Part I: Legislative framework
Q1. Please specify the legislative framework generally applicable to the conclusion and execution of distribution agreements (a)? Please include a link to the official publication of the applicable rules (e.g., relevant link to the Official Gazette) (b) and, if available, to the English translation of the legislative framework (c).
a. Legislative framework:
Distribution agreements are not specifically regulated under Polish law, which means they fall into the broader category of the so called “unnamed agreements”. They are thus governed by the general provisions on agreements provided in the Polish Civil Code (“CC”), in particular the provisions on the conclusion of agreements (Art 66-72 CC1) and the performance of obligations (Art 353-396 CC). However, depending on the features of a distribution agreement concerned, the provisions on certain regulated (specified or “named”) agreements may apply, in particular the provisions on the sale (Art 535-602 CC), supply (Art 605-612 CC), contract farming (Art 613-626 CC) and consignment (Art 765-773 CC) agreements.
b. Link(s) to official publication:
The Polish version of the CC is accessible via the Internet System of Legal Acts (ISAP).
c. Link(s) to English translation:
No official English translation available.
Q2. Other than for agency agreements pursuant to Directive 86/653 (EEC) on the coordination of the laws of the Member States relating to self-employed commercial agents, are there specific rules depending on the distribution format (e.g. franchising, exclusive distribution)?
If yes, which specific rules apply (a)? Where available, please also include a link to the official publication of the applicable rules (b) and, if available, to the English translation of the legislative framework (c).
a. Specific rules depending on distribution format:
Many distribution systems will be structured based on the standard terms of sale, mandate or agency agreements. However, in certain particular circumstances the parties may, depending on the type of the intended relationship, decide to provide for additional commitments falling under other type of contract, namely: the (1) supply agreement (pol. umowa dostawy), (2) consignment agreement (pol. umowa komisu) and (3) contract farming agreement (pol. umowa kontraktacji). These three types of agreements are specifically governed by the Polish Civil Code (the ‘named’ agreements).
There are also two other types of agreements that should be mentioned in this context: (4) a distribution (dealership) agreement and (5) a franchising agreement. These agreements have not been named in the Polish Civil Code, however, the features of those agreements have been set out in case law.
1. Supply agreement
Under the terms of a supply agreement the supplier undertakes to manufacture goods of a specified kind and delivers them in parts or periodically to the customer, and the customer undertakes to accept the delivery of the goods and to pay the price. The supply agreement can only cover future goods – goods which are yet to be produced – and which will be delivered in parts or periodically, as opposed to a one-time delivery.
The supply agreement allows the customer to have a degree of influence over and to participate in the production process. The customer can monitor the production, choose the source of materials and the packaging, provide guidance and supervise the enforcement of certain standards or guidelines.
The supply agreement is regulated by Art 605 to 612 CC.
2. Consignment agreement
Under the terms of a consignment agreement the consignee undertakes, within the scope of his business activity, to buy or sell certain goods for the benefit of the consignor, but on his own behalf. In return, the consignee receives a commission. The agreement is most commonly used for the purpose of selling valuable second-hand goods such as vehicles and home appliances. It can prove useful in certain distribution models as it allows the consignee to pay the price of the goods only after reselling them. It is regulated by Art 765 to 773 CC.
3. Contract farming agreement
Under the terms of a contract farming agreement, the agricultural producer undertakes to produce and deliver to the contracting party a specified quantity of agricultural products of a specified type, and the contracting party undertakes to take delivery of the products within a specified time, pay the agreed price and perform certain additional obligations specified by the agreement or law. The contracting party has the right to supervise the performance of the contract by the agricultural producer. If the producer is unable to deliver the contract products due to circumstances for which neither party may be held responsible, then the producer shall be obliged only to reimburse advances and bank credits.
The contract farming agreement is regulated by Art 613 to 626 CC.
4. Distribution (dealership) agreement
A dealership agreement is not specified in the Polish Civil Code (i.e. it is an unnamed agreement). While legal provisions relating to sale and agency will often apply, the parties will have considerable freedom in structuring their relationship. As explained by the Supreme Court, “the distribution agreement consists in one party - the supplier - agreeing to supply a designated good on an ongoing basis and the other party - the distributor - agreeing to buy that good from the supplier and then sells it to third parties in his name and for his account.” (Supreme Court judgment of 8 December 2016, I CSK 825/15).
