Distribution Agreement

Damages awarded to exclusive Distributors

It should be noted that most contracts entered into between foreign companies and Spanish Distributors are oral agreements and that, therefore, they are deemed effective for an indefinite period of time. In such cases, the Courts acknowledge that any of the parties may terminate the contract without necessarily resulting in damages to the Distributor.  

Nevertheless, the Distributor is deemed to be entitled to damages when advance notice previously provided for in the agreement is not given and when termination by the supplier is abusive or arbitrary.

In addition to damages for lack of advance notice, the Courts are likewise acknowledging a sort of customer portfolio compensation when the Distributor can prove that it has acquired new customers for the Principal and that the Principal continuous to benefit substantially from its business with said customers. In many cases said compensation is estimated on the Distributor’s average gross margin (depending on the case), even if the future trend of Court judgements will be not to rely as much on objective calculations as to acknowledge solely the actual damage resulting from termination of the relationship.