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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
by International Chamber of Commerce (ICC)
IT IS AGREED AS FOLLOWS13
The Supplier grants and the Distributor accepts the exclusive right to market the products listed in Annex I, § 1 (hereinafter called “the Products”) in the territory defined in Annex I, § 2 (hereinafter called “the Territory”) to the customers (hereinafter called “Contractual Customers”), as defined in Annex I, § 3. Contractual Customers are all customers, except the Excluded Customers (if any) listed in Annex I, § 3.
If the Supplier decides to market any other products in the Territory, it shall so inform the Distributor in order to discuss the possibility of including such other products within the Products defined under Article 1.1. However, the above obligation to inform the Distributor does not apply if, in consideration of the characteristics of the new products and the specialization of the Distributor, it is not to be expected that such products may be marketed by the Distributor (e.g. products of a completely different range).
In carrying out their obligations under this Contract the parties will act in accordance with good faith and fair dealing.
The provisions of this Contract, as well as any statements made by the parties in connection with this distributorship relationship, shall be interpreted in good faith.
The Distributor sells in its own name and for its own account, the Products supplied by the Supplier.
The Distributor agrees to efficiently promote the sale of the Products in the Territory in accordance with the Supplier’s policy and shall protect the Supplier’s interests with the diligence of a responsible businessperson.
The Distributor has no authority to act in the name or on behalf of the Supplier or in any way to bind the Supplier towards third parties, unless previously and specifically authorized in writing to do so by the Supplier.
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The Distributor may, in exceptional cases in which it is not in a position to buy and resell, propose such business to the Supplier for a direct sale to the customer. For such activity as intermediary the Distributor will receive a commission as set out in Annex II, § 1 (if completed) or otherwise to be agreed upon case by case, to be calculated and paid according to Annex II, § 3. It is expressly agreed that such activity as intermediary, to the extent it remains of an accessory character, does not modify the legal status of the Distributor as a trader acting in its own name and for its own account.
Without the prior written authorization of the Supplier, the Distributor shall not represent, directly or indirectly, manufacture, market or sell in the Territory14 any products which are in competition with the Products, for the entire term of this Contract.
The Distributor is entitled to represent, manufacture, market or sell any products which are not competitive15 with the Products, provided he informs the Supplier in advance of such activityand provided the exercise of such activity does not prejudice the fulfilment of its obligations under this contract.
The Distributor declares that it represents (and/or manufactures, markets or sells, directly or indirectly) on the date on which this contract is signed the products listed in Annex III.
The Distributor shall set up and maintain an adequate organization for sales and, where appropriate, after-sales service, with all means and personnel as are reasonably necessary in order to ensure the fulfilment of its obligations under this Contract for all Products and throughout the Territory.16
The parties shall discuss in advance the marketing programme for each year. All advertising materials, including digital, must be approved by the Supplier in advance. The costs of agreed advertising and other marketing activities shall be shared between the parties in accordance with Annex IV, § 1 (if completed); otherwise each party will bear the marketing expenses it has incurred.
The Supplier shall provide Distributor, at Supplier’s discretion, with brochures, leaflets, technical and commercial information on the Products, as a support for its marketing activity. Parties shall agree on sharing possible costs of translation and adaptation of such materials. All promotional materials delivered shall remain the exclusive property of Supplier, undertaking Distributor to return them to Supplier upon contract termination.
The parties shall agree on their participation in fairs, exhibitions, and other promotional activities within the Territory. The costs of the Distributor’s participation in such fairs, exhibitions and other promotional activities shall be apportioned between the parties as indicated in Annex IV, § 2.
The parties may agree on a detailed marketing strategy on the basis of the indications contained in Annex V.17
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The Supplier shall supply all Products ordered, subject to their availability, and provided payment of the Products is adequately warranted. The Supplier may not unreasonably reject orders received from the Distributor; in particular, a repeated refusal of orders contrary to good faith (e.g. if made for the purpose of hindering the Distributor’s activity) shall be considered as a breach of contract by the Supplier.