In a 2005 judgment the Supreme Court considered additional elements of a distribution agreement, including: (i) the exclusivity for the benefit of the distributor, (ii) the fact that the distributor must resell the goods for his own benefit and in his own name; and (iii) that the resale is supervised by the supplier (judgment of the Supreme Court of 6 July 2005, III CK 3/05). The case-law has, however, also developed towards characterizing the distribution agreement by the obligation of the distributor to resell and promote the goods (judgment of the Supreme Court of 15 June 2018, I CSK 494/17).
A distribution agreement should be distinguished from a supply agreement. As explained by the Supreme Court, “the dealership agreement differs significantly from the supply agreement primarily in that its purpose is not only that of a periodical supply of specific goods by the manufacturer for the agreed price to the buyer, but first of all, the sale of these goods by the buyer in a specific way, promotion in a specific area or to specific buyers. A significant difference between these two agreements is also the fact that in the case of a supply agreement, it is the customer who has the right to control and supervise the production of goods (Art 608 CC), while in the case of a dealership agreement, as a rule, it is the manufacturer who controls the sale of goods by the dealer and establishes its principles. Proper performance of the agreement by the dealer requires good cooperation with the manufacturer, which above all means [the supplier] refraining from the direct sales of the contract goods to the dealer’s customers.” (judgment of the Supreme Court of 6 July 2005, III CK 3/05)
5. Franchising agreement
As in the case of a distribution agreement, a franchising agreement has not been specifically regulated in the Polish Civil Code. Such an agreement will typically have the elements of other specified agreements (in particular mandate agreement, services agreement and licensing agreement). However, the parties are largely free to determine the contents of the agreement (judgment of the Supreme Court of 7 February 2008, V CSK 397/07, see also the judgment of the Court of Appeal in Katowice of 22 December 2017, I ACa 707/17).
A franchising agreement is based on the relationship of trust. As such, a franchising agreement with elements of a mandate agreement can be terminated without notice where such trust has been irreparably damaged (see judgment of the Court of Appeal in Kraków of 30 March 2017, I ACa 711/16).
b. Link(s) to official publication:
The Polish version of the CC is accessible via the Internet System of Legal Acts (ISAP).
c. Link(s) to English translation:
No official English translation available.
Q3. Other than general contract law and competition law, are there other rules which may generally restrict the parties when drafting and concluding distribution agreements (e.g. rules in relation to unfair contract terms in B2B contracts, specific requirements in the context of a prohibition of abuse of economic dependence)?
Which general rules apply (a)? Where available, please also include a link to the official publication of the applicable rules (b) and to the English translation of the regulatory framework (c).
a. General rules
In the context of distribution agreements, there are three major pieces of legislation that restrict the parties’ freedom of contract in addition to the provisions of the Civil Code:
- the Act of 8 March 2013 on preventing excessive delays in business transactions (“PEDA 2013”, pol. ustawa z dnia 8 marca 2013 r. o przeciwdziałaniu nadmiernym opóźnieniom w transakcjach handlowych);
- the Act of 17 November 2021 on preventing unfair use of contractual advantage in trade of agricultural products and food (“UCAA 2021 “, pol. ustawa z dnia 17 listopada 2021 r. o przeciwdziałaniu nieuczciwemu wykorzystywaniu przewagi kontraktowej w obrocie produktami rolnymi i spożywczymi); and
- the Act of 16 April 1993 on combating unfair competition (“CUCA 1993”, pol. ustawa z dnia 16 kwietnia 1993 r. o zwalczaniu nieuczciwej konkurencji).
A summary of the key provisions of these acts is provided below.
