At some stage, you must accept that it is not your product which is to blame but it is your distributor’s fault. They have tried to mask their own performance by ungratefully passing on customer complaints about quality and short deliveries. Your distributor is unlikely to give you any credit for taking the hard decision to terminate especially if they have made the classic business mistake of having faith in your product and invested in infrastructure, people and systems.

You look for your distribution agreement and find that there isn’t one, it is out of date, or it was drafted by your brother in law. In any event, it does not say how you end the distributorship. In that case, in Australia, we don’t have any of those wishy washy European Union notions of compensation. But we are going to give these distributors, a “fair go” by allowing reasonable notice of termination. What is reasonable notice? Well, the answer is - it all depends. Here are some of the considerations:

1.  Duration “ the longer the distributorship, the longer it will take to unravel the commitments made.
2.  Redeployment “ how long will it take the distributor to redeploy its resources?
3.  Commitments “ how long to unravel its commitments to third parties e.g. leases.
4.  Reward for efforts “ if it is an old comfortable arrangement where the distributor has made its money back many times over then a short period may be reasonable. But if it has just started to turn a profit after a lot of investment it will need longer notice.

None of this should be seen as compensation as of right. If your distributor will immediately become your main rival a short period of notice is quite in order and if the distributor has misbehaved, no notice.

The court will also take into account any promises made by you even if they are implied so be wary of the ever popular smoking gun complimentary email.

So what is reasonable notice? Well, it all depends.

© Paul.Brennan 2015. All rights reserved. 

Click here if you need to speak to a lawyer

Sponsored by: