Termination Of Distribution Agreements

It is possible to regulate a non-competitive obligation after the termination of the contract. Such an obligation is common in agency relationships. It is important to explicitly define the extent of the territory, products or services and the duration of the non-competition obligation. The duration of non-competitive competition may exceed one year for the distributor and two years for the representative. In the absence of a termination clause in the distribution contract, the manufacturer and distributor may negotiate a review of the current agreement. While the parties still view this relationship as profitable and rewarding, the renegotiations show that they can still cooperate, although their circumstances have changed since the original agreement was signed. These efforts also show that even if they fail to reach a new agreement, the parties can cooperate to avoid costly legal action. A common area of concern during termination is the status of the extended customer base or client lists and how this information is handled if there is no specific clause to address the issue. It is clear that both parties have a stake in maintaining control or financial relations with the companies in the end-to-end distribution chain. The supplier wants to preserve the expanded market obtained by the distribution contract and distributors often want to restrict the use of customer information by suppliers. It is important to report on what each party learns through its relationship with the other. Termination agreements generally contain provisions governing dener, non-competition rules, confidentiality, value compensation, inventories, conditions and essential notices for agency and distribution contracts.

In accordance with contractual freedom, the provisions may be extended to cover certain other matters depending on the nature of the main contract and the intent of the parties. The laws applicable to the termination contract must certainly be taken into account, as they vary from country to country. The relationship under distribution contracts is also governed by Federal Act No. 18 of 1981 relating to the organization of commercial agencies (UAE Commercial Agency Law), which defines an agency as “the representation of the client by an agent for the purpose of distributing, selling, displaying or delivering a good or service in the United Arab Emirates against a commission or profit.” The VAE Commercial Agency Act does not authorize the termination of the distribution contract without serious cause under section 8 and provides for compensation in the event of termination under section 9 of the Act. However, such agreements only enjoy the protection of the uae Commercial Agency`s law if the agreement is registered with the United Water Ministry of Economy (CEE). In the normal procedure of terminating an agency agreement, the Agency`s management informs the local representative of the request for termination and, if the agent gives his consent and shows the appearance before the ministry within sixty (60) days, the opt-out is done on a mutually consensual basis. If the opt-out is challenged, the party requesting opt-out has the right to refer the dispute to the department`s trade agency committee for decision. This procedure can take between five (5) and seven (7) months or more if the case is prolonged. A distribution contract is a contractual agreement whereby a manufacturer or supplier allows an external supplier to sell/market its products to consumers in a given geographic area.

We see daily the results of distribution contracts with branded products sold at sites located in two locations, although the manufacturer or supplier maintains a small centralized operation.

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