The termination provision is particularly important in the case of a termination agreement. The exact amount of termination before the termination comes into force must be clearly defined in the agreement. A manufacturer generally wants a short notice period. a much longer distributor. Most lawyers, especially those who represent a manufacturer, will also want a so-called “blue pencil” clause. This clause provides that a provision of the agreement, if it is illegal or unenforceable, does not affect the applicability of the rest of the contract. Lawyers often doubt the applicability of different provisions of a distribution agreement, the most obvious example being that of the foreigner. I hope that the inclusion of a “blue” clause will ensure that if an unenforceable clause is included in the agreement, only that clause will fail and that the rest of the treaty will remain negotiated. We also believe that the parties must “go with the river” in most distribution agreements that must last over a period of time. Product change, change of management, brand change, market taste change and, in fact, almost everything in the business environment in which manufacturers and distributors operate can virtually be guaranteed that they are significantly different ten years after the signing of the agreement. Most distribution agreements last a long time, so we believe that the letter that embodies these agreements should be flexible enough to cope with the changing environment, without the parties needing to constantly change the agreement.
Both parties will likely want a “merger clause” or a “full agreement” clause. It simply means that the contract is the whole agreement between the parties and that neither party can subsequently say that the terms of the contract are different, based on oral conversations, correspondence, file note, etc. In principle, the “complete agreement” clause is good contractual practice. If two people meet and negotiate a contract, it should be the contract, and its terms should not be changed by conversations, phone calls, letters, etc. Last week, we wrote about a recent decision in the Southern District of New York, Prince of Peace Enterprises, Inc. v. Top Quality Food Market, LLC, 2011 U.S. LEXIS 3917 (See blog here). In this case, a distributor has secured the exclusive right to broadcast as well as the exclusive right to use the brand of a product called “Po Chai” pills. When it found that similar products bearing the same mark had been marketed, the distributor filed a infringement complaint pursuant to paragraphs 32, 1, 43 (a) and 43 (c) of the Federal Lanham Act.
The case was dismissed because the agreement giving the applicant his exclusive right to broadcast and use the mark was not sufficient to provide an opportunity to pursue the right to trademark infringement under federal law. As a first comment, we must keep in mind that the overwhelming majority of all disputes in the context of distribution will arise if the manufacturer wants to end the relationship against the will of the distributor. Therefore, the conclusion of this whole exercise is to do two things. First, spell the agreement so that everyone knows what the agreement is. In other words, do what you would do in each contract. Second, when negotiating the franchise agreement, whether you represent the manufacturer or distributor, Jockey for the position that will have the upper hand if the manufacturer ever wants to terminate the contract. Some distribution agreements simply require the distributor to give up its “best efforts” to sell the manufacturer`s product.