This is something on which we are often asked to advise – both by wine producers who want to know how much notice they should give, and by agents/distributors who want to know how much they should receive. Here is a quick summary of the position under English law.
Termination for very serious breach
If a party to a contract commits a breach so serious that it amounts to a renunciation, or repudiation, of the contract, the other party can (a) elect to treat the contract as having come to an end, and (b) claim damages for the breach.
Fixed term contract
A contract for a fixed term cannot be terminated by either party giving notice to the other before the end of that term unless the contract provides for that. In the absence of such provision – or a very serious breach as above – neither party can terminate before the end of the agreed term.
Indefinite term contract
Notice period stipulated in the contract
If the contract states what period of notice must be given, then – again, absent a very serious breach – that period must be given.
Mandatory notice periods for commercial agency contracts
If the Commercial Agency Regulations apply, an agency contract for an indefinite term may be terminated by either party giving notice as follows:
- 1 month for the first year of the contract
- 2 months for “the second year commenced”
- 3 months for “the third year commenced” and for subsequent years.
Unless otherwise agreed, the notice must expire at the end of a calendar month.
These are mandatory periods – they apply even if the contract provides for shorter periods. The parties can agree longer periods, but the notice to be given by the principal must not be shorter than that to be given by the agent.
Termination on reasonable notice
Where the parties to a distribution agreement – or an agency agreement to which the Commercial Agency Regulations do not apply – have not agreed what period of notice must be given, their agreement will usually be treated as subject to an implied term that either party may terminate it by giving reasonable notice to the other. What is a reasonable period will depend on the particular facts of the case. Decisions in previous cases are of limited assistance. Although it is rarely possible to predict with certainty what the court would say was reasonable, it will usually fall within the range 3 to 12 months.
What if an agent is also a distributor?
An “agent” will often act as a producer’s agent for some customers or sales channels, and as his distributor for others. If there is no agreement as to notice, different periods may be required to bring each activity to an end – mandatory notice as above to terminate the agency, reasonable notice to terminate the distributorship.
What if the producer doesn’t want to give as much notice as he should?
If a producer wants to terminate before the end of a fixed term, or to give less notice than he should, he can do so. The agent/distributor may apply to the court for an order requiring him to continue to the end of the fixed term, or of the notice period he should have given. In practice such injunctions are rarely granted. So a producer who terminates in this way, unless he can justify it on grounds of very serious breach, may only face a claim for damages for his breach of contract. It would be unwise to do this, however, without first seeking legal advice and carefully evaluating the potential consequences.
Except where otherwise stated, all information given and any legal opinions expressed on this website assume that English law applies. See Conditions of use.