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

The selection of distributors in a selective distribution network is made relative to the status of the reseller and/or its staff. In cases of transfer of business, it would therefore appear indispensable that the transferee of the contract meets the selection criteria of the network developer. For network developers to protect themselves against transfers that may not meet their criteria, they sometimes include a clause which provides for the automatic termination in case of transfer of the ownership of the business. Such a clause is lawful where it is uniformly imposed on all distributors and that its object is “to allow the supplier to ensure that the transferee of the business, as a legal person distinct from the transferor, meets the objective criteria defined by it for the distribution of the products of its brand” . The distributor may also have a duty to notify the transfer under penalty of having the contract being automatically terminated . Such a clause complies both with the provisions of Article 1199 (former Article 1165) of the Civil Code and with the competition rules . Moreover, in case of sale of the distributor's business, it is for the parties to provide which contracts are expressly or tacitly included in the transfer . The seller runs the risk of a cancellation of the sale for fraudulent non-disclosure if it has not informed the transferee of the content of contracts entered into with various suppliers, in particular about the contractual conditions of renewal of these contracts and their interdependence . By contrast, there will be no cancellation and the person drafting the transfer deed does not fail to fulfill his/her duty of advice if the transferee could not have been unaware of the non-transferrable nature of the distribution contracts entered into between the suppliers and the transferor  due to the experience of previous purchases. 

In the past, when justifying the impossibility of transferring a selective distribution contract at the same time as the business, the courts would refer to the concept of “intuitus personae” . Thus, where the distributor was a company, the person of the manager was not taken into account . The Court of Cassation has put an end to that case law by asserting that “a selective distribution network does not imply the existence of “intuitus personae relationships” between the supplier and each of its resellers” . The person of the future purchaser of the selective distribution contract would only be taken into account in respect of ensuring that it meets the selection conditions. The transfer could therefore not be subject to any other conditions except from the obligation to notify the network developer and the compliance by the transferee with the selection process and criteria .

By equating the conditions of authorization required from the distributor to the selection criteria required to enter the network, the courts seem to postulate that distribution will be entrusted to a natural person who will have to fulfill certain selection criteria himself, or to a legal entity, and thus the criteria should be met in the person of the manager. However, a modern conception of distribution suggests that legal entities themselves meet the selection criteria in such a case and that the conditions of authorization are autonomous in scope. In effect, the provision authorizing managers and/or shareholders may be motivated by considerations which are completely external to the conditions for entrance to the network. The network leader may want to object, for example, to a transfer to a competitor or a powerful distribution group on which it would then be dependent. It would therefore be wise to admit authorization clauses which are autonomous in relation to the selection criteria, where they are justified by objective reasons. However, by reason of the stakes involved and the absence of recognition of intuitus personae by the Court of Cassation, great care is required in the drafting and implementation of authorization clauses in cases of transfer, it is possible that the courts will recognize that a traditional analysis is no longer properly adapted to the realities of modern distribution.

CA Paris, 3 July 1992, LawLex200200005938JBJ.

CA Versailles, 5 October 1995, LawLex200200005496JBJ.

Cass. com., 2 July 1991, LawLex200200005853JBJ; CA Paris, 3 July 1992, LawLex200200005938JBJ; T. com. Nanterre, 1 February 1994.

See, for example, for a distribution contract, CA Paris, 19 June 1991.

CA Bordeaux, 7 May 1991, LawLex200200005844JBJ; Cass. com., 4 May 1993, LawLex200200005991JBJ.

See, regarding the duty of advice of the drafter of the instrument: CA Orléans, 3 August 1999, LawLex200300003634JBJ; Cass. com., 24 September 2003, LawLex200300003529JBJ.

CA Douai, 13 December 1990, LawLex201000000528JBJ; CA Orléans, 27 October 1992, LawLex201000000529JBJ; CA Paris, 4 March 1994, LawLex201000000530JBJ.

Cass. com., 29 June 1993, LawLex200200006014JBJ.

Cass. com., 4 May 1999, LawLex200200005208JBJ.

For an example, Cass. com., 10 January 1995, LawLex201000000518JBJ.

235. Conditions of authorization of the transferee.