of their relationship with the other. In 1996, a Spanish supplier entered into an exclusive distribution agreement with a Polish distributor (the “Agreement”).

The agreement concerned the distribution of mint suckers and dredges. The distributor was required not to distribute lollipops other than the contract products. However, the distributor was free to distribute products from other manufacturers, and it did. [4] Council Directive 86/653/EEC coordinating the laws of the Member States relating to self-employed commercial agents was published on 31 December 1986. Article 20 of the Directive contains the provision on the placing to competition of agents after obligations linked to the end of the procedure. The English version of this Directive is available at eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:31986L0653&from=EN (available on 09.07.2015). When a supplier or distributor uses legal advice to create a new distribution contract, the first thoughts focus on customer-specific issues. Is a boilerplate general contract sufficient or does the customer want/need a contract specific to their sector or business relationship? When reviewing a distribution agreement, the parties must have done their homework. Is this a situation where the other party has shown that they can play well with others? Did a lawyer ask to intervene in the contract? Do you know if a page has an established history/reputation compared to its previous distributors or previous distribution contracts? You may have the best product in the world, but if the supplier`s story at the conclusion of each distribution agreement is a scorched earth story, you may want to pass on the distribution. Is the supplier willing to share some “control” with the distributor or will it be “its way or the highway”? Specific issues to be included in the contract include the duration of the contract, the service required, exclusivity or non-exclusivity, the definition of territorial restrictions, the definition of the transfer of materials and the specific definition of the conditions of sale. In addition, such contracts should include specific conditions for authorised or necessary marketing and advertising, the necessary coverage of activities and sales, the consideration of what is considered to be competition independently of exclusivity decisions, concerns about trademarks and intellectual property concerns, as well as traditional choice of law provisions, both for the interpretation and for the application of the contract.

. . .