The Supplier agrees to make its best efforts to fulfil the orders it has accepted.18
Sales of the Products to the Distributor shall be governed by the Supplier’s general conditions of sale, the currently applicable version of which is attached to this Contract (Annex VI, § 1). In case of conflict between such general conditions and the terms of this Contract, the latter shall prevail.19
The prices payable by the Distributor shall be those set forth in the Supplier’s price list in force at the time the order is received by the Supplier with the discount, delivery conditions and lead time indicated in Annex VI, § 2.20 Unless otherwise agreed, such prices are subject to change at any time, subject to one month’s notice.21
The Distributor agrees to comply, with the utmost care, with the terms of payment agreed upon between the parties.22
It is agreed that the Products delivered remain the Supplier’s property until the Supplier has received payment in full.23
The parties may agree annually on the sales targets for the forthcoming year.
The parties shall make their best efforts to attain the targets agreed upon, but the non-attainment shall not be considered as a breach of the contract by a party, unless that party is clearly at fault.
In Annex VII the parties may agree on a Guaranteed Minimum Target and on the consequences of its non-attainment.
The Distributor may appoint sub-distributors or agents for the sale of the Products in the Territory, provided the Distributor informs the Supplier before the engagement.
The Distributor shall be responsible for its sub-distributors or agents.
The Distributor shall exercise due diligence to keep the Supplier informed about the Distributor’s activities, market conditions and the state of competition within the Territory. The Distributor shall answer any reasonable request for information made by the Supplier.26
The Distributor shall exercise due diligence to keep the Supplier informed about: (i) the laws and regulations which are applicable in the Territory and relate to the Products (e.g. import regulations,[Page15:]labelling, technical specifications, safety requirements, etc.), and (ii) as far as they are relevant for the Supplier, the laws and regulations concerning the Distributor’s activity.
The Distributor is free to fix the resale prices of the Products, with the only exception of maximum sales prices that the Supplier may impose. The Supplier may indicate “non binding” resale prices, provided this does in no way limit the Distributor’s right to grant lower prices.
The Distributor may promote the Products through the Internet, but may not use the Supplier’s trademarks, trade names, symbols and other Intellectual property rights without previously agreeing in writing with the Supplier the details of such use.30
The Distributor shall use the Supplier’s trademarks, trade names and symbols for the purpose of identifying and advertising the Products, within the scope of this Contract.
The Distributor shall not register nor have registered on its behalf any trademarks, trade names, or symbols of the Supplier (or which are confusingly similar with the Supplier’s), or use such as domain names or metatags, in the Territory or elsewhere.31
The right to use the Supplier’s trademarks, trade names and symbols, as provided for under the first paragraph of this Article, shall cease immediately for the Distributor, on the expiration or termination, for any reason, of the present Contract.
The Distributor shall notify the Supplier of any infringement of the Supplier’s trademarks, trade names and symbols as well as of any act of unfair competition or illegal trade practice in relation thereto that comes to its attention.
Each party agrees not to disclose to third parties any Confidential Information disclosed to it by the other party in the context of this Contract in conformity with the ICC Model Confidentiality Clause at Annex VIII. This Article 14 survives the termination of this Contract.
The Distributor agrees to maintain at its own expense, for the whole term of this Contract, a stock of Products and spare parts sufficient for the normal needs of the Territory, and in any case at least as indicated in Annex IX.
The Distributor agrees to provide after sales service according to the terms and conditions set out in Annex IX, provided such Annex has been completed.
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The Supplier shall not, during the term of this Contract, grant any other person or undertaking (including a subsidiary of the Supplier) within the Territory the right to represent or market the Products. The Supplier shall furthermore refrain from selling to customers established in the Territory, except pursuant to the conditions set out under Article 17 hereafter.32
The Supplier shall be entitled to deal directly with the special customers listed in Annex II, § 2; in respect of the sales to such customers the Distributor may be entitled to a commission, if any, as provided for in Annex II, § 2. This article shall not apply if § 2 of Annex II (Special customers commission) has not been completed by the parties.
Whenever a commission is due to the Distributor, it shall be calculated and paid according to Annex II, § 3.
