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Suppliers supply and distributors distribute - a regular blog
Reasonable notice and the length of a piece of string
Legend has it that in years gone past, some lawyers (perhaps seeking to emulate Theseus) would deliberately carry around one or more pieces of string. The reason: to be able to use whichever piece of string came to hand in order to demonstrate that when it came to giving notice to terminate a distributorship agreement, what was reasonable was as long as a piece of string.
The world has moved on.
A series of judgments indicates that when considering whether the supplier has given the distributor the correct period of notice of termination, a variety of factors come into play.
In one case, the judge rejected an argument that the distributor was entitled to 18 months’ notice of termination on the basis that the agreement was informal and intended by the parties to be a short term, interim agreement. In addition, the agreement had been regularly adjusted to reflect the distributor’s deteriorating financial position.
In an earlier case, the judge was particularly taken with the formality – or lack thereof – of the relationship. The more relaxed the relationship between supplier and distributor, the less likely that the courts would imply a lengthy notice period.
Similarly, if the distributor was not reliant on the supplier’s products (because the distributor sold the products of other suppliers), a less lengthy period of notice would be implied.
Equally, an obligation on the distributor to use best endeavours to promote the supplier’s products after notice of termination was given indicated a rather longer period of notice.
Overall, however, there is no substitute for formalising the distributorship relationship and setting out the period of notice be given – unless, of course, you want to carry around pieces of string.