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Futura Spa appointed Mr. Müller as its exclusive agent for Germany in 2003. The contract prohibited Müller from selling competing products but Futura was aware he had been selling jackets from a competing brand since 2004. While the competing jackets did not significantly impact Futura's sales, there was no explicit agreement allowing Müller to sell them. Futura now wants to terminate the contract early to appoint a new agent they believe can substantially increase business. Futura is considering either terminating without notice for breach of the non-compete or giving Müller 15 days to stop selling the competing brand and terminating if he does not.

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151 views

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Futura Spa appointed Mr. Müller as its exclusive agent for Germany in 2003. The contract prohibited Müller from selling competing products but Futura was aware he had been selling jackets from a competing brand since 2004. While the competing jackets did not significantly impact Futura's sales, there was no explicit agreement allowing Müller to sell them. Futura now wants to terminate the contract early to appoint a new agent they believe can substantially increase business. Futura is considering either terminating without notice for breach of the non-compete or giving Müller 15 days to stop selling the competing brand and terminating if he does not.

Uploaded by

eun hee kim
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Terminating a contract because the agent is selling competing products Fututra Spa, an Italian company

manufacturing casual wear appointed in 2003 Mr. Gerhardt Müller as its exclusive agent for Germany.
The agency contract expressly provided the agent’s obligation not to distribute any competing products.
The clause was drafted as follows: Article 3. - The Agent shall not represent, manufacture, sell or
distribute (or be involved either directly or indirectly in the manufacture, sale or distribution of) any
products which are in competition with the Products, for the entire term of this contract. He shall
especially not engage, in acting as distributor, reseller, commission agent, agent or in any other similar
way in the territory or elsewhere, for the benefit of third parties who manufacture or sell products
which are in competition with the Products. Shall be considered as competing products any type of
casual wear. The agency contract was made for an indefinite period could be terminated with a notice of
six months. The contract could also be terminated without notice in case of substantial breach,
according to the following clause: Article 19. Each party may terminate this contract with immediate
effect, without respecting a period of notice, by simple communication served in conformity with Article
20, in case of :a substantial breach by the other party of the obligations arising out of this contract, Any
failure by a party to carry out all or part of his contractual obligations resulting in such detriment to the
other party as to substantially deprive him of what he is entitled to expect under the contract, The
parties agree to consider in any case as a substantial breach which justifies the termination without
notice the violation of the non-compete obligation contained in Article 3. The Agent represented and
distributed since 2004 jackets of a competing company, Marlene srl. There is no doubt that the Marlene
jackets are competing products in the sense of Article 3. However, since the competing jackets did not
substantially impact on the sales of Futura, the latter never objected. There is evidence that Futura knew
that the Marlene jackets were distributed by Mr. Müller (such jackets were displayed near to Futura’s
products in the agent’s show-room and there is correspondence showing that Futura knew that Mr.
Müller was distributing such products). There is no evidence of an express (oral or written) agreement
permitting Müller to distribute the competing jackets. Mr. Müller is performing well his task as Futura’s
agent. However Futura has been contacted by Mr. Schmidt who seems to have better connections in
business and who could substantially increase the business. Consequently Futura would like to
terminate the agency agreement as soon as possible, and therefore envisages the following options: (a)
terminating the contract without notice under Article 19, invoking the breach of article 3, or (b) asking
the agent to stop distributing the Marlene jackets within 15 days and terminating the contract for
breach if he does not. The questions to be discussed are: - whether the above options would be
admissible under the law of the members of the panel, and - whether the answer would be different if
the contract contained the following non-waiver clause:

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