The Supplier shall provide the Distributor free of charge with all documentation relating to the Products (brochures, etc.) reasonably needed by the Distributor for carrying out its obligations under the Contract.33 The Distributor shall return to the Supplier, at the end of this Contract, all documents that have been made available to it by the Supplier and that remain in its possession.
The Supplier shall provide the Distributor with all other information reasonably needed by the Distributor for carrying out its obligations under the Contract including without limitation any information regarding a material decrease in its supply capacity.
The Supplier shall keep the Distributor informed of any relevant communication with customers in the Territory.
If the Supplier expects that its capacity of supply will be significantly lower than that which the Distributor could normally expect, it will inform the Distributor within a reasonable time.
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Each party may terminate this Contract with immediate effect, by notice given in writing by means of communication ensuring evidence and date of receipt (e.g. registered mail with return receipt, special courier), in case of a substantial breach by the other party of the obligations arising out of the Contract, or in case of exceptional circumstances justifying the earlier termination.
Any failure by a party to carry out all or part of its obligations under the Contract resulting in such detriment to the other party as to substantially deprive such other party of what it is entitled to expect under the Contract, shall be considered a substantial breach for the purpose of Article 20.1. above. Circumstances in which it would be unreasonable to require the terminating party to continue to be bound by this Contract, shall be considered as exceptional circumstances for the purpose of Article 20.1. above.
The parties hereby agree that the violation of the provisions under .................38 of the present Contract is to be considered, as a substantial breach of the Contract. Moreover, any violation of the contractual obligations may be considered as a substantial breach, if such violation is repeated notwithstanding a request by the other party to fulfil the contractual obligations.
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Furthermore, the parties agree that the following situations shall be considered as exceptional circumstances which justify the earlier termination by the other party: bankruptcy, moratorium, receivership, liquidation or any kind of arrangement between debtor and creditors,39 or any other circumstances which are likely to affect substantially one party’s ability to carry out its obligations under this Contract.
If the parties have filled in Annex XI, the Contract may also be terminated by the Supplier with immediate effect in case of change of control, ownership and/or management of the Distributor company, according to the provisions set forth in Annex XI.40
If a party terminates the Contract according to this Article, but it is thereafter ascertained that the reasons put forward by that party did not justify the earlier termination, the termination will be effective, but the other party will be entitled to damages for the unjustified earlier termination. Such damages will be equal to the gross profits of the sale of the Products for the period the Contract would have lasted in case of normal termination, based on the turnover of the preceding year, unless the damaged party proves that the actual damage is higher (or, respectively, the party having terminated the Contract proves that the actual damage is lower). The above damages are in addition to the indemnity which may be due under Article 21.
Upon expiry of this Contract the Distributor shall return to the Supplier all promotional material and other documents and samples which have been supplied to it by the Supplier and are in the Distributor’s possession.
At the Distributor’s option, the Supplier will buy from the Distributor all Products the latter has in stock, provided they are still currently sold by the Supplier and are in new condition and in original packaging, at the price originally paid by the Distributor. Products not so purchased by the Supplier must be sold by the Distributor in accordance with the Contract on usual terms.
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The parties may at any time, without prejudice to Article 23.2, seek to settle any dispute arising out of or in connection with this Distributorship Contract in accordance with the ICC Mediation Rules.43
Unless otherwise agreed in writing or regulated in the Supplier’s general conditions of sale, the sale contracts concluded between the Supplier and the Distributor within this Distributorship Contract will be governed by the United Nations Convention on Contracts for the International Sale of Goods (Vienna Convention of 1980, hereafter referred to as CISG), and to the extent that such questions are not covered by CISG and that no applicable law has been agreed upon, by reference to the law of the country where the Supplier has its business.
If the parties have not made a choice between the alternative solutions provided in Articles 12, 16.2, 16.3, 19, 21, 23.2 and 24.1 under the letters A and B, by deleting one of the alternatives, and provided they have not expressly made a choice by other means, alternative A shall be considered applicable.
The Annexes attached to this model form an integral part of the Contract. Annexes or parts of Annexes which have not been completed will be effective only to the extent and under the conditions indicated in this Contract.
