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Published in June 2001 by ICC PUBLISHING S.A. International Chamber of Commerce

The world business organization 38 Cours Albert 1er 75008 Paris, France Reprinted in March 2003 Copyright © 2001 International Chamber of Commerce All rights reserved. No part of this work may be reproduced or copied in any form or by any means without written permission of ICC Publishing SA, except by the purchaser of this ICC publication No. 634, for his or her own personal use. This publication may not be reproduced in part or in whole for sale, hire or licensing or any other commercial purpose without the written permission of ICC Publishing SA. The software being part of the publication is subject to this provision.

ICC Publication No. 634 ISBN 92-842-1299-5

FOREWORD By Maria Livanos Cattaui, Secretary General of ICC

Practice has shown that companies and businesses involved in international trade mainly use commercial agency and distributorship contracts to distribute their products or services abroad. However, users should bear in mind fundamental differences in purpose and substance between these contracts when deciding which one to choose. ICC Short Form Model Contracts gives a clear and concise presentation of both types of contract. It provides essential model clauses for drafting simplified contracts and is an invaluable practical tool for international traders. This new publication complements two existing publications, both of them dealing with long form model contracts: ICC Model Commercial Agency Contract (publication n° 496) and ICC Model Distributorship Contract – Sole Importer-Distributor (publication n° 518). This latest book on model contracts was written by the Working Party on Agency and Distributorship of the ICC Commission on International Commercial Practice. We are grateful to the Commission Chair, Fabio Bortolotti (Italy), who also chaired the working party. Our thanks also go to the following working party members: Didier Ferrier (France), Klaus Meyer-Swantée (The Netherlands), Ercüment Erdem (Turkey), Christoph Martin Radtke (France), Elspeth Anderson (United Kingdom) and David Moss (United Kingdom).

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TABLE OF CONTENTS 3

Foreword

I.

THE ICC SHORT FORM MODEL INTERNATIONAL COMMERCIAL AGENCY CONTRACT

Introduction Comments on specific points PART I – Special conditions PART II – General conditions

II.

7 8 11 15

THE ICC SHORT FORM MODEL INTERNATIONAL DISTRIBUTORSHIP CONTRACT

Introduction Comments on specific points PART I – Special conditions PART II – General conditions

ICC at a glance and selected ICC publications

21 22 25 29

35

5

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THE ICC SHORT FORM MODEL INTERNATIONAL COMMERCIAL AGENCY CONTRACT

I. The ICC Short Form Model International Commercial Agency Contract

INTRODUCTION This “short form” is a simplified contract intended for parties who do not want a detailed commercial agency contract, but prefer a shorter simpler form covering only the most essential issues. It should be stressed that a “short form” contract will contain only provisions which cover the most typical issues arising between the parties and will not provide the choice of more sophisticated alternative provisions which might actually be more appropriate for some users. Indeed, some issues may arise which are not covered at all and they will be left to be determined by the courts. If parties need more sophisticated solutions, they should use the “full” ICC Model Commercial Agency Contract (ICC publication No. 496), which provides a more complete set of clauses and options (particularly through the annexes). The model has been made bearing in mind mainly the situation of agents who promote the sale of goods. It can also be applied to agents who promote services, but in that case the parties should check if all clauses are appropriate for their situation. Many clauses of the model include the words “unless otherwise agreed”. This wording has been used in order to draw the attention of the users to the possibility of choosing other solutions which may be more appropriate for their specific needs. However, this does not mean that in the absence of the indication “unless otherwise agreed” the parties cannot agree otherwise. Only in some cases, where parties should be sure that they really want a different solution (or where it may be difficult to understand what their real intention was) it has been preferred to use the words “unless otherwise agreed in writing”, in order to make clear that parties can depart from the contractual provision only by a written agreement.

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THE ICC SHORT FORM MODEL INTERNATIONAL COMMERCIAL AGENCY CONTRACT

COMMENTS ON SPECIFIC POINTS

Products (Box A-3-A) If the parties do not fill in A-3, the contract will cover all the products of the principal (see Article 1.2). If the parties define the products in Box A-3, they may refer to categories of products or to specific models. If the space is not sufficient, reference may be made to an annex: e.g. by writing in Box A-3-A “see Annex 1". Commission (Box A-4) If a “flat” rate of commission is insufficient (e.g. because the parties prefer a range of different rates according to the value of the transaction and/or with respect to authorized discounts granted by the agent), they can refer to an annex. In the right-hand side of Box A-4 parties can choose the time when the commission is due. If they choose the first option, the agent’s right to commission will accrue when the principal delivers the goods; if they choose the second one, the agent will be entitled to commission only after the customer has paid. If the parties make no choice, the second option will apply in accordance with Article 6.4. Goodwill indemnity (Box A-5) In many countries (e.g. in all Member States of the European Union) the law provides that, except in the circumstances identified in Article 9.3, the agent is entitled to an indemnity in the event of termination by the principal, in order to repay him for the goodwill developed by him from which the principal will benefit after the contract has ended. If the agent is domiciled in such a country, it is strongly recommended that the agent be granted such an indemnity, by choosing alternative A-5-A (or by not completing Box A-5, which will have the same effect: see Article 9). If, on the contrary, the agent is domiciled in a country where no such indemnity is required by law, the parties may choose alternative B.

