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Distribution Contracts

Another option open to anyone wishing to supply a product or service to the Spanish market is to use the services of a professional distributor.

Ordinary clauses of a distribution contract may cover any subject to which the parties agree provided that the clauses are not contrary to the laws of Spain, morality, or public order. The standard clauses of a distribution contract often include:

  • The territory covered by the distribution contract and the indication of any exclusive character of this territory.
  • Limits to third party purchases.
  • A minimum volume of sales and subsequent modifications.
  • A pricing system and modifications: periods, pricing, percentage basis, promotions, notifications, and the effective dates of new prices.
  • The party responsible for executing advertising and financing.
  • The duration and extension of the contract and conditions for its rejection and termination.
  • Conditions for the repurchase of products.
  • Notification of the parties.
  • A dispute resolution mechanism that can include commercial arbitration, under Spanish or foreign decision, and which is subject to any legislation with which the contracts or the parties may have minimum contacts. The contract may also contain a damages clause governing the amount of compensation paid to the parties in the case of annulment or cancellation.

You might also bear in mind that Spain's courts recognise the right of the distributor to indemnity after the party terminates the contract if the following conditions are met:

  • The distributor must have increased the customer base, either in the number of clients or in the volume of sales.
  • The supplier or a new distributor takes advantage of the opportunities obtained by the dismissed distributor.