1. Key provisions of the PEDA 2013
The provisions of the PEDA 2013 apply only in B2B transactions. Slightly different provisions apply to public authorities. The key provisions are as follows:
- Art 5: where the parties have fixed a payment term longer than 30 days, then the creditor who is not a large undertaking can demand statutory interest (currently at 10,25%) 30 days after performing his obligation and delivering the invoice/ receipt. The interest will accrue from the day of the creditor’s performance until payment, but no later than until the payment is due (under the contract);
- Art 6: where the parties have not fixed a payment term, then the creditor has a right, without requesting it, to statutory interest for the late payment in commercial transactions (currently at 16%; announced periodically by the Minister responsible for economic affairs) accruing from the day when he performed his obligation until payment;
- Art 7(1): if the creditor (i) performed his obligation and (ii) was not paid within the deadline set in the agreement, then he will have a right to statutory interest for late payment in commercial transactions (currently at 16%, see above) accruing from the day of the performance until the date of payment;
- Art 7(2)-7(3a): payment deadline can only exceed 60 days from the date of delivery of invoice/ receipt only if (i) the parties explicitly agree to a longer deadline in the agreement; (ii) the debtor is not a large undertaking, while the creditor is a micro, small or a medium undertaking; and (iii) agreeing on such a longer deadline would not be blatantly unfair. If a longer deadline is agreed in breach of conditions (i), (ii) or (iii), then the creditor has a right to statutory interest for late payment in business transactions, accruing from the date of delivery of the receipt/ invoice until payment. If a deadline longer than 120 days has been agreed in breach of conditions (i), (ii) or (iii) then the creditor can terminate the agreement.
- Art 13: contract provisions which limit the rights of the creditor and duties of the debtor with regard to, in particular, the interest, are void and the provisions of the Act apply.
- Art 13b prohibits excessive late payments. An excessive late payment is defined as a situation where over a period of 3 months, the sum of outstanding or late payments amounts to at least PLN 2,000,000 (approx. EUR 430,000).
The President of the Office of Competition and Consumer Protection can launch proceedings against a business which excessively delays in its payments (Art 13c PEDA 2013). PEDA 2013 gives the President of the Office as well as the Commercial Inspection the right to carry out inspections (Art 13j PEDA 2013). Obstruction of an inspection as well as failure to provide the requested information can result in a fine of up to 5% of income obtained in the previous financial year (but no more than the equivalent of EUR 50,000,000).
If the President of the Office finds that an undertaking excessively delayed its payment(s), it can impose a fine calculated on the basis of the amount of payment that was outstanding or late, the number of days when the payment was outstanding and the statutory interest rate for late payment in commercial transactions. As of November 2022, the highest fine imposed in proceedings concerning excessive late payments was more than PLN 4 million (approx. EUR 850 thousand) (decision addressed to Polska Grupa Farmaceutyczna, not yet published).
2. Key provisions of the UCAA 2016
The UCAA 2021 prohibits unfair use of a contractual advantage in relations between suppliers and purchasers of food and agricultural products.
The UCAA 2021 adopts the definition of agricultural products by reference to the products listed in Annex I to the Treaty on the Functioning of the European Union as well as products not listed in that Annex, but processed for use as food using products listed in that Annex (Art 3(4) UCAA 2021).
Contractual advantage is understood as “considerable disproportion in the economic potential” between the parties (Art 7(1) UCAA 2021).
The use of a contractual advantage will be unfair where it is contrary to good commercial conduct and it threatens or violates an important interest of the other party (Art 6 UCAA 2021). Examples of unfair trading practices (Art 8(1) UCAA 2021, which corresponds to Art 3 of the Directive (EU) 2019/633 of the European Parliament and of the Council of 17 April 2019 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain) include:
- the buyer cancels orders of perishable agricultural and food products at short notice;
- the buyer requires payments from the supplier that are not related to the sale of the agricultural and food products of the supplier;
- the buyer requires the supplier to pay for the deterioration or loss, or both, of agricultural and food products that occurs on the buyer's premises or after ownership has been transferred to the buyer, where such deterioration or loss is not caused by the negligence or fault of the supplier;
- the buyer pays for delivered products with delays.
The President of the Office of Competition and Consumer Protection can launch proceedings against a business that has engaged in a prohibited trading practice. UCAA 2021 gives the President of the Office the right to request information and documents (Art 18 UCAA 2021) and carry out inspections (Art 19-28 UCAA 2021). Obstruction of an inspection as well as failure to provide the requested information can result in a fine of up to the equivalent of EUR 50,000,000 (Art 43 UCAA 2021).