Applicable law (Box A-6) The recommended solution is that the parties should not select a specific national law to govern the contract. Instead they should agree to apply the general principles of law generally recognized in international trade (see Article 10.1). The reason for proposing this solution is that there are substantial differences between the domestic rules of various countries,

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THE ICC SHORT FORM MODEL INTERNATIONAL COMMERCIAL AGENCY CONTRACT

and it would consequently have been impossible to establish a set of rules compatible with each national law. This is why a reference to generally recognized principles of international trade, rather than to a specific national law, appeared a better solution, at least if the parties submit their disputes to arbitration. If the parties adopt this solution, they should either not complete Box A-6 or should choose alternative A. However, since this solution (i.e. that the contract be governed by general principles of law instead of a domestic law) is more appropriate when disputes are submitted to arbitration rather than to litigation in national courts, the choice of a specific national law will be preferable if the parties decide to have recourse to litigation before the ordinary courts (see Box A-7). In this case, however, the parties should check if and to what extent the contract conforms to the provisions of the applicable domestic law. Resolution of disputes (Box A-7) Box A-7 offers the choice between arbitration and jurisdiction of ordinary courts. If no choice is made ICC arbitration will apply, by virtue of Article 10.2. When litigation before ordinary courts is chosen, a further option is if such jurisdiction should be exclusive or not. The purpose of a non-exclusive jurisdiction is to make sure that the parties can bring the dispute before that court even if it would not otherwise have jurisdiction, without limiting their right to go to other jurisdictions. On the contrary, in case of exclusive jurisdiction, the parties intend to exclude all other courts. However, in certain countries such exclusion may not be effective due to public policy rules reserving jurisdiction to local courts. EU competition rules As a principle, agency agreements do not fall under the prohibition of Article 81 (formerly 85) of the EC treaty and therefore need not to comply with the EC antitrust rules. However, in exceptional cases, where the agent takes financial and commercial risks that are similar to those of a distributor (reseller), the contract may fall under Article 81 and will therefore need to comply with Regulation 2790/1999 in order to be exempted from the prohibition. In this case parties should ask for expert advice.

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THE ICC SHORT FORM MODEL INTERNATIONAL COMMERCIAL AGENCY CONTRACT

PART I – SPECIAL CONDITIONS

A–1

PRINCIPAL

Name: ..................................................................................................................................... Address: ................................................................................................................................. ................................................................................................................................................ (hereinafter called “the Principal”)

A–2

AGENT

Name: ..................................................................................................................................... Address: ................................................................................................................................. ................................................................................................................................................ (hereinafter called “the Agent”)

A–3

PRODUCTS AND TERRITORY (ARTICLE 1.1)

A. The contractual products are:

B. The contractual territory is:

..................................................................

..................................................................

..................................................................

..................................................................

..................................................................

..................................................................

..................................................................

..................................................................

.................................................................. .................................................................. ..................................................................

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THE ICC SHORT FORM MODEL INTERNATIONAL COMMERCIAL AGENCY CONTRACT

A–4

AGENT’S COMMISSION (ARTICLE 6)

The rate of commission is .........%

Commission shall be due: when the Principal delivers the goods when the customer pays the price other: ...............................................

A–5 A.

GOODWILL INDEMNITY (ARTICLE 9) Goodwill indemnity

Upon contract termination the agent will be entitled to a goodwill indemnity in accordance with Article 9.

B.

No goodwill indemnity

Upon contract termination the agent will not be entitled to any goodwill indemnity or similar compensation.

Alternative B should be avoided when the law of the agent’s country provides for a goodwill indemnity or similar compensation.

A–6

APPLICABLE LAW

The two solutions hereunder (general principles of law and domestic laws) are alternatives: parties should not choose both of them. If no choice is made, general principles of law will apply, in accordance with Article 10.1. A.

General principles of law

This agency contract shall be governed by the rules and principles of law generally recognized in international trade as specified in Article 10.1 of the general conditions.

B.

Domestic law

This agency contract shall be governed by the laws of ...................................... .............................................. (country)

If the parties select alternative B, they should first check if the provisions contained in the present contract are in accordance with the domestic law they have chosen.

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THE ICC SHORT FORM MODEL INTERNATIONAL COMMERCIAL AGENCY CONTRACT

A–7

RESOLUTION OF DISPUTES

The two solutions hereunder (arbitration or litigation before ordinary courts) are alternatives: parties cannot choose both of them. If no choice is made, ICC arbitration will apply, in accordance with Article 10.2. A.

ARBITRATION

ICC (in accordance with Article 10.2)

B.

LITIGATION (ordinary courts)

In case of dispute the courts of ...................................................

(place)

................................................... (country) shall have jurisdiction. Other: ........................................................ Such jurisdiction shall be: exclusive Place of arbitration: .......................................

A–8

non-exclusive

DATE AND SIGNATURE OF THE PARTIES

This Agency contract is governed by the Special Conditions hereabove (to the extent that the respective boxes have been filled in) and by the General Conditions contained in Part II hereafter. ........................................................ (place)

........................................................ (date)

The Principal

The Agent

........................................................

.........................................................

13

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THE ICC SHORT FORM MODEL INTERNATIONAL COMMERCIAL AGENCY CONTRACT

PART II – GENERAL CONDITIONS

1. Territory and products

1.1 The Principal appoints the Agent, who agrees to promote the sale of the products listed in Box A-3-A (hereinafter called “the Products”) in the territory (if any) indicated in Box A-3-B (hereinafter called “the Territory”). 1.2 If the parties have not completed Box A-3-A, all products manufactured and/or marketed by the Principal at present and in the future will be considered as “Products” for the purpose of this contract. 2. Good faith and fair dealing

2.1 In carrying out their obligations under this contract the parties will act in accordance with good faith and fair dealing. 2.2 The provisions of this contract, as well as any statements made by the parties in connection with it, shall be interpreted in good faith. 2.3 The parties will supply each other with such information and support as is reasonably necessary for the fulfilment of their contractual obligations. 3. Agent’s functions

3.1 The Agent agrees to use all reasonable endeavours to promote the sale of the Products in the Territory in accordance with the Principal’s reasonable instructions and to protect the Principal’s interests with the diligence of a responsible businessman. 3.2 The Agent shall transmit to the Principal the offers or orders received by him, the Principal being free to accept or reject such offers. Unless otherwise agreed in writing, the Agent has no authority to make contracts on behalf of the Principal, or in any way to bind the Principal to third parties. 3.3 The Agent shall use all reasonable efforts to satisfy himself of the creditworthiness of customers whose orders he transmits to the Principal. He shall not transmit orders from customers whose creditworthiness he knows, or reasonably ought to know, is in question, without informing the Principal in advance. He shall, furthermore, give reasonable assistance to the Principal in recovering debts due. 3.4 The Agent is not entitled to receive payments on the Principal’s behalf unless specifically authorized in writing by the Principal.

