This book provides a wide-ranging review of the European rules relating to distribution: exclusive purchase and exclusive supply, exclusive and selective distribution, motor vehicle distribution, franchises, commercial agents.

French Distribution Law

After for a long time considering that investments made by the distributor could not constitute an obstacle to the supplier's possibility to terminate the contract on an unilateral basis and that it reverted to the distributor to assess the appropriateness of investments according to its financial capacities and the very precarious nature of the contract binding it to the supplier, the courts have …

Spontaneous or required investments.

After for a long time considering that investments made by the distributor could not constitute an obstacle to the supplier's possibility to terminate the contract on an unilateral basis and that it reverted to the distributor to assess the appropriateness of investments according to its financial capacities and the very precarious nature of the contract binding it to the supplier, the courts have now made a distinction between investments required by the supplier and spontaneous investments by the distributor, as is the case for fixed-term contracts. Only the former are liable to incur the supplier's liability if it terminates the contract just after having imposed them and before the distributor has been able to make them profitable . In effect, it seems that the court takes account of the possibility for the distributor to obtain a fair return for its work and its investments . The latter remain the burden of the distributor . Thus, where investments are old or intended to strengthen the distributor's financial structure , are carried out against the supplier's will, are not specific to the brand and may be used again under another contract, are disproportionate, or are not required by the supplier even if it has collaborated in their achievement , the termination is not abusive.

When assessing the legitimacy of the termination, the courts take investments into account only if they are required or imposed by the supplier and specific to the brand . The termination is abusive, despite the compliance with the contractual notice period, where just before the termination, the distributors have carried out significant investments to comply with the network, and the supplier imposed, supervised and took an active part in the completion of the works  or where the supplier revoked a decision to extend the territory, whereas the distributor had made investments . However, if a supplier is involved in the completion of new establishment and oversees compliance with its standards in the premises and according to conditions for enhancing the premises vis-à-vis customers, its liability cannot be incurred in case of subsequent termination of the contract if it was the distributor who initially solicited the supplier in order to obtain exclusive representation and implemented the proposed investment . Abuse has also been found where significant investments were required by the supplier having led the distributor to believe that the contract would be pursued, or where the termination takes place six months after heavy investments were required from the distributor , or the decision to terminate, taken a long time before, was notified late, after having required investments, therefore placing the distributor in a weak position vis-à-vis possible buyers .

All the actions engaged in the company's interest and all requests by the supplier cannot be assimilated to investments. The repurchase of the securities of a dealer by the new shareholders, the current account contribution, the purchase or leasing of land by a real estate company created by the shareholders of the dealer, and the subscription by those shareholders of a personal surety , the requirement of a bank guarantee of a reasonable amount, the request for maintenance of a minimum working capital and frozen current accounts, which for the distributor constitute rules of proper management, i.e. “ensuring sufficient equity capital for its activity, maintaining cash-flow and avoiding the increase of the financial burden with excessive indebtedness”  - are not characterized as investments incurring the supplier's liability.

Cass. com., 5 April 1994, LawLex200200005387JBJ; CA Paris, 28 September 1995, LawLex200200005493JBJ; Cass. com., 29 January 2002, LawLex200200002249JBJ.

CA Versailles, 3 May 1990, LawLex200200005782JBJ; Cass. com., 3 November 2004, LawLex200400002746JBJ: the unjustified termination of a distribution contract in order to favor another distributor, where the distributor's activity is significantly developing and does not allow it to obtain a fair return from its canvassing work, is abusive.

Cass. com., 9 January 2001, LawLex200200004787JBJ. See also Cass. com., 9 April 2002, LawLex200200004653JBJ.

T. com. Versailles, 4 June 2003, LawLex200300002302JBJ, upheld by CA Versailles, 16 September 2004, LawLex200400002138JBJ.

TGI Paris, 5 April 2005, LawLex200500005371JBJ. 

Cass. com., 7 October 1997, LawLex200200005053JBJ; 6 June 2001, LawLex200200004370JBJ; 22 May 2001, LawLex200200004906JBJ; 5 October 2004, LawLex200400002405JBJ.

TGI Paris, 25 November 2004, LawLex200500004026JBJ. See also TGI Paris, 4 November 2002, LawLex200300000678JBJ: loans taken out by a dealer to consolidate its financial position are not analyzed as investments that the grantor would be required to take into consideration before terminating the contract, whereas in all events the distributor is an independent trader capable of assessing the extent of its own debts.

Cass. com., 3 December 2002, LawLex200300001194JBJ; also see CA Paris, 16 January 2013, LawLex201300000066JBJ.

TGI Paris, 7 September 2004, LawLex200400002212JBJ; CA Paris, 27 November 2003, LawLex200300004517JBJ; T. com. Paris, 19 May 2003, LawLex200400000147JBJ; Cass. com., 3 December 2002, LawLex200300001194JBJ: investments must not be re-utilized as part of another exploitation.

CA Paris, 28 April 2004, LawLex200400000960JBJ; Cass. com., 9 April 2002, LawLex200200004653JBJ.

CA Paris, 15 October 2003, LawLex200400000854JBJ.

CA Metz, 16 January 2008, LawLex200800000105JBJ, quashing TGI Metz, 26 October 2004, LawLex200400002599JBJ.

Cass. com., 23 June 1998, LawLex200200005135JBJ; Paris, 27 November 2003, LawLex200300004517JBJ.

French Distribution Law

123. Spontaneous or required investments.

Demandez un accès gratuit
au contenu exclusif Livv – juristes d’entreprise

Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

123. Spontaneous or required investments.

Demandez un accès gratuit au contenu exclusif Livv – juristes d’entreprise

Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

Demandez un accès gratuit
au contenu exclusif Livv – juristes d’entreprise