November 2006
EXCLUSIVE
SELLING
CONTRACTS
In parallel with the
international developments at the commercial arena, volume of
world’s
trade is also expanding. Therefore, countries are moving towards to
create common economical targets. “Exclusive Selling
Contract” is
a typical contract which enables easier transfer of goods and
products to foreign markets.
With the help of
Exclusive Selling Contract, exports to a certain country can be
conducted via a sole distribution center located there. In a few
words, the commercial relationships are sustained by a sole buyer at
the country of export. The buyer undertakes many risks and becomes
the branch of the producer at the contract’s implementation
country.
After this brief
explanation, before defining the Exclusive Selling Contract, we
should clarify one point: There is not an exact definition of
Exclusive Selling Contract neither in Turkish Law nor in other law
systems. However, depending on the definitions proposed by the
doctrine and can be found in some Turkish Supreme Court judgements,
we may suggest the following:
“Exclusive
Selling Contract is a type of continuous contract of frame nature
between the producer (manufacturer/exporter) and exclusive seller, in
which the producer undertakes the liability of sending any or all of
his goods to be exclusively sold by the exclusive seller at a certain
geographical region and in return, the exclusive seller undertakes
the liability of acting towards distribution’s and
sales’
improvement, by selling the goods on his behalf and account.”
As
a result of aforementioned definition, the elements of the Exclusive
Selling Contract might be listed as follows:
-
Providing sales monopoly to a certain
location,
-
Being
a contract which leads to continuous and regular liability,
-
Exclusive
seller sells the goods subject to the contract on behalf and account of
himself, on the other hand, he is integrated with the distribution
network of the producer,
-
Exclusive
seller’s liability to act towards distribution’s
and sales’ improvement.
If we comment on the
legal nature of contract in the context of aforementioned elements,
we might conclude that it is neither a sales contract, a pre-contract
nor an agency contract. Quite the contrary, Exclusive Selling
Contract has a frame contract’s qualities, which settles all
commercial relations between the parties. Therefore, in addition with
granting the exclusive seller to sell the goods at the location
determined by the contract, the producer is liable to refrain from
making direct sales to that location or having the goods sold by
third parties, which forms an incongruity with the competition law.
In return, the exclusive seller is obliged to improve the sales by
accelerating the launches. These rights and liabilities form the
subject of the frame contract between the parties of Exclusive
Selling Contract. On the other hand, the producer is entitled with
the right and liabilty of delivering the goods to exclusive seller
and accordingly, the exclusive seller is liable with accepting the
delivery of goods and defray the costs. The rights and obligations of
this phase are about the implementation stage of the contract.
While settling the
contract, the parties are free to determine the terms and conditions
under the liberty of contract, but they should obey the legal
restrictions. Consequently, under Article 11/1 of Turkish Obligations
Code, the liberty of contract principle is also effective for the
Exclusive Selling Contracts. In practice, such contracts are usually
acted in statutory form, but they can also be acted implicitly or
verbally. Considering the provision of Turkish Code on Civil
Procedure, which states that the existance of a transaction whose
subject exceeds 400 New Turkish Liras can only be proven by
conclusive evidence, to overcome probable confirmation issues, acting
such a contract in statutory form would be better. Otherwise, many
difficulties would be faced when determining the content of an
implicit contract.
From the competition
law’s point of view, we might easily claim that Exclusive
Selling
Contracts have a competition restricting effect. Because, with the
settlement of an Exclusive Selling Contract, the commercial relations
of parties with the third parties are blocked. For example, when an
exclusive seller is granted to act at a certain region (that is, the
exclusive area protection), the exclusive seller becomes the sole
marketer of that region. In this case, the goods subject to Exclusive
Selling Contract cannot be marketed at that region by other
distributors or the producer himself. Therefore, while acting an
Exclusive Selling Contract, the provisions of competition law should
also be taken into consideration. Otherwise, the contract might be
unlawful. So, to prevent the Exclusive Selling Contract, which has an
international quality, being incompatible with the competition law,
the restrictions and exemptions at the communiques of European Union
and the provisions of Act No. 4054, on Protection of Competition
should be taken into consideration.
In an Exclusive Selling
Contract, both the producer (or exporter) and the distributor
(exclusive seller) makes big investments, therefore the contract
should be terminated in a manner which does not affect the other
party; that is, the contract should not be terminated in any time or
unlawfully. The need to overcome the possibility of great damages in
case of a termination leads to the continuity of such contracts.
As a matter of fact, the
Exclusive Selling Contracts cause regular incurring of debts, so they
can be acted for a definite or indefinite time. In case they are
indefinite, both parties are entitled to terminate the contract by
using their ordinary annulment rights. However, if the contract is
acted for a definite time, parties may terminate the contract only by
using their extraordinary annulment rights. Between the probable
reasons for using the extraordinary annulment right, the violation
of sales monopoly by producer (exporter/manufacturer) or exclusive
seller’s acting on behalf of another producer
(exporter/manufacturer) at the area, where is allocated to himself,
can be mentioned..
In case the Exclusive
Selling Contract is terminated due to a reason mentioned above, upon
Article 96 of Turkish Obligations Code, the opposite party has right
to claim equalization compensation for the breach of the contract.
This compensation corresponds to the damages which are arisen due to
the violation of contractual obligations. Besides, the exclusive
seller may claim a compensation for losing his circle of customers
and facing financial difficulties, under the fairness principle. This
matter is explicitly formulated at the Belgian Law, however in German
Law, such a compensation is included in the provisions about agency
contract and for exclusive sellers, these provisions may be
implemented by way of analogy. In Turkish Law, no compensation might
be claimed for the loss of circle of customers.
As
it is already mentioned, the “Exclusive Selling
Contract” might
lead some difficulties in finding the exact provisions to be
implemented, due to its peculiarity and lack of specific provisions
in Turkish Law. These problems might be solved by analogy or
judge’s
legal creation under Article 1st of Turkish Civil Code. According to
the rules on bilateral contracts, the provisions to be implemented
for the Exclusive Selling Contract are found by deductive reasoning
of provisions on sales, agencies and civil law partnerships.
Furthermore, the Exclusive Selling Contract leads to a debt
relationship, therefore the general provisions of Turkish Civil Code
and Turkish Obligations Code are also applicable to the contract
between parties. In general, the parties of such contracts are
merchants; so, the general provisions of Turkish Commercial Code are
also applicable.
Due to the Exclusive
Selling Contracts’ important place at the improvement of
international trade, the lack of specific regulations lead to
troublesome cases. Especially, determination of the applicable law
has great importance, considering its international quality. The
parties usually solve such issues by predetermining the applicable
law at the contract; if it is not predetermined, upon Article 24 of
Turkish Code on International Civil Procedure, applying the law of
place of performance, if there is more than one place of performance,
applying law of place of predominant performance, if the place of
predominant performance is not determinable, applying the law of
place where is most closely connected with the contract. Of course,
in such cases, the relation of the characteristic performance of the
contract with the parties should be determined. In
our point of view, the law of exclusive seller’s center of
activities should be applied for the characteristic performance of
the contract. However, if there is another law than Turkish Law, that
is more closely related with the matter, due to the lack of a
positive legislation for the application of such law, the law of
exclusive seller’s center of activities has more importance.
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