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THE ICC SHORT FORM MODEL INTERNATIONAL COMMERCIAL AGENCY CONTRACT

4. Undertaking not to compete

4.1 Without the prior written authorization of the Principal, the Agent shall not, during the term of this contract, represent, manufacture or distribute any products that are in competition with the Products and he shall not, directly or indirectly, act as agent, commission merchant, reseller, distributor, or in any other way, for the benefit of third parties who manufacture or market products which are in competition with the Products. 4.2 The Agent may represent, distribute or manufacture non-competing products (provided they are not for the benefit of competing principals), on the condition that he keeps the Principal informed of such activity. However, the above obligation to inform the Principal does not apply if, in consideration of: (i) the characteristics of the products which the Agent wants to represent, and (ii) the field of activity of the principal for whom the Agent wishes to act, it is unreasonable to expect that the Principal’s interests may be affected. 5. Exclusivity

5.1 The Principal shall not grant to any third party the right to represent or distribute the Products within the Territory. 5.2 The Principal shall be entitled to deal directly, without the Agent’s intervention, with customers situated in the Territory provided he informs the Agent in advance. In respect of such sales the Agent shall be entitled to the commission provided for in Article 6.1. 6. Commission

6.1 Except as otherwise agreed, the Agent is entitled to the commission indicated in Box A-4 on all sales of the Products that are made by the Principal during the term of the contract to customers established in the Territory. 6.2 If the Agent, when dealing with customers established in the Territory, solicits orders resulting in contracts of sale with customers established outside the Territory, and provided the Principal is interested in such business, the Agent shall be entitled to receive a reduced commission, to be agreed upon on a case-by-case basis. Similarly, the Agent accepts that his commission will be reduced in the opposite case of business solicited by others outside the Territory, which gives rise to sales to customers established within the Territory. 6.3 Commission shall be calculated as a percentage of the net amount of the invoices, i.e. on the effective sales price (any discount other than discounts for early payment being deducted) clear of any additional charges (such as packing, transport, insurance) and clear of all custom duties or taxes of any kind, provided that such additionnal charges are separately stated in the invoice.

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THE ICC SHORT FORM MODEL INTERNATIONAL COMMERCIAL AGENCY CONTRACT

6.4 Unless otherwise agreed (e.g. as indicated in Box A-4), the Agent shall acquire the right to commission only after full payment by the customers of the invoiced price. In case of partial payment, provided it is made in compliance with the sale contract, the Principal shall make an advance payment of a corresponding proportion of the commission. 6.5 The Principal shall provide the Agent with a statement of the commissions due in respect of each quarter, or such shorter period as the parties may agree, and shall set out all the business in respect of which such commission is payable. The commission shall be paid not later than the last day of the month following the relevant quarter. 7. Term and termination of the contract

7.1 This contract is concluded for an indefinite period and enters into force on the date on which it is signed. 7.2 This contract may be terminated by either party by notice given in writing by means of communication ensuring evidence and date of receipt (e.g. registered mail with return receipt, special courier), not less than four months in advance. If the contract has lasted for more than four years, the period of notice will be of not less than six months. The end of the period of notice must coincide with the end of a calendar month. The parties may agree in writing on longer periods of notice. 8. Early contract termination

8.1 Each party may terminate this contract with immediate effect by notice given in writing by means of communication ensuring evidence and date of receipt (e.g. registered mail with return receipt, special courier) in the following situations: a) Substantial breach, i.e. if the other party is in breach of all or part of his obligations under the contract resulting in such detriment to the terminating party as to substantially deprive him of what he is entitled to expect under the contract and, if the breach is capable of remedy, fails to remedy it within thirty days of being required to do so. b) Exceptional circumstances, i.e. in case of bankruptcy, moratorium, receivership, liquidation or any kind of composition between the debtor and the creditors of the other party, or any circumstances which are likely to affect substantially his ability to carry out his obligations under this contract. If the Agent is a company, any change of control, ownership and/or management of the agent-company shall also be considered as exceptional circumstances which justify the earlier contract termination by the Principal, unless the Agent proves that such change does not adversely affect the fulfilment of this contract.

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THE ICC SHORT FORM MODEL INTERNATIONAL COMMERCIAL AGENCY CONTRACT

8.2 If a party terminates the contract in accordance with this Article, and it appears thereafter that the reasons put forward by that party did not justify the earlier termination, the termination will be effective, but the other party will be entitled to damages for the unjustified earlier termination. Such damages will be equal to the average commission for the period the contract would have lasted in case of normal termination, unless the damaged party proves that the actual damage is higher (or, respectively, the party having terminated the contract proves that the actual damage is lower). The above damages are in addition to the indemnity which may be due under Article 9. 9. Goodwill indemnity

