Termination Agreement Distribution

In November 2016, the District Court again rejected the appeal in its entirety, a decision this time upheld by the Zurich Cantonal Court of Appeal in November 2017. With respect to claims, the Court of Appeal argued that the information provided by the distributor was not sufficient to assess the prejudice suffered by the judge. In addition, the Court of Appeal found that the conditions for the similar application of Article 418U CO (i.e. the legal basis for goodwill compensation under the Swiss agency) to the aforementioned exclusive distribution relationship were not met. In particular, if the agent is deprived of the commission to which he would normally be entitled while the awarding entity derives benefits related to the agent`s activity or if he has not been able to depreciate the costs and costs incurred for the performance of the contract on the advice of the awarding entity, that agent would be entitled to compensation for the damage suffered. Too often, the quality of a contract is defined by the problems posed by poor drafting. Even the best-placed plans can contractually turn into a disputeland in the event of unforeseen problems or relationship breakdowns. The formation of distribution contracts requires not only foresight and experience in potential problems, but also a healthy relationship between the parent company or supplier and the distributor. Legal guidelines can help parties avoid these pitfalls. The development of a framework to deal with common contractual issues specific to distribution contracts is both possible and necessary. In these circumstances, a distributor may be entitled to goodwill compensation, provided that: 1) the distributor`s activity has significantly expanded the customer base; 2) the supplier benefits from the acquired customer base, even after the termination of the distribution report; 3) if such goodwill compensation is not unjustified. 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. As you can see, there are many factors to consider when creating a well-suited distribution contract. You must consider and deal with a variety of facts, contingencies, regulations, statutes, business practices and many times the egos of the parties. More than nothing, the provisions that are originally considered minor or axiomatic become major problems on the road. This can be avoided by transparency and planning in the initial phase of contract negotiations. As a lawyer, you need to take the time to work closely with your client to ensure that their needs are met, but also that their backs are covered. This way you will have curry favors with your client and let them go back to what they do best without worrying when they make a „bad deal“.

Termination agreements generally contain provisions governing dener, non-competition rules, confidentiality, value compensation, inventories, conditions and essential notices for agency and distribution contracts. In accordance with contractual freedom, the provisions may be extended to cover certain other matters depending on the nature of the main contract and the intent of the parties.

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Christoph