The President of the Office can also impose a fine for the infringement of the prohibition on the unfair use of a contractual advantage in the amount of up to 3% of turnover generated in the preceding financial year (Art 42 UCAA 2021). As of November 2022, the largest fine for unfair use of contractual advantage imposed on Jeronimo Martins Polska (the owner of one of the largest discount and convenience chains) amounted to over PLN 723 million (approx. EUR 150 million).
3. The CUCA 1993
The CUCA 1993 is a private enforcement act relating to unfair competition. It lays down the framework for seeking compensation or other measures in court against businesses that engage in unfair practices. An act of unfair competition is defined as an act contrary to the law or accepted principles of morality which threatens or violates the interests of another entrepreneur or the customer (Art 3(1) CUCA 1993). The Act provides a non-exhaustive list of examples of unfair competition practices which includes in particular: misleading indication of the geographical origin of the goods or services, false or fraudulent indication of the geographical origin of the goods or services, infringement of business secrets, inducement to dissolve or breach a contract, imitation of products, slander or unfair praise, hindering of access to the market, bribery of a person exercising a public function, unfair or prohibited advertising, as well as organising a system of pyramid selling, operating or arranging activities in a consortium system and unreasonably extending the payment period for goods or services supplied.
In the context of distribution agreements one provision of the CUCA 1993 is particularly relevant. Art 15(1)(4) prohibits charging fees other than the margin for accepting a product for the purpose of reselling it. This provision has been extensively litigated in circumstances where retailers and cash & carry markets charged their suppliers a fee for placing the product in a manner more visible to the customer (e.g. on the eye-level shelf, by the till or at the end of any aisle).
b. Link(s) to official publication:
The Polish version of the PEDA 2013, the UCAA 2021 and the CUCA 1993 is accessible via the Internet System of Legal Acts (ISAP).
c. Link(s) to English translation:
No official English translation available.
Part 2: Pre-contractual phase
Q4. Are there mandatory provisions in relation to the disclosure of pre-contractual information prior to concluding and/or executing distribution agreements?
No, not specifically (distribution agreements are not specifically governed by the CC). However, the sale contract requires that certain information be provided prior to the conclusion of the contract (see below).
Q5. Is there a standstill obligation linked to the requirements imposed for the pre-contractual phase?
Q6. Does the relevant regulatory framework impose sanctions if the pre-contractual obligations are not (fully) respected?
If yes, which sanctions apply (e.g., nullity of contract, penalty payment)?
According to Art 546 CC the seller is under duty to provide the necessary clarifications on the legal and factual situation concerning the item (product(s)) prior to the conclusion of the contract. The seller must transmit the documents concerning the item that is in his possession. An instruction should also be provided and a clarification on the use of the item, in case that this is necessary to ensure the proper usage of the item, in accordance with its intended purpose.
If the parties have not by contract excluded the application of Art 546 CC, then failing to provide the required information may result in:
- a claim for compensation for loss incurred by the non-infringing party (under Art 471 CC);
- rescission of the contract by the non-infringing party (under Art 84 or 86 CC);
- a claim for compensation by the buyer (Art 415 et seq., 471, 5561 CC).
Q7. Can a party be held liable if it terminates the pre-contractual negotiations?
If yes, on what grounds (a); under what conditions (b); and what consequences are generally linked to such liability (c)?
a. Grounds for pre-contractual liability:
Art 72 § 2 CC relating to negotiations ethics.
b. Conditions for pre-conctractual liability
A party to the negotiations will be liable if he/she commenced or conducted negotiations in breach of good morals, in particular without the intention to conclude an agreement.
Thus, the first requirement of liability is commencing or conducting negotiations. As a minimum, negotiations are understood as interactions (communications) between the parties.