9.1 Unless otherwise agreed (e.g. in Box A-5), upon termination of the contract the Agent shall be entitled to an indemnity (“goodwill indemnity”) if and to the extent he has brought the Principal new customers or has significantly increased the volume of business with existing customers and the Principal continues to derive substantial benefits from the business with such customers, and the payment of this indemnity is equitable having regard to all the circumstances and, in particular, the commission lost by the Agent on the business transacted with such customers and provided that he claims such indemnity in writing within one year from contract termination. 9.2 The amount of the indemnity shall not exceed a figure equivalent to a commission for one year calculated from the Agent’s average annual commission over the preceding five years and, if the contract lasted for less than five years, the indemnity shall be calculated on the average for the period in question. 9.3 The Agent shall have no right to indemnity in the following cases: a) where the Principal has terminated the contract in accordance with Article 8; b) where the Agent has terminated the contract, unless the termination is justified under Article 8 or on grounds of age, infirmity or illness in consequence of which the Agent cannot reasonably be required to continue his activities; c) where, with the agreement of the Principal, the Agent assigns his rights and duties under this agency contract to another person. 9.4 The goodwill indemnity under this Article 9 (“Contractual Indemnity”) is in lieu of any goodwill indemnity or equivalent compensation the Agent may be entitled to by virtue of rules of law applicable to the present contract (“Statutory Indemnity”) and will consequently replace such Statutory Indemnity (if any). However, in case the Agent’s right to the Statutory Indemnity cannot be validly replaced by the Contractual Indemnity under the applicable law, Article 9.1 will not apply and the Agent will be entitled to the Statutory Indemnity in lieu of the Contractual Indemnity set out in this Article 9.

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THE ICC SHORT FORM MODEL INTERNATIONAL COMMERCIAL AGENCY CONTRACT

10. Applicable law – Arbitration

10.1 Unless otherwise agreed in writing (whether in Box A-6 or elsewhere), any questions relating to this agency agreement shall be governed by the rules and principles of law generally recognized in international trade as applicable to international commercial agency contracts. 10.2 Unless otherwise agreed in writing, all disputes arising out of or in connection with this agency agreement shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.

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THE ICC SHORT FORM MODEL INTERNATIONAL DISTRIBUTORSHIP CONTRACT

II. The ICC Short Form Model International Distributorship Contract

INTRODUCTION This “short form” is a simplified contract intended for parties who do not want a detailed distributorship contract, but prefer a shorter simpler form covering only the most essential issues. It should be stressed that a “short form” contract will contain only provisions which cover the most typical issues arising between the parties and will not provide the choice of more sophisticated alternative provisions which might actually be more appropriate for some users. Indeed, some issues may arise which are not covered at all and they will be left to be determined by the courts. If parties need more sophisticated solutions, they should use the “full” ICC Model Distributorship Contract (Sole Importer-Distributor) (ICC publication No. 518), which provides a more complete set of clauses and options (particularly through the annexes). Many clauses of the model include the words “unless otherwise agreed”. This wording has been used in order to draw the attention of the users to the possibility of choosing other solutions which may be more appropriate for their specific needs. However, this does not mean that in the absence of the indication “unless otherwise agreed” the parties cannot agree otherwise. Only in some cases, where parties should be sure that they really want a different solution (or where it may be difficult to understand what their real intention was) it has been preferred to use the words “unless otherwise agreed in writing”, in order to make clear that parties can depart from the contractual provision only by a written agreement.

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THE ICC SHORT FORM MODEL INTERNATIONAL DISTRIBUTORSHIP CONTRACT

COMMENTS ON SPECIFIC POINTS

Products (Box A-3-A) If the parties do not fill in A-3, the contract will cover all the products of the supplier (see Article 1.2). If the parties define the products in Box A-3, they may refer to categories of products or to specific models. If the space is not sufficient, reference may be made to an annex: e.g. by writing in Box A-3-A “see Annex 1”. Goodwill indemnity (Box A-6) In most countries the distributor is not entitled to a goodwill indemnity. However, since parties may wish to introduce this type of benefit, the model gives them the option (under Box A-6) to make such a choice. If the parties decide to agree upon a “contractual” goodwill indemnity, such indemnity is assumed to be the only goodwill indemnity due to the distributor: this is why Article 11.2 expressly states that the goodwill indemnity under Article 11 cannot be cumulated with an indemnity possibly due under the applicable law. Applicable law (Box A-7) The recommended solution is not to submit the contract to a specific national law, but to only refer to the general principles of law generally recognized in international trade (see Article 13.1). In this case, parties should either not complete Box A-7 or should choose alternative A. However, since this solution is more appropriate when disputes are submitted to arbitration rather than to litigation in national courts, the choice of a specific national law will be preferable if the parties decide to have recourse to litigation before the ordinary courts (see Box A-8-B). In this case, however, the parties should check if and to what extent the contract conforms to the provisions of the applicable law. Law governing sales to the distributor (Article 13.1) As for the sales contracts concluded between the supplier and the distributor, Article 13.1 states that the sale contract will be governed by the United Nations Convention on Contracts for the International Sale of Goods (Vienna Convention of 1980, also called CISG), since such a solution appears to be the most appropriate for international contracts of sale. This does not of course prevent the parties from making a different choice, particularly within general conditions of sale (or of purchase) they may refer to within

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THE ICC SHORT FORM MODEL INTERNATIONAL DISTRIBUTORSHIP CONTRACT

the distribution contract. Resolution of disputes (Box A-8) Box A-8 offers the choice between arbitration and jurisdiction of ordinary courts. If no choice is made ICC arbitration will apply, by virtue of Article 13.2. When litigation before ordinary courts is chosen, a further option is if such jurisdiction should be exclusive or not. The purpose of a non-exclusive jurisdiction is to make sure that the parties can bring the dispute before that court even if it would not otherwise have jurisdiction, without limiting their right to go to other jurisdictions. On the contrary, in case of exclusive jurisdiction, the parties intend to exclude all other courts. However, in certain countries such exclusion may not be effective due to public policy rules reserving jurisdiction to local courts. Reservation of title (Article 6.5) This Article states in general terms that the products delivered to the distributor remain the property of the supplier until complete payment is received. However, such reservation of title will only be effective to the extent it is permitted by the law governing transfer of reservation of title of the products which will normally be the law of the country where the goods are. Parties should consequently check if reservation of title will be valid in the distributor’s country and if any special requirements are needed for its validity. EU competition rules As for contracts within the European Union (or capable of producing significant effects within the EU) the competition rules of the EC treaty and particularly Article 81 (formerly Article 85) are to be respected. Except in the case that the supplier has a market share of 30% or higher (in which case an individual exemption may be needed), in all cases it will be sufficient that the contract complies with the block exemption regulation 2790/1999. In this model solutions are proposed which meet the requirements of regulation 2790/ 1999, particularly regarding sales outside the contractual territory (Article 7.1) and resale prices (Article 7.2). Moreover, since under the regulation non-competition obligations should not exceed five years, the maximum duration of the contract has been limited to five years (see Article 9.1).