This Contract replaces any other preceding agreement between the parties on the subject, except for any pre-existing confidentiality agreements.
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No addition or modification to this Contract shall be valid unless agreed in writing. However, a party may be precluded by its conduct from asserting the invalidity of additions or modifications not made in writing to the extent that the other party has relied on such conduct.
If any provision or clause of this Contract is found to be null or unenforceable, the Contract will be construed as a whole to effect as closely as practicable the original intent of the parties; however, if for good cause, either party would not have entered into the Contract knowing the interpretation of the Contract resulting from the foregoing, the Contract itself shall be null.
The present Contract cannot be assigned without the prior written agreement of the parties.
The English text of this Contract is the only authentic text.46
13 Parties may wish to include certain introductory paragraphs describing the history of their relationship, for example to state that the contract continues a prior relationship.
14 The distributor is therefore free to market competing products in other territories. In special situations (e.g., where a relationship between the distributor and a particular competitor of the supplier would substantially impair the confidence between the parties or negatively affect the protection of confidential information), the parties may agree to extend the non-competition obligation beyond the contractual territory.
15 In certain cases the parties may wish to extend the non-competition obligation to the sale of non-competing products supplied by a manufacturer who is a competitor of the supplier. Such prohibition may be justified in cases where a relationship with a competitor of the supplier may impair the confidence between the parties and/or conflict with the need to protect confidential information.
16 The parties may specify in more detail the obligations to be performed: e.g., the nature of the sales premises, qualifications of technical staff, number of sub-distributors, etc. (see also Article 15.2, below). They may also, if appropriate, cover this subject matter in a separate contract.
17 The parties may agree on certain marketing rules such as the Consolidated ICC Code of Advertising and Marketing Communication Practice published on 01/08/2011, available at http://www.iccwbo.org/advocacy-codes-and-rules/document-centre/2011/advertising-and-marketing-communication-practice-(consolidated-icc-code)/
18 It is understood that the Supplier is not obliged to supply the Products whenever their sale to the Distributor is prohibited under the applicable law (e.g. in case of sanctions, embargo, etc.).
19 This is the more frequently used solution, which corresponds to the needs of the Supplier. However, the Distributor may not agree with all the provisions of general conditions drafted by the Supplier, and may ask to modify clauses it considers too much in favour of the other party. Parties may also wish to consult the General Conditions of the ICC Model International Sale Contract, ICC Publication No. 738, available for sale at: http://www.iccbooks.com/Product/ProductInfo.aspx?id=686
20 The parties may incorporate the current price list (or a special price list) in Annex I, together with the list of contractual products..
21 It is usual that the supplier retains the right to modify prices, provided he or she gives an appropriate notice. However, an abuse of this right (e.g., an unjustified price increase with respect to a particular distributor) may conflict with Article 2. In order to avoid abuses, parties may agree that the distributor will be granted the most-favored customer condition.
22 Payment conditions will normally be governed by the Supplier’s general conditions of sale, or agreed upon case by case. Parties may however decide to expressly agree in the Contract on the payment conditions to be applied to future sales to the Distributor (e.g. payment by documentary credit, payment on open account possibly backed by a bank guarantee, payment by documentary collection). For further details, consult the ICC Model International Sale Contract, ICC Publication No. 738, available for sale at: http://www.iccbooks.com/Product/ProductInfo.aspx?id=686.
23 The effectiveness of this clause depends on the law applicable in the country where the goods are, and may therefore be invalid in certain countries.
24 A distinction is made between a ‘sales target’ (Articles 8.1 and 8.2) the non-attainment of which does not, in principle, involve a contract breach, and a ‘guaranteed minimum target’ (Article 8.3), which implies a possible contract termination (or other consequences) in case of non-attainment. The sales target is meant to give a realistic objective to pursue, whilst the guaranteed minimum should be the ultimate sanction against a distributor who is failing in the performance of its task. If the parties wish to agree upon such ‘guaranteed minimum target’, they must fill in Annex VII.
25 In certain circumstances it may be advisable to add a clause providing that each party agrees not to engage subagents and/or employees of the other party.
