Vicissitudes of Distribution Agreements

distribution agreement


Does your distribution contract unilateral price increase by the manufacturer? Should compensation for unamortized investments? Can I claim for intimidation manufacturer?

Una vez transcurrida la “luna de miel” de los primeros años entre fabricante y distribuidor, es muy frecuente que las disputas vinculadas a distribution contracts end up in court.

A "maneuver" that are not normally expected in the drafting of contracts is the unilateral price increase by the manufacturer, que puede dejar al distribuidor fuera de mercado.

The Supreme Court has solved one of these cases at its Judgment 30 May 2016, in which his doctrine is manifested on several key points.

In 1996, known manufacturer Brugal rum, He signed a contract with Zamora Distribuciones de Bebidas S.L.. (hereinafter Zadibe) whereby the first designating the latter as exclusive distributor Spain and Andorra for certain products.

Both sides were forced exclusively in products and agreed territory.

Zadibe purchase prices and the conditions indicated in the price list and Brugal should forewarning with a minimum of four months of their entry into force any change in its price list.

The marketing plan would be agreed and paid to 50% by Zadibe and Brugal.

They were agreed as grounds for termination of contract breach or insolvency of either party, but no unilateral withdrawal or the notice should be made with which foresaw.

January, 2002, Brugal, Zadibe y Diego Zamora S.A. (hereinafter DZ) agreed that Zadibe, with full consent of Brugal, cedía a DZ su todos los derechos y obligaciones de su distribution agreement.

In May 2006 It sets one price increase amending box Ron Brugal Añejo passes 24 dólares a 40.80$ y el Ron Extraviejo pasa de 37$ a 58.60$.

The Brugal brand was not known in Spain thanks to the work of its distributor, came to have a 20.4% share on the Spanish market.

En febrero de 2008, DZ receives burorax Brugal by which it was terminated the distribution contract.

DZ filed a complaint against Brugal by breach of contract distribution and abuse of rights, seeking millions in compensation consistente en:

  • 32.020.449€ for the annulment of defects of consent economic conditions imposed 2006.
  • 343.290.447€ por la ruptura del contrato de distribución.
  • 13.600.811€ for unamortized investments.

Brugal he opposed and made counterclaim against € 8,594,411 in respect of non-compliance by DZ of its obligation to pay advertising costs.

The judgment of the first instance dismissed requests for damages and claim only estimated € 13,600,811 in investment unamortized. Also he rejected the counterclaim.

Ambas partes recurrieron y la Audiencia Provincial fijó una indemnización por clientela de 28.606.296€. Revocó la indemnización por inversiones no amortizadas y desestimó la reconvención de Brugal.

Both DZ as Brugal present two special resources for procedural infringement and cassation.

The Supreme Court rejects all resources and confirms the judgment of the Provincial Court of Madrid of 10 September 2013, and highlights the following puntos clave del contrato de distribución.

1.- On bullying in the trade

DZ alleged infringement of Article 1.267 C.C. and doctrine, considering that there is intimidation when one party accepts a contract modification that harms in order to avoid serious harm whose occurrence depends on the contrary.

For the Board, under Article 1.267 C.C., hay Bullying inspires when one party founded a rational fear and suffering a bad imminent and serious in his person or property. The requirements are:

  1. Agreeing in a rational state of fear and founded.
  2. The fear stems from the threat of a bad qualified.
  3. Existence of a causal link between the threat and consent.
  4. The threat must be culpable or willful and unfairness.
  5. The threat must be caused by the other contracting party or by a third.

In this case, not those conditions are satisfied: Se celebra el contrato entre dos empresarios sin que sea presumible una situación de desigualdad o de subordinación económica (It must be alleged and proven). Even we are faced with general conditions of contract.

“(…..) the grantor contact the dealer who wants to review the agreed conditions and warn that, do not reach an agreement, can grant distribution to a third party who has agreed improved economic conditions can not be considered intimidation (….)”.

2.- On compensation for customers

DZ claims that should be compensated on the basis of gross margin, undiscounted advertising and marketing expenses.

For the Board, Article 28.3 LCA set to limit the average annual amount of remuneration received in the last five years: It does not indicate gross remuneration should apply, but that's the limit. And the analogous application of the rules of the LCA the distribution contract is not absolute or automatic, but must take into account the peculiarities of the same. In this regard cites the STS 296/2007 of 21 March stating that in these cases, compensation should be calculated on the net remuneration, namely, sobre el porcentaje de beneficio que le queda al distribuidor tras descontar gastos e impuestos. Therefore, given how good the test applied by the Provincial Court.

3.- Sobre la indemnización de las inversiones no amortizables

DZ alleges infringement of Article 29 LCA for compensation for investments not been accepted unamortized.

For the Board, should compensate investments imposed by the main, carryforwards in the future development. No son indemnizables las inversiones no amortizables como puedan ser las inherentes a las ventas. Y según los hechos probados en la Audiencia Provincial, the contribution of the distributor to advertising and marketing expenses were not imposed by the manufacturer, but it was a covenant freely accepted by the parties.

Ultimately, all resources are rejected and se confirma la Sentencia de la Audiencia Provincial de Madrid que establece una indemnización por clientela de 28.606.296€ por la rescisión unilateral del contrato de distribución y rechaza el resto de peticiones.

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