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THE ICC SHORT FORM MODEL INTERNATIONAL DISTRIBUTORSHIP CONTRACT

PART I – SPECIAL CONDITIONS

A–1

SUPPLIER

Name: ..................................................................................................................................... Address: ................................................................................................................................. ................................................................................................................................................ (hereinafter called “the Supplier”)

A–2

DISTRIBUTOR

Name: ..................................................................................................................................... Address: ................................................................................................................................. ................................................................................................................................................ (hereinafter called “the Distributor”)

A–3

PRODUCTS AND TERRITORY (ARTICLE 1.1)

A. The contractual products are:

B. The contractual territory is:

..................................................................

..................................................................

..................................................................

..................................................................

..................................................................

..................................................................

..................................................................

..................................................................

.................................................................. .................................................................. ..................................................................

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THE ICC SHORT FORM MODEL INTERNATIONAL DISTRIBUTORSHIP CONTRACT

A–4

YEARLY MINIMUM PURCHASE (ARTICLE 5)

Year

Currency

Amount

If this box has not been filled in, Article 5 is not applicable. For the years which follow those indicated in the box the increase of 10% indicated in Article 5.1 will apply, unless otherwise agreed.

A–5

DISCOUNT TO DISTRIBUTOR (ARTICLE 6.2) %

This box must not be completed if the price to the Distributor is already a net price (e.g. if there is a special list price for distributors).

A–6 A.

GOODWILL INDEMNITY (ARTICLE 11) Goodwill indemnity

Upon contract termination the Distributor will be entitled to a goodwill indemnity in accordance with Article 11.

26

B.

No goodwill indemnity

Upon contract termination the Distributor will not be entitled to any goodwill indemnity or similar compensation.

THE ICC SHORT FORM MODEL INTERNATIONAL DISTRIBUTORSHIP CONTRACT

A–7

APPLICABLE LAW

The two solutions hereunder (general principles of law and domestic laws) are alternatives: parties should not choose both of them. If no choice is made, general principles of law will apply, in accordance with Article 13.1. A.

General principles of law

This distributorship contract shall be governed by the rules and principles of law generally recognized in international trade as specified in Article 13.1 of the general conditions.

B.

Domestic law

This distributorship contract shall be governed by the laws of .......................... ................................................... (country)

If the parties select alternative B, they should first check if the provisions contained in the present contract are in accordance with the domestic law they have chosen. A–8

RESOLUTION OF DISPUTES

The two solutions hereunder (arbitration or litigation before ordinary courts) are alternatives: parties cannot choose both of them. If no choice is made, ICC arbitration will apply, in accordance with Article 13.2. A.

ARBITRATION

ICC (in accordance with Article 13.2)

B.

LITIGATION (ordinary courts)

In case of dispute the courts of ...................................................

(place)

................................................... (country) shall have jurisdiction. Other: ........................................................ Such jurisdiction shall be: Place of arbitration: .......................................

A–9

exclusive non-exclusive

DATE AND SIGNATURE OF THE PARTIES

This distributorship contract is governed by the Special Conditions hereabove (to the extent that the respective boxes have been filled in) and by the General Conditions contained in Part II hereafter. ........................................................ (place)

........................................................ (date)

The Supplier

The Distributor

........................................................

.........................................................

27

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THE ICC SHORT FORM MODEL INTERNATIONAL DISTRIBUTORSHIP CONTRACT

PART II – GENERAL CONDITIONS

1. Territory and products

1.1 The Supplier grants and the Distributor accepts the exclusive right to market and sell the products listed in Box A-3-A (hereinafter called “the Products”) in the territory (if any) indicated in Box A-3-B (hereinafter called “the Territory”). 1.2 If the parties have not completed Box A-3-A, all products manufactured and/or marketed by the Supplier at present and in the future will be considered as “Products” for the purpose of this contract.

2. Good faith and fair dealing

2.1 In carrying out their obligations under this agreement the parties will act in accordance with good faith and fair dealing. 2.2 The provisions of this agreement, as well as any statements made by the parties in connection with it, shall be interpreted in good faith. 2.3 The parties will supply each other with such information and support as is reasonably necessary for the fulfilment of their contractual obligations.

3. Distributor’s functions

3.1 The Distributor sells in his own name and for his own account, in the Territory, the Products supplied by the Supplier. 3.2 Unless otherwise agreed in writing, the Distributor has no authority to make contracts on behalf of the Supplier, or in any way to bind the Supplier to third parties. 3.3 The Distributor agrees to use all reasonable endeavours to promote the sale of the Products in the Territory in accordance with the Supplier’s policy and shall protect the Supplier’s interests with the diligence of a responsible businessman. He shall especially set up and maintain an adequate organization for sales and, where appropriate, after-sales service, with all means and personnel as are reasonably necessary in order to ensure the fulfilment of his obligations under this contract for all Products and throughout the Territory.

