In last month’s blog I discussed how a distributor whose distributorship agreement is terminated can protect itself given that distributors (unlike commercial agents) do not receive special protection under English law.
The answer is through exercising a right of set-off in order to offset unpaid invoices issued by the supplier against damages claimed by the distributor for failure to give proper notice.
So how does a supplier prevent this situation from happening? The textbook answer is straightforward. First by ensuring the proper incorporation by the supplier of its standard terms and conditions of sale into contracts entered into with the distributor for the sale of goods. Second, by drafting the terms and conditions of sale so as to exclude the right of set-off.
But what the textbook says and what happens in practice can often be different.
Regularly there is a failure on the part of suppliers to properly incorporate their terms and conditions of sale into contracts with distributors. As such, the best drafted terms and conditions of sale in the world will not save the supplier which fails to properly use them.
Sometimes even where incorporation occurs, the distributor will seek to overcome the supplier’s terms by referring repeatedly to its terms and conditions of business or otherwise seeking to disapply the supplier’s terms. Indeed, in 2017, when a large retailer went into administration, the evidence post-administration showed that prior to administration its buyers had been instructed by senior managers to counter every attempt by a particular supplier to rely on its terms and conditions of sale. The evidence further showed that in some cases the buyers had been successful!
So for suppliers persistence is key – not simply in insisting that their terms and conditions of sale are part of the contract but in being alert to facing down attempts by distributors to be able to exercise a right of set-off.
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