Applicable law to Distribution Agreements in the European Union

We share an interview of Ana Pepeljugoska Kostovska Ph.D. as Attorney at law and Partner in Law office Pepeljugoski, in publication of Andersen Global.

“The distribution contracts are not separately regulated although its content is influenced by the trade customs and the provisions of the other similar types of agreements and they must comply with the Law on Obligations and the Law on Protection of Competition”

In your jurisdiction, is there a regulation of distribution contract and through what legislative tool?

In Macedonian legislation, the distribution contract is considered as “unnamed contract” i.e. contract that is not separately regulated and named by the law. Instead, the distribution contract arose as a result of the autonomous trade practice and its content is largely influenced by the trade customs and the provisions of the other similar types of agreements such as purchase agreement, commercial representation contract, franchise contract etc. The Law on Obligations is the main law that regulates the content of the contracts, hence is widely applicable to the content of the distribution contracts too. Beside the Law on Obligation, the Law on Protection of Competition contains some provisions that regulate the distribution contracts but exclusively in regards to the protection of competition. In addition, since the distribution contract regulates supply and distribution of goods, the provisions of the Law on road transport are applicable to some extent too.

Is it allowed in your jurisdiction the submission of the contract by agreement of the parties to different legislation from the one applicable to the distributor territory with a waiver of the legislation of the latter?

The party autonomy is the main principle of the contract law. According to the Private International Law Act, whenever there is a foreign element, the contracting parties are free to choose their applicable law in regards to the contract and to submit their contract under a legislation of their choice, whether that is for the whole contract or just part of the contract. Their will for the chosen applicable law may be explicitly expressed with the contract or it may arise from the provisions of the contract of from other circumstances. However, if both of the parties are domestic natural persons or legal entities and the contract is concluded on the territory of North Macedonia, they cannot submit the contract to a different legislation than the Macedonian.

Is the distributor entitled to be compensated upon the termination of the term of his distributions right? What is the applicable compensation, if any?

The distributor is entitled to compensation upon termination of the term of his distribution rights for the completed and due work that was performed according to the contract, before the termination of the contract. In this case, the other contracting party is obliged to compensate the distributor, or otherwise the distributor will have the right of court protection. The amount of the compensation will depend solely on the prices agreed between the parties with the distribution contract. Beside the compensation for completed and due work, in case of unilaterally, premature termination of the contract, the contractual party that breached the contract is obliged to compensate the damages to the other party. The amount of the compensation will depend on the real damage that occurred from the breach of the contract and the loss of future benefit that the other party will have to bear. In addition, the contracting parties are also free to agree penalties in case of breach of the contract. If penalties were agreed, the party that breached the contract will be obliged to pay them to the other party in the amount agreed with the contract.

Can the distributor validly waive such compensation in the contract itself?

The distributor cannot validly waive the right on compensation for completed and dull work in the contract itself. The distributor also cannot waive the right on compensation for damages with the contract, before the damage occurs. Any opposite provision will be considered null and void.

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