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THE ICC SHORT FORM MODEL INTERNATIONAL DISTRIBUTORSHIP CONTRACT

3.4 The Distributor may, in cases in which he does not want to act as buyer-reseller, propose such business to the Supplier for the direct sale to the customer. For such activity as intermediary the Distributor will receive a remuneration to be agreed upon case-by-case. It is expressly agreed that such activity as intermediary does in no way modify the legal status of the Distributor as an independent trader acting in his own name and for his own account. 4. Undertaking not to compete

4.1 Without the prior written authorization of the Supplier, the Distributor shall not, during the term of this contract, represent, manufacture, market or sell in the Territory any products which are in competition with the Products, and he shall not, directly or indirectly, act as agent, commission merchant, reseller, distributor, or in any other way, for the benefit of third parties who manufacture or market products which are in competition with the Products. 4.2 The Distributor may represent, distribute or manufacture non-competing products (provided not for the benefit of competing suppliers), on the condition that he keeps the Supplier informed of such activity. However, the above obligation to inform the Supplier does not apply if, in consideration of: (i) the characteristics of the products which the Distributor wants to represent, and (ii) the field of activity of the supplier for whom the Distributor wishes to act, it is unreasonable to expect that the Supplier’s interests may be affected. 5. Minimum purchase

5.1 The Distributor undertakes to purchase, during each year, Products amounting to at least the minimum yearly turnover indicated in Box A-4. Unless otherwise agreed, such turnover will be automatically increased by 10% every successive year. 5.2 If the Distributor fails to attain within the end of any year the minimum purchase in force for such year, the Supplier shall be entitled, subject to giving one month’s notice, at his choice, to terminate this contract, or to cancel the Distributor’s exclusivity, or to reduce the extent of the Territory. This right must however be exercised in writing not later than two months after the end of the year in which the minimum yearly turnover has not been attained. 6. Conditions of supply – Prices

6.1 The Supplier agrees to supply all Products ordered, subject to their availability, and provided payment of the Products is adequately warranted. All sales of the Products

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THE ICC SHORT FORM MODEL INTERNATIONAL DISTRIBUTORSHIP CONTRACT

to the Distributor shall be governed by the Supplier’s general conditions of sale, if attached to this contract or otherwise communicated in writing to the Distributor. In case of contradiction between such general conditions and the terms of this contract, the latter shall prevail. 6.2 The prices payable by the Distributor shall be those set forth in the Supplier’s pricelists as in force at the time the order is received by the Supplier with the discount indicated in Box A-5 (if completed). Such prices are subject to change at any time, on condition of a one month’s notice. 6.3 Payment will be made, unless otherwise agreed, (i) by means of an irrevocable letter of credit confirmed by a leading bank of the Supplier’s country at least thirty days before the agreed date of delivery and payable upon presentation of shipping documents, or (ii) by deferred payment, provided adequate bank guarantees, covering the entire debt of the Distributor, are made available in advance. 6.4 The Distributor agrees to comply, with the utmost care, with the terms of payment agreed upon between the parties. 6.5 It is agreed that the Products delivered remain the Supplier’s property until complete payment is received by the Supplier. The Distributor agrees to cooperate with the Supplier by performing such actions as may be necessary for the protection of the latter’s rights. 7. Resale of the Products by the Distributor

7.1 The Distributor agrees not to actively promote sales (e.g. through advertising, establishing branches or distribution depots) into the territories reserved by the Supplier exclusively for himself or allocated by the Supplier to other exclusive distributors or buyers. 7.2 The Distributor is free to determine his resale prices with the only exception of maximum sales prices that the Supplier may impose. 8. Exclusivity

8.1 The Supplier shall not, during the term of this contract, grant any other person or undertaking (including a subsidiary of the Supplier) within the Territory the right to represent or market the Products. The Supplier shall furthermore refrain from selling to customers established in the Territory.

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THE ICC SHORT FORM MODEL INTERNATIONAL DISTRIBUTORSHIP CONTRACT

8.2 The Supplier is entitled to sell the Products to customers outside the Territory, even if such customers intend to export the Products into the Territory, but may not actively solicit or otherwise provoke such sales to third parties with the purpose of circumventing the exclusivity under Article 8.1.

9. Term and termination of the contract

9.1 This contract enters into force on the date of its signature and shall remain in force until terminated in accordance with Articles 5.2, 9.2 or 10, but shall in any case expire (if not terminated earlier) after a period of five years from the date of its signature. The parties agree to meet at least three months before the end of the five-year period in order to discuss the possibility of entering into a new contract after its expiration. 9.2 This contract may be terminated by either party at any time by notice given in writing by means of communication ensuring evidence and date of receipt (e.g. registered mail with return receipt, special courier), not less than six months in advance. The end of the period of notice must coincide with the end of a calendar month.

10. Early contract termination

Each party may terminate this contract with immediate effect, without respecting a period of notice, by notice given in writing by means of communication ensuring evidence and date of receipt (e.g. registered mail with return receipt, special courier) in the following situations: a) Substantial breach, i.e. if the other party is in breach of all or part of his obligations under the contract resulting in such detriment to the terminating party as to substantially deprive him of what he is entitled to expect under the contract and, if the breach is capable of remedy, fails to remedy it within thirty days of being required to do so. b) Exceptional circumstances, i.e. in case of bankruptcy, moratorium, receivership, liquidation or any kind of composition between the debtor and the creditors of the other party, or any circumstances which are likely to affect substantially his ability to carry out his obligations under this contract. If the Distributor is a company, any change of control, ownership and/or management of the Distributorcompany shall also be considered as exceptional circumstances which justify the earlier contract termination by the Supplier, unless the Distributor proves that such change does not adversely affect the fulfilment of this contract.