The second condition of precontractual liability is breach of good morals. This will in principle include any acts of disloyalty towards the other party. This on a case-by-case basis could include the following: (i) withdrawal from advanced negotiations without giving any reason or for an insignificant reason; (ii) intentional delay of negotiations; (iii) hindering negotiations by misleading the counterparty; (iv) deliberate submission of proposals that are unacceptable to the other party; (v) unreasonable refusal to disclose information essential for the negotiations. This condition will be fulfilled also where the liable party entered into the negotiations in compliance with good morals, but these circumstances changed while the negotiations were ongoing. By contrast, this condition will not be met where a party makes clear at the outset of the negotiations that he/she does not intend to conclude an agreement but rather seeks to explore the possibility of reaching such an agreement or its terms.
There is some controversy as to whether culpability is a condition for precontractual liability. It seems that the subjective element will be relevant at least in some cases of disloyalty, e.g. intentional delay or deliberate submission of unacceptable proposals.
c. Consequences of pre-contractual liability
The infringing party shall be obliged to compensate the damage incurred by the other party due to the fact that the latter expected to conclude an agreement. In other words, the non-infringing party should be compensated for the damage resulting from failed negotiations. Importantly, the damages are not intended to compensate for the fact that the agreement was not concluded, but rather for the costs or expenses incurred as a result of the negotiation process.
Q8. Are there other relevant rules and/or restrictions that apply during pre-contractual negotiations between supplier and distributor?
Part 3: Contractual phase
A. Form of distribution agreements
Q9. Must a distribution agreement be executed in writing to be valid and enforceable?
Only in certain instances
Please explain when a written agreement is required.
Sale of goods does not require a written form, but the parties are free to agree on a written or other particular form. In such cases, in order for the agreement or any amendments thereof to be effective, the agreed form must be kept. However, if a written, document or electronic form is reserved, but the parties do not provide in their contract for the effect in the case of failure to keep the agreed form, it will be construed that the form was only stipulated for evidentiary purposes. This means that failure to execute the agreement in the agreed form will not render the agreement void but rather prevent the parties from producing witness testimony as evidence of the agreement in court (Art 74 § 2 CC). However, under Art 74 § 4 CC this effect does not extend to agreements in B2B relations, therefore the agreement is effective and there are no limitations as to witness evidence basis in the case of non-adherence with the stipulated form in B2B relations.
A contract farming agreement should generally be executed and signed in writing (Art 616 CC), however, failure to execute the agreement in writing will not render the agreement void, but will be associated with evidentiary limitations (see above, reference to Art 74 CC). In practical terms, there is no requirement of a written form for a contract farming agreement in B2B relations and there are no limitations as to witness evidence basis in the case of non-adherence with the stipulated form.
A supply agreement needs to be made in writing (Art 606 CC). There is no general consensus, but most legal scholars agree that this requirement will effectively not apply in B2B relations.
Q10. Are there any (other) requirements as to the form of the distribution agreement for it to be valid and enforceable?
B. Content of distribution agreements
Q11. Other than restrictions imposed by EU competition law (including Regulation (EU) 330/2010), do specific rules and/or restrictions apply in distribution agreements with respect to
- the territory in which or the customers to whom the goods/services will be sold;
- an exclusivity granted to the distributor;
- (exclusive) sourcing/purchasing obligations;
- resale prices;
- non-compete clauses?
None of the above are applicable.
Q12. Do specific rules and/or restrutions apply in distribution agreements with respect to
- obligations of the supplier vis-à-vis the distributor, including in relation to the remuneration of the distributor;
- obligations of the distributor vis-à-vis the supplier or vice versa;
- a non-solicitation clause during and/or after the term of the distribution agreement;
- minimum sales quota imposed on the distributor;
- specific sector rules?
Yes, there are specific rules regarding (i) obligations of the supplier vis-à-vis the distributor, including in relation to the remuneration of the distributor, (ii) obligations of the distributor vis-à-vis the supplier or vice versa and (iii) specific sector rules.
What do these specific rules and/or restrictions entail?
See, Q5 for rules applicable in the food and agricultural sector and payment deadlines.
