Distribution agreements are a critical aspect of businesses in Germany, which involves the transfer of goods or services from one party to another. A distribution agreement outlines the terms and conditions for the distribution of goods and services between an entity and a distributor. This type of agreement is essential in protecting the rights and interests of both parties involved. German law has specific provisions that regulate the formation, execution, and termination of distribution agreements.
The German Law on Distribution Agreements
The distribution agreement in Germany is subject to the law of obligations, the Commercial Code, and supplementary regulations. German law defines a distribution agreement as an agreement between two parties, whereby the distributor agrees to distribute goods or services for the supplier. The agreement should contain specific provisions on the scope, duration, and territorial limits of the distribution.
Under German law, a distribution agreement is deemed to be a commercial agency agreement if the distributor carries out the distribution activities on a regular basis and is authorized to conclude contracts on behalf of the supplier. In such cases, the distributor would be entitled to compensation upon termination of the agreement.
Formation of Distribution Agreements in Germany
Distribution agreements can be concluded either in writing or orally. However, it is advisable to have the agreement in writing, as it would make it easier to prove the terms and conditions of the agreement. The parties should also take into consideration the different legal requirements that apply to written or oral agreements.
Execution and Termination of Distribution Agreements in Germany
Under German law, the distribution agreement must be executed in good faith by both parties. The supplier must ensure that the goods or services being supplied meet the required quality standards and are fit for the intended purpose. The distributor, on the other hand, must use best efforts to distribute the goods or services as agreed.
A distribution agreement can be terminated by either party on notice. The notice period depends on the terms of the agreement and whether the agreement is for a definite or indefinite period. If the agreement is for an indefinite period, the notice period under German law is generally six months. However, parties may agree on different notice periods.
In conclusion, the distribution agreement is a critical aspect of businesses in Germany. It is important to ensure that the agreement is executed in good faith and that the terms and conditions are clear and precise. The German law on distribution agreements provides a framework that regulates the formation, execution, and termination of these agreements. Businesses should seek professional advice to ensure that they comply with the relevant legal requirements.