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THE ICC SHORT FORM MODEL INTERNATIONAL DISTRIBUTORSHIP CONTRACT

11. Goodwill indemnity

11.1 If the parties have completed Box A-6-A, the Distributor shall be entitled, upon termination of the contract by the Supplier for reasons other than a breach by the Distributor, justifying earlier termination under Article 10, to a goodwill indemnity equal to 50% of the annual gross profit made with customers introduced by the Distributor or with customers with whom the Distributor has significantly increased the volume of business, to be calculated on the average of the preceding five years (or, if the contract has lasted less than five years on the average of such duration). The Distributor undertakes to make all reasonable efforts to have the existing customers transferred to the Supplier or to the new distributor (or agent) of the Supplier. In pursuance of the above obligation the Distributor agrees to refrain, for a period of twelve months from contract termination, directly or indirectly, from selling, distributing or promoting any products which are in competition with the Products to customers to which he previously sold the Products or promoted the sale of the Products under this contract. The indemnity shall be paid in three instalments of equal amount respectively four, eight and twelve months after contract termination. The payment of the indemnity is made conditional upon the performance, by the Distributor, of his obligation to make all reasonable efforts to have the existing customers transferred to his successor or to the Supplier. 11.2 The goodwill indemnity under this Article 11 (“Contractual Indemnity”) is in lieu of any goodwill indemnity or equivalent compensation the Distributor may be entitled to by virtue of rules of law applicable to the present contract (“Statutory Indemnity”) and will consequently replace such Statutory Indemnity (if any). However, in case the Distributor’s right to the Statutory Indemnity cannot be validly replaced by the Contractual Indemnity under the applicable law, Article 11.1 will not apply and the Distributor will be entitled to the Statutory Indemnity in lieu of the Contractual Indemnity set out in this Article 11. 11.3 If the parties have completed Box A-6-B , the Distributor shall not be entitled, upon termination of the contract, to any indemnity or similar compensation. 11.4 The above provisions do not affect the Distributor’s right to claim damages for breach of contract as far as the termination by the Supplier amounts to such a breach.

12. Force majeure

12.1 A party is not liable for a failure to perform or a delay in the performance of any of his obligations in so far as he proves that:

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THE ICC SHORT FORM MODEL INTERNATIONAL DISTRIBUTORSHIP CONTRACT

a) the failure was due to an impediment beyond his control, and b) he could not reasonably be expected to have taken into account the impediment and its effects upon his ability to perform at the time of the conclusion of the contract, and c) he could not reasonably have avoided or overcome it or its effects. 12.2 A party seeking relief shall, as soon as practicable after the impediment and its effects upon his ability to perform become known to him, give notice to the other party of such impediment and its effects on his ability to perform. Notice shall also be given when the ground of relief ceases. Failure to give either notice makes the party thus failing liable in damages for loss which otherwise could have been avoided. 12.3 A ground of relief under this Article relieves the party failing to perform from liability in damages, from penalties and other contractual sanctions, from the duty to pay interest on money owing as long as and to the extent that the ground subsists. 12.4 If the grounds of relief subsist for more than six months, either party shall be entitled to terminate the contract without notice.

13. Applicable law – Arbitration

13.1 Unless otherwise agreed in writing (whether in Box A-7 or elsewhere), any questions relating to this distributorship contract shall be governed by the rules and principles of law generally recognized in international trade as applicable to international distribution contracts. Unless otherwise agreed in writing, the sale contracts concluded between the Supplier and the Distributor within this distributorship agreement will be governed by the United Nations Convention on Contracts for the International Sale of Goods (Vienna Convention of 1980, hereafter referred to as CISG), and to the extent that such questions are not covered by CISG, by reference to the rules and principles of law generally recognized in international trade as applicable to international contracts of sale. 13.2 Unless otherwise agreed in writing, all disputes arising out of or in connection with this distributorship contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.

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ICC at a glance and selected ICC publications

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INTERNATIONAL CHAMBER OF COMMERCE

ICC AT A GLANCE ICC is the world business organization. It is the only representative body that speaks with authority on behalf of enterprises from all sectors in every part of the world. ICC’s purpose is to promote an open international trade and investment system and the market economy worldwide. It makes rules that govern the conduct of business across borders. It provides essential services, foremost among them the ICC International Court of Arbitration, the world’s leading institution of its kind. Within a year of the creation of the United Nations, ICC was granted consultative status at the highest level with the UN and its specialized agencies. Today ICC is the preferred partner of international and regional organizations whenever decisions have to be made on global issues of importance to business. Business leaders and experts drawn from ICC membership establish the business stance on broad issues of trade and investment policy as well as on vital technical or sectoral subjects. These include financial services, information technologies, telecommunications, marketing ethics, the environment, transportation, competition law and intellectual property, among others. ICC was founded in 1919 by a handful of far-sighted business leaders. Today it groups thousands of member companies and associations from over 130 countries. National committees in all major capitals coordinate with their membership to address the concerns of the business community and to put across to their governments the business views formulated by ICC. Some ICC Services The ICC International Court of Arbitration (Paris) The ICC International Centre for Expertise (Paris) The ICC International Bureau of Chambers of Commerce – IBCC (Paris) The ICC Institute of World Business Law (Paris) The ICC Centre for Maritime Co-operation (London) ICC Commercial Crime Services (London), grouping: The ICC Counterfeiting Intelligence Bureau The ICC Commercial Crime Bureau The ICC International Maritime Bureau

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SELECTED ICC PUBLICATIONS

SELECTED ICC PUBLICATIONS E: English – F: French – D: German – S: Spanish – I: Italian – EF: bilingual edition – E-F: separate editions in each language

ICC MODEL CONTRACTS SERIES ICC Model Distributorship Contract (sole importer-distributor), 2nd edition (with CD-ROM)

A concise and practical model contract which can be used in its entirety by parties having no need to draw up a specific contract of their own as it has been designed to assure balance for both sides. This updated version is an invaluable tool for companies engaged in international trade and their lawyers. E-F