The Parties are in general free to determine their obligations as they see fit, as long as the content or purpose of the agreement does not contradict the nature of the relationship, the law or the principles of social coexistence (Art 3531 CC). For example, where the supplier is granted extensive rights to supervise and instruct the distributor, this could be contrary to the very nature of a distribution agreement which presupposes that the distributor will resell the contract goods in his own name and for his own benefit. As a result, the agreement could be construed as e.g. an agency agreement, with the relevant provisions of the Polish Civil Code being applicable. Equally, it would be contrary to the nature of a relationship to impose a non-disclosure obligation with respect to information that is publicly available.
Per Art 56 CC, a legal action has not only the effects expressed in it, but also those arising from law, the rules of social coexistence and established customs. Moreover, under Art 355 § 1 CC, the debtor is obliged to act with the care customarily due in relations of the particular kind. These two provisions give rise to a general obligation of the contract parties to act loyally. The detailed scope of this obligation will depend on the circumstances of each case. For example, it may translate into an obligation to keep the other party informed or to protect the reputation of the product distributed.
In addition, where distribution is carried out based on a sale agreement, the following mandatory provisions are relevant:
- under Art 551 CC if a distributor is delaying the collection of the item sold, the supplier can put that item into storage at distributor’s cost and risk and, after setting an additional deadline for the distributor, sell the item at the distributor’s cost;
- under Art 5761 CC a distributor who compensated a consumer for a product which was not fit for purpose, did not comply with publicly announced qualities or was handed over incomplete, then that distributor can seek compensation from the supplier (or another undertaking in the supply chain) that is responsible for the product being defective.
Furthermore, unless agreed otherwise, the parties are obliged to keep confidential the information obtained during negotiations and refrain from using it for their own purposes (Art 721 § 1 CC). Failure to comply with this obligation will give the non-infringing party the right to seek compensation or to demand the benefits thus obtained by the infringing party (Art 721 § 2 CC). In addition, failure to protect confidential information of the other party can constitute an act of unfair competition under Art 11 of the Act for the combatting of unfair competition (CUCA 1993). The infringing party would be liable for compensation for the loss resulting from the publication of the information.
For statutory rights and obligations of the parties to a consignment agreement, see Art 766-772 CC.
Otherwise, rights and obligations commonly included in distribution agreements (e.g. the distributor’s obligation to follow supplier’s reasonable instructions or the supplier’s right to inspect and supervise the distribution) will have to be explicitly provided for in the agreement.
C. Term and termination
Q13. Are there particular rules and/or restrictions in relation to the term (incl. renewal) of distribution agreements?
Q14. Are there any specific rules and/or restrictions with respect to the termination of distribution agreements (e.g. minimum notice period, statutory right to compensation (goodwill or other))?
What do these specific rules and/or restrictions entail (a)? Please include whether these specific rules and/or restrictions differ depending on whether the distribution agreement is of definite or indefinite duration (b) or whether the distribution agreement is terminated by one party for convenience or for breach by the other party (c).
a. What do these specific rules and/or restrictions entail?
There are no rules or restrictions on term or termination applicable specifically in the context of distribution agreements. Hence, the parties’ freedom of contract is restricted only by general principles of contract law as well as provisions on specific (named in CC) agreements, provided that the distribution agreement at hand can be classified as such a specific agreement.
General principles of contract law with respect to termination
The parties can terminate an agreement by mutual consent. Equally, the parties can provide directly in the agreement the right to terminate (Art. 395 CC).
Art. 3651 CC provides that „a continuous obligation of an indefinite duration shall terminate upon notice by the debtor or creditor in accordance with contractual, statutory or customary notice period or, in the absence of such a period, immediately upon termination.”
When determining whether the agreement has been rightfully terminated, the court will have regard to the circumstances of the case, the principles of social coexistence and customs (Art. 56 and 65 CC).
Under Art. 77, paragraph 2 CC, if an agreement was concluded in signed written form, documentary or electronic form, its termination with the consent of both parties, as well as withdrawal from it or its termination requires a documentary form, unless an Act of Parliament or the agreement stipulates another form. Documentary form requires that the declaration of will be made in a document in a manner that makes it possible to determine the person making the declaration (see, Art. 772 CC). A document is an information carrier enabling one to get acquainted with its contents, e.g. email or a text message (see, Art. 773 CC). Moreover, pursuant to Art. 77, paragraph 3 CC, where the agreement was concluded in a different special form, termination should be made in signed written form.
