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Distribution

French Distribition Agreements - A Brief Overview of French Law

French Law perceives a Distributor to be an independent person or entity that buys goods from a manufacturer and resells them to third parties and does so under trading conditions, and at a profit margin, fixed solely by the distributor.

It is important to avoid any confusion between a Distribution Agreement for a particular market and an Agency Agreement (where the principal sets the price of the goods, issues the invoice to the end client and pays the agent a commission).

A Distributor may be appointed for a particular territory either on an exclusive or non-exclusive basis and it would be advisable from the manufacturer's perspective to make this basis very clear in the distribution agreement to be signed with distributor.

The law applicable to a Distribution Agreement may be chosen freely by the parties.

In other words, and for example, a distribution agreement between, say, a French distributor and a US or UK manufacturer could be made subject to French law, US law, English law or indeed any other law which the parties agreed on.

However, there are nevertheless a certain number of requirements which flow from French case law which might be held to override the contractual arrangements between the parties and which would, in a number of circumstances, be interpreted to the advantage of the French distributor by the French Courts.

For example, historically there was generally no compensation for the loss of clientele at the expiry or termination of the Distribution Agreement, but gradually over a number of years French case law has moved towards granting compensation to the distributor in a number of circumstances

  • where the percentage of the distributor's turnover flowing from the sale of manufacturer's product was disproportionately high
  • where the distributor had taken on staff specifically to work on the marketing and selling of the manufacturer's product
  • where the distributor had made a major investment in, say, equipment, point of sale material, warehousing and stocking facilities etc which were used solely for the manufacturer's product
  • where the Court considered that the notice period was insufficient notably taking into account the above criteria

In regard to the notice period, although there is currently no statutory period at French law, many recent agreements tend to have a minimum 6 month notice period; possibly because this tends to be the period which the French Commercial Courts consider to be a minimum notice period.

The notice period would moreover generally be greater in function of the number of years that the parties have been working together in the distribution relationship as well as in function of the case law criteria set out above and, for instance, a one year notice period would not be unusual.

Finally, in this very brief overview, it is mentioned that particular care should be taken by the manufacturer whose goods are distributed in France in regard to the product liability provisions of French and European Union legislation.

For more information about French law or a specific French Distribution Agreements enquiry, please click here