68 pages

ISBN 92-842-1315-0

No. 646

ICC Model Commercial Agency Contract, 2nd edition (with CD-ROM)

Fully revised edition of a tried and tested ICC model contract that takes into account recent developments in the laws of agency, including Internet sales. The text is included on CD-ROM for even more flexibility. E-F

68 pages

ISBN 92-842-1313-4

No. 644

ICC Model Occasional Intermediary Contract (with diskette)

Designed to take into account the interests of all parties involved in a noncircumvention and non-disclosure agreement, minimizing the risk of fraud and misunderstanding and so providing legal security. Includes general and special conditions, both of which are provided on a diskette. E-F

35 pages

ISBN 92-842-1272-3

No. 619

The ICC Model International Franchising Contract (with diskette)

Franchising is increasingly being used as a means of rapid market penetration without the capital costs of international expansion, but international franchising has been seriously hampered by laws and regulations which differ from country to country. This ICC model contract offers franchisors and franchisees a framework agreement within which their rights and responsibilities can be protected. The model contract applies to all international franchise agreements that govern the distribution of goods or provision of services, and helps overcome the difficulties caused by a lack of uniform international rules on this subject. E-F

76 pages

ISBN 92-842-1211-1

No. 557

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INTERNATIONAL CHAMBER OF COMMERCE

Model International Sale Contract (with diskette)

A flexible and clear model contract providing directions to sellers and buyers of manufactured goods. Allows users either to incorporate only the general conditions or to include the specific conditions, which set out standard terms common to all contracts with the ICC General Conditions of Sale. A diskette provides the text of the model, and useful annexes include the preambles of Incoterms 2000 and the United Nations Convention for the International Sale of Goods. Easy-to-use for first-time traders, but also providing the legal protection demanded by experienced practitioners. E-F

64 pages

ISBN 92-842-1210-3

No. 556

DICTIONARIES AND REFERENCE WORKS Guide to Export-Import Basics, 2nd edition

A fully revised edition of this ICC bestseller. Providing clear explanations of the core mechanics of trade, this book takes a lucid look at legal, financial, transport and e-commerce issues. Fully indexed, it also includes a handy glossary of the principal terms and abbreviations. E

352 pages

ISBN 92-842-1309-6

No. 641

A to Z of International Trade

More than a dictionary, A to Z doubles as a reference book, with its nine “Focus” sections providing introductions to the main areas of international trade. Over 2000 definitions, 150 key words in 5 languages, acronyms and website addresses and a thorough bibliography help you understand the jargon. E

450 pages

ISBN 92-842-1277-4

No. 623

Key Words in International Trade, 4th edition

A unique business handbook with over 3000 entries in English, French, Spanish, Italian and German. This perfect desk-top aid covers arbitration, accounting, banking, IT, contracts, finance, IGOs and NGOs, management, trade, marketing, transport and telecommunications. EFSDI

424 pages

ISBN 92-842-1187-5

No. 417

Trade Finance Fraud

A lively study that shows traders and financiers how to identify occupational perils and protect against them. Including case studies and a detailed look at the legal recourse options available, this is the perfect antidote to swindling and fraudulence. E

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84 pages

ISBN 92-842-1213-6

No. 643

SELECTED ICC PUBLICATIONS

THE INCOTERMS 2000 SERIES Incoterms 2000

ICC’s 13 standard full definitions at the core of world trade. EF

272 pages

ISBN 92-842-1199-9

No. 560

ICC Guide to Incoterms 2000

Written by Professor Jan Ramberg, international expert, chair of the revision of Incoterms 2000 and author of Guide to Incoterms 1990, this clearly written and authoritative guide provides a term-by-term review of the new Incoterms, with commentary on each obligation of the seller and the buyer. The indispensable companion to the Incoterms 2000. E-F

192 pages

ISBN 92-842-1269-3

No. 620

Incoterms 2000 Wall Chart

A full-colour chart, ideal for hanging on the office wall or for slotting into a file. With a clear illustration of the buyers’ and sellers’ responsibilities under each of the Incoterms, plus a list of the critical points, traders will find this the ideal tool for quick reference at a glance. E

29.7 x 63 cm

No. 614

Incoterms 2000: a Forum of Experts

Four experts who drafted Incoterms 2000 describe the ins and outs of the new rules in this word-for-word transcript of the ICC conference held to launch them. Providing an in-depth view into the changes in these important commercial terms, the experts discuss the following issues: An overview of the terms and how they have changed (or haven’t). Incoterms, transport procedures and techniques. Incoterms and customs clearance procedures. Incoterms and documentary practices. Each presentation is followed by a series of questions and answers. The perfect complement to help you fully understand the Incoterms. E

128 pages

ISBN 92-842-1270-7

No. 617

Incoterms 2000 Multimedia Expert

Available in single user or LAN version, the Incoterms 2000 Multimedia Expert is a lively, interactive software designed to help you make sense of the 13 Incoterms 2000. Expert is not only an ideal visual tool for teachers and trainers, it is also a valuable everyday reference in the work place for those needing a detailed knowledge of Incoterms. E

CD-ROM

ISBN 92-842-1280-4

No. 616

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INTERNATIONAL CHAMBER OF COMMERCE

HOW TO OBTAIN ICC PUBLICATIONS

ICC Publications are available from ICC national committees or councils which exist in some 60 countries or from: ICC PUBLISHING S.A. 38, Cours Albert 1er, 75008 Paris France Tel: +33 1.49.53.29.23/28.89 Fax: +33 1.49.53.29.02 e-mail: [email protected]

ICC PUBLISHING, INC. 156 Fifth Avenue, Suite 417 New York, NY 10010 (U.S.A) Tel: +1 (212) 206 1150 Fax: +1 (212) 633 6025 e-mail: [email protected]

Interested in other ICC Publishing titles? Want to purchase on the Internet? Go to www.iccbooks.com

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