Dealer, distributor or regular customer?
A sales dealership contract is an integrated distribution agreement between two or more entrepreneurs, and it is often difficult to distinguish between a dealer-concessionaire relationship and a sales relationship with a regular customer; the European Court of Justice has indicated certain distinguishing and characterising criteria that help its qualification, such as price predetermination, exclusivity and a high volume of sales relationships.
The sales dealership contract (also referred to as a distribution contract) is one of the most widespread forms of integrated distribution and is used both at the level of marketing through dealers (such as exclusive importers in charge of a state) and at the retail level (think of the classic example of car dealers).
This contract, although in our country is not legislatively regulated,[1] takes the form, in principle, of the marketing of particular products, through a coordinated action between two or more entrepreneurs: the licensor (who undertakes to produce) and the dealer who undertakes to purchase the products periodically.[2]
Here are the main distinguishing features of this type of contract:[3]
- is a distribution contract, having as its main object and purpose the marketing of the grantor's products;
- the dealer enjoys a position of privilege (such as, for example, although not necessary, area exclusivity), in return for the obligations it assumes to ensure a correct distribution of products;
- the concessionaire acts as buyer dealer and therefore, unlike the agent and/or procurer, does not merely promote the parent company's products, but purchases them and bears the resale risks (cf. main differences between the agent and the grantor).
- the dealer is integrated into the grantor's distribution networkbeing obliged to resell the products according to the directives and directions of the grantor himself.
That being said, very frequently, especially in cases where the parties have not specifically regulated the relationship, the question arises as to whether the grantor's counterpart is a dealeror a simple "regular customer". Think of the case in which the grantor starts selling in a market to a certain person, who gradually assumes more responsibilities and commitments typical of a dealer (e.g. obligation to promote): in such cases, the problem arises as to whether the relationship between the parties can be qualified as a series of sales contracts, rather than as the execution of a sales dealership contract, and therefore whether the buyer has in fact "transformed" from a mere customer into a dealer, responsible for the distribution of the products in a certain territory under his jurisdiction.
Case law on this point holds that a sales concession contract exists whenever a
"unnamed contract, [...] is characterised by a complex function of exchange and cooperation and consists, on a structural level, of a framework contract [...], from which arises the obligation to conclude individual sales contracts or the obligation to conclude pure product transfer contracts on the terms set out in the initial agreement. "[4]
One of the main consequences of classifying a relationship as a sales dealership, and not simply a relationship between manufacturer and regular customer, is that the dealership contract is normally framed as contract of durationwhich cannot be terminated without giving the distributor reasonable notice. Accordingly, if the situation is indeed the latter, there will be an obligation on the seller to give notice if it decides to cease supplying the other party, and vice versa, an obligation on the purchaser to purchase the products from the grantor during the notice period.[5]
In 2013, the European Court of Justice, in the Corman-Collins judgment,[6] attempted to define as precisely as possible what are the characteristic traits of the dealer, in order to distinguish this figure from the 'regular customer'.
In particular, according to the Courts of the Court, a durable commercial relationship between economic operators is configurable as a sale of goods when
"is limited to successive agreements, each concerning the delivery and collection of goods. "
Conversely, the relationship must be regarded as a sales concession when the distribution is regulated (in writing or de facto) by
"a framework agreement having as its object a supply and procurement obligation concluded for the future, which contains specific contractual clauses relating to distribution by the dealer of the goods sold by the grantor."
In conclusion, according to the Court, if the relationship is limited to the supply of goods, regardless of whether it continues even over a long period of time, it must be qualified as a regular customer, who makes several purchases over time. If, on the other hand, the reseller assumes specific obligations typical of distribution, the relationship must be qualified as a sales licence.
However, these interpretative criteria dictated by the Court of Justice must be used by national courtswhich are required to identify the elements from which it may be inferred whether or not such obligations have been undertaken. In particular, it will be necessary to ascertain how the relationship between the parties actually developed, even irrespective of whether or not the parties entered into a contract.
These principles are not always easy to apply and do not always lead to an unambiguous interpretation. Attached below, by way of example, are some characterising elements and which may, according to Italian case law, lead to the qualification of the relationship as a sales concession, i.e.
- the predetermination of resale prices and related discountsthe existence of an exclusive, significant, continuous and economically conspicuous series of contracts of buying and selling the grantor's products;[7]
- agreements on the sale of products "submarine"the fact that the dealership was repository of products, that the volume of turnover of sales was relevant.[8]
[1] Only in Belgium was the sale concession already regulated by the law of 27 July 1961.
[2] See on this point Bocchini and Gambino, I contratti di somministrazione e di distribuzione, 2017, UTET, p. 640 ff.
[3] See on this point Bortolotti, Manuale di diritto della distribuzione, CEDAM, 2007, p. 2 et seq.; Bortolotti, Contratti di Distribuzione, Itinera, 2016, p. 538 et seq.
[4] Cass. Civ., no. 1469 of 1999; Cass. Civ., no. 13569 of 2009.
