Legal Updates

A non-exclusive distributor is not entitled to a notice period prior to the termination of the distribution agreement

July 2, 2019

A supplier decided to raise the price of the products it sells to its distributor and reduce the quantity of products sold to the distributor, due to failure of distributor to meet sales targets.
The Court rejected the distributor's claim and held that the actions are not a breach of contract by the supplier. An exclusive distribution agreement usually includes terms for the duration of the agreement, minimum quantities, provision of information by the distributor, a defined distribution territory and reciprocity as to exclusivity. In this case, the agreement did not explicitly address the issue of exclusivity and there was no date for commencement of exclusivity or its termination, and therefore this is not an exclusive distribution agreement. A price increase is not considered a breach of the distribution agreement, but in any event, the right to receive prior notice of termination of a distribution agreement exists only for an exclusive distributor as it is intended to enable the distributor to cover its expenses and organize its business towards the termination of the agreement.