26 Parties are advised explicitly to address whether or not the customer list is included in the information obligation.
27 This clause is in accordance with Regulation 330/2010 and should therefore be used within the European Union. It may be useful to underline that under Regulation 330/2010 the distributor cannot be prevented from selling in territories that have not been reserved to the Supplier or granted to others on an exclusive basis.
28 This alternative is contrary to EU antitrust law, and should therefore be avoided in contracts with distributors of the European Union.
29 This means that the distributor must remain free to accept unsolicited orders from customers established outside the Territory (passive sales).
30 The supplier is entitled to ensure that the use by the Distributor of Supplier's trademarks for promoting the contractual products fully complies with Supplier’s prescriptions. However, using this right for the purpose of hindering the Distributor in its recourse to the Internet might be considered a restriction of competition.
31 It is of course preferable that the supplier registers its trademarks in the distributor's country. However if this is not possible (or too expensive), it is in any case important to provide an express prohibition, since under most trademark laws a registration made in breach of an express agreement may be invalidated. Moreover the prohibition also covers trademarks which are confusingly similar.
32 This alternative is contrary to EU antitrust law, and should therefore be avoided in contracts with EU distributors, as well as in contracts with distributors outside the European Union, if there is a risk that they might resell (in absence of the clause) within the EU.
33 Parties may further specify in the contract if such documentation should be adapted to the distributor's market or if the distributor should make the necessary modifications at its own expense.
34 This alternative A has been worked out in order to comply with the EU antitrust rules. Since Regulation 330/2010 does not allow the non-competition clause (Article 4 of the model contract) to last for more than five years and since this clause is essential for the performance of the contract, Article 19.A limits the contract duration to a maximum period of five years. Of course the parties may enter into a new contract at the end of the five-year period.
35 This alternative B is very similar to option A: the only difference is that the clause does not foresee the maximum duration of 5 years requested by EU antitrust law. This clause should be considered as complying with the EU antitrust rules if the market share of each of the parties does not exceed 15% on any of the relevant markets affected by the agreement (see Commission notice on agreements of minor importance, 2014/C 291/01).
36 The parties may of course agree on shorter or longer periods of notice. It is however recommended that the period should be long enough to allow the parties to adapt themselves to the new situation created by the termination. This necessity should in particular be taken into account when the distributor agrees to make substantial investments specifically for the sale of the goods of the Supplier
37 The alternative C may also be used when the parties wish to have a trial period. If they wish that after such period the contract will be for an indefinite time, they must change appropriately article 19.2.
38 The parties may make reference here to those articles for which a breach is considered of particular importance. This may be the case for Articles 4 (undertaking not to compete), 7.5 (respect of agreed payment conditions), 8.3 (guaranteed minimum target: if agreed), 13.2 (unauthorized registration of the manufacturer’s trademarks by the distributor) and 16 (respect of exclusive rights by the manufacturer). It is recommended that the use of this Article be limited to really important obligations only.
39 Although provisions of this kind are commonly found in distributorship and agency agreements, it should be reminded that in several countries clauses which provide for the earlier termination in case of bankruptcy or similar proceedings are unlawful under such law.
40 In such cases where the distributor is a company, the supplier may have entered into the contract in reliance on a particular individual remaining active within the organization. Annex XI can be completed to cover this situation.
41 This provision may be contrary to mandatory rules of certain countries. See Introduction, §5
42 This broad definition is meant to cover any compensation to be paid in case of contract termination, independent from a breach of contract by the supplier, including payments that are no defined as an ‘indemnity’ or ‘goodwill indemnity’.
43 The ICC Mediation Rules can be found on the web site http://www.iccwbo.org/products-and-services/arbitration-and-adr/mediation/rules/.
44 Parties should choose whether to appoint one or more arbitrators.
45 This model form has been prepared on the assumption that it would not be governed by a specific national law (as stated in alternative A of Article 24.1.). If the parties prefer nevertheless to submit the agreement to a national law, they should carefully check in advance, if the clauses of the model conform to the mandatory provisions of the law they have chosen.
46 If the contract is written in another language, this clause should of course be modified to indicate the language of the contract.