[5] Cass. civ. no. 16787 of 2014; Appeal Cagliari 2 February 1988.
[6] Judgment 19.12.2013, in case C-9/12.
[7] Cass. Civ., no. 17528, 2010.
[8] Cass. Civ., no. 13394 of 2011.
Main differences between the agency contract and the commercial distribution contract
The sales dealership contract and the agency contract are among the most common forms of organising distribution. These contracts are united by the fact that both the agent and the dealer undertake the obligation to organise and promote, in an autonomous manner, sales in accordance with the manufacturer's policies, integrating themselves within the manufacturer's distribution network. What mainly differentiates these two intermediaries is the fact that, whereas the agent undertakes, in return for a commission, to promote the conclusion of contracts between the manufacturer and the customers whom the agent has procured, the dealer acts as a buyer-seller and his source of income is based on the difference between the purchase price and the resale price.
The sales concession is a particularly important instrument for the organisation of distribution in markets, both domestic and foreign, which differs from other non-integrated retailers (e.g. 'wholesalers') in that it performs aautonomous promotion and organisation of sales of the grantor's productsin a given territory, which, in principle, is granted to him on an exclusive basis.
A definition of this type of contract is not given by the Civil Codeas it has not been regulated in our legal system and must therefore be qualified as an atypical contract. In any case, if one wants to give a definition of the sales agent, it can be framed as a commercial entrepreneur, who concludes a framework contract with the manufacturer, of fixed or indefinite duration, to regulate, in a given area, all the sales that are carried out on a stable and continuous basis by the grantor to the dealer.
La definition of agent, or rather, of agency contract is, on the other hand, given by the Civil Code, which provides atArticle 1742 of the Civil Code that 'With the agency contract one party undertakes on a permanent basis the task of promoting, on behalf of the other, against remuneration the conclusion of contracts in a specified area' (see also What is the difference between an agency contract and a business intermediary?).
Therefore, while the dealer deals in his own name and on his own behalfby purchasing the goods directly from the grantor and reselling them to third parties, contrary to theagent acts on behalf of and as an autonomous collaborator of the principal, promoting the conclusion of sales contracts to third parties and, only to the extent that he has the power of representation, also in the name of the principal.
Thus, although the agent and the dealer perform a very similar function, in that both are in charge of organising the distribution of a principal's products, in a given territory entrusted to them, as autonomous entrepreneurs, but integrated into the manufacturer's sales network, at the same time, they distinguish in a very pronounced way, in the way they manage sales the agent is purely and simply an intermediary of the principal, the dealer, on the other hand, buys the products directly from the licensor and is himself responsible for reselling them directly to the end customer, who has been procured by him.
Looking at the two figures from a strategic point of view, it can be seen that thecommercial agent allows the principal to have stronger and more direct control over customersas the sale is made by the principal itself and the agent is instead responsible for passing the order on to the principal, the dealer has instead the task of organising the sales phase to the end customer and, often, also the service phase, and therefore normally has more direct control over the customerIt also performs activities related to the promotion of the sale, such as customs clearance of goods, shipment to the consignee and warehousing.
These types of contracts also differ in terms of the commercial risks that the manufacturer assumes: in the distribution the risk is definitely shifted more to the dealer, who bears the potential danger of not being able to resell the purchased products. On the contrary in the case of agencythe risk of non-performance by the end customer, falls directly back on the principal, especially if the parties have applied Italian law, since in our legal system the usability of the so-called ''default clause'' is limited.star of belief"has in fact been deleted. It is briefly recalled that with such a clause, the agent assumes in part or in full, the risk of non-payment by a third party introduced by it, undertaking to reimburse the principal, within the agreed limits, for the loss incurred by the latter.
It should be noted, however, that in most sales distribution contracts there is a clause, which postpones the dealer's obligation to pay for the goods, only after payment of the product by the end customer. It is evident that such an agreement will greatly shift the entrepreneurial risk towards the grantor.
Certainly, one aspect that strongly distinguishes the two contracts is theseverance pay (on this subject see also calculation of indemnity pursuant to art. 1751 of the civil code., calculation of former AEC 2014 allowances calculation of former AEC 2009 allowances e calculation of ex ANA allowances 2003). As is well known, the agency contract expressly provides, in Article 1751 of the Civil Code, for the agent's right to receive, under certain conditions, an indemnity following the termination of the contractual relationship. Likewise cannot be said for the sales concession contract. Italian jurisprudence, in fact, differs from the jurisprudence of several European countries - e.g. Austria and Germany) does not recognise this right to the concessionaire.
Authoritative doctrine dissociates itself from this jurisprudential orientation, stating that "even in the absence of legislative provisions, the right to an indemnity in an agency contract in which the agent is also authorised to make purchases on its own account as a dealer could be extended to the business carried on by the dealer. Indeed, it seems to us that in such cases, since it is a mixed contract, in which the cause of the agency contract prevails, the indemnity for termination, by virtue of the principle of absorption, could be extended to the business carried on by the agent as dealer"(Venice-Baldi).