French Distribution, Agency & Franchise Agreements

The law applicable to a Distribution Agreement is left to the appreciation of the parties.Nevertheless, at French Law, and as a matter of public policy, it is held to be essential to avoid any confusion between a Distribution Agreement for a particular market and an Agency Agreement.

French Law states that the definition of a Distributor is an independent person or entity, which buys goods or chattels and resells them to third parties upon trading conditions, and at a profit margin, fixed by him.

A Distributor may be appointed for a particular territory either on an exclusive or non-exclusive basis.

There is generally no compensation for the loss of clientele at the expiry or termination of the Distribution Agreement, although, of late, case law has envisaged compensation for major investment realised by the Distributor on behalf of the manufacturer.

French Law illustrates that there is no statutory notice period, although many agreements tend to have a 3-6 month notice period.

Particular care should be taken by the manufacturer whose goods are distributed in France in regard to the product liability provisions of French and European Union legislation.

At French law, the role of a Commercial Agent is strictly defined by legislative provisions, which are of a public policy nature.The Commercial Agent must be registered as such upon a special statutory list held by the registrar of the territorially competent Commercial Court.

French law demonstrates that compared to many common law systems, the said provisions are very much in favour of the agent as opposed to the principal.

French law illustrates that it is extremely difficult to dismiss a Commercial Agent in France, indeed other than for “faute grave” or serious misconduct; it is virtually impossible to remove a Commercial Agent without paying considerable compensation.

The concept of “faute grave” is currently subject to much discussion in commercial case law and it might be useful for the principal to attempt to characterise this notion within the agreement, i.e. before future difficulties were encountered.

In any event, it will generally be necessary to pay compensation for loss of clientele upon the expiry or termination of her agreement under French law

Under French law illustrates the concept of franchise agreements is particularly well integrated into the world of French business and commerce and there are numerous legal framework possibilities on offer.It is self-evidently vital to ensure that the savoir-faire offered within the scope of the franchise is real and is capable of being transmitted to a third party.

To this end, and to ensure that all parties are fully aware of the object, terms and conditions of a particular franchise, French Law requires that a pre-agreement document be drafted and executed thereby.