Rules applicable depending on characterisation of the agreement
A distribution agreement could in principle be classified as a reciprocal agreement (see judgment of the Supreme Court of 15 June 2018, I CSK 494/17). As a result, the following grounds for termination would apply:
- termination for delay (Art. 491-492 CC),
- termination due to renunciation by the other party (Art. 4921 CC),
- termination due to impossibility of performance for which the other party is responsible (Art. 493 CC).
Where and to the extent that a distribution agreement is found to constitute a sale agreement, the following provisions will apply in addition to the provisions applicable to reciprocal agreements:
- termination for delay in payment (Art. 552 CC);
- termination due to the object of the sale having a non-insignificant defect (Art. 560 CC).
Where and to the extent that a distribution agreement is found to constitute a supply agreement, the following provisions will apply in addition to the provisions applicable to reciprocal agreements:
- right for the recipient to terminate for delay in starting production so serious that it indicates that the supplier will not meet the delivery deadline (Art. 610 CC);
- right for the recipient to terminate if the production process is defective or contrary to the agreement (Art. 611 CC).
Where and to the extent that a distribution agreement is found to constitute a contract farming agreement, the contracting party has a right to terminate due to the object of the agreement having a significant defect (Art. 621 CC).
It is controversial whether and to what extent distribution agreements can be considered mandate agreements given that the distributor will be purchasing and reselling the goods in his own name and for his own benefit. However, provisions on mandate agreements can sometimes apply, in particular with regard to franchising agreements or agreements for promotional services, which often accompany distribution agreements.
In case of mandate agreements, Art. 746 CC in principle provides that both the mandator and the mandatee are free to terminate the mandate whenever they please. However, the mandator should reimburse the mandatee for the costs incurred with respect to the mandate and pay the fee due, if a fee was agreed. Moreover, where the mandate is terminated without an important reason, the mandator is liable for compensation for the damage caused to the other party. The same principle applies to the terminating mandatee provided that the mandate was for a fee. Neither of the parties can renounce in advance her right to terminate the agreement for an important reason.
b. Differences dependent on whether the distribution agreement is of definite or indefinite duration
Legal literature states that a distribution agreement for a definite period can be terminated only before the end of the term if the parties have explicitly provided for it in the contract. It is controversial whether an agreement for a definite duration can be terminated without important reasons.
c. Differences dependent on whether the distribution agreement is terminated by one party for convenience or for breach by the other party
See, Q14 a. here-above.
Q15. Is it possible to terminate the distribution agreement based on certain grounds for termination (breach or other) included in the distribution agreement?
If yes, is prior judicial intervention required in order for the termination of the agreement to take effect?
Part 4: Post-contractual phase
Q16. Is the supplier required to repurchase the stock that is still at the distributor’s disposal when the distribution agreement ends?
Q17. Are there other post-contractual obligations that generally apply to either of the parties in the context of the termination of the distribution agreement?
Part 5: Dispute resolution
Q18. Do specific rules and/or restrictions apply as regards the choice of forum and/or jurisdiction?
Q35. Can the parties opt for arbitration?
Q19. If yes, are there any rules and/or restrictions as regards the enforceability of arbitration clauses in distribution agreements?
Q20. What is the statute of limitations applicable to claims regarding the performance of a distribution agreement?
The applicable limitation period will depend on how the distribution agreement is qualified depending on its features and obligations of both parties (Supreme Court judgment of 19 January 2012, IV CSK 201/11). Where the agreement is dominated by features typical to a sale agreement, Article 554 CC will apply (Supreme Court judgment of 14 January 2010, IV CSK 319/09). Accordingly, the limitation period will be 2 years. The same limitation period will apply to supply agreements by virtue of Art. 612 CC.
Claims based on a contract farming agreement will become time-barred 2 years after the agricultural producer performed her obligation or, if the obligation has not been performed, 2 years after she should have performed it.
The general limitation periods provided in Art. 118 CC shall apply to a consignment agreement. Under that provision, claims arising out of business commercial activity become time-barred after 3 years.