The Distribution and Agency Agreement in Swiss Law
Distribution and commercial agency agreements are essential tools for companies wishing to market their products or services in Switzerland or internationally through third parties. Swiss law does not provide a specific statute on distribution, but articles 418a to 418v of the Code of Obligations (CO) govern commercial agency. PBM Avocats advises companies in Geneva and Lausanne in drafting and managing these contracts.
Comparison of Main Distribution Forms
| Form | Legal Status | Remuneration | End-of-Contract Indemnity |
|---|---|---|---|
| Commercial agent | Intermediary for the account of the principal | Commission on concluded business | Yes (art. 418u CO) |
| Exclusive distributor | Independent buyer-reseller | Resale margin | No (unless clause / analogy) |
| Franchisee | Independent operator under licence | Profit from operations | As per contract |
| Commission agent | Intermediary in their own name | Commission on business | As per contract |
The Commercial Agency Contract (arts. 418a et seq. CO)
Commercial agency is the contract by which the agent undertakes to negotiate, in the name of and for the account of the principal, the conclusion of specific business. Key characteristics:
- Agent independence: the agent is an independent entrepreneur, not an employee
- Representation authority: the agent may conclude contracts in the name of the principal if this power is granted
- Commission: the agent is entitled to a commission on all business concluded through their efforts, even after the end of the contract if the order was placed before
- Exclusivity: the principal may grant territorial exclusivity; in return, the agent may be required to handle all business in their territory
The Agent's Goodwill Indemnity (art. 418u CO)
One of the major issues in an agency contract is the goodwill indemnity due at the end of the contract. The agent is entitled to this if:
- They have brought in new clients or substantially developed business with existing clients
- The principal will continue to benefit from these advantages after the end of the contract
- Payment of the indemnity is equitable taking into account the circumstances
The maximum indemnity is one average annual remuneration over the last 5 years. It may be excluded contractually if the agent terminates the contract without just cause or assigns the contract to a third party. The action for payment of the indemnity is time-barred after one year (art. 418u para. 3 CO).
Key Clauses of a Distribution Agreement
- Definition of products/services: precise list of products covered by the agreement
- Exclusive or non-exclusive territory: geographical area of activity
- Minimum targets: minimum sales volume or turnover (subject to termination)
- Resale prices: attention to competition law (prohibition on fixing resale prices)
- Payment terms: deadlines, discounts, handling of unpaid invoices
- Commercial assistance: training, marketing materials, technical support
- Intellectual property: authorised use of trademarks, logos
- Non-compete clause: post-contractual restrictions
- Applicable law and dispute resolution: often Swiss law with arbitration
What is the difference between a commercial agent and a distributor in Swiss law?
A commercial agent (arts. 418a et seq. CO) is an independent intermediary who concludes business in the name of and for the account of the principal. They are entitled to a commission on concluded business and, at the end of the contract, to a goodwill indemnity. A distributor (reseller) buys the products for their own account and resells them in their own name. They do not automatically benefit from a goodwill indemnity at the end of the contract, unless contractually provided.
Is an exclusive distributor entitled to a contract termination indemnity?
Under Swiss law, an exclusive distributor has no automatic statutory right to a goodwill indemnity at the end of the contract, unlike a commercial agent. However, Federal Supreme Court case law sometimes admits an analogy with the agency contract (art. 418u CO) if the distributor has developed the supplier's customer base, particularly if the contract provided for obligations similar to those of an agent.
What is the notice period for terminating a distribution agreement?
For fixed-term contracts, ordinary termination is excluded unless contractually provided. For indefinite contracts, reasonable notice must be observed. Swiss case law determines reasonable notice taking into account the duration of the relationship, investments made by the distributor, and the time needed to find a commercial alternative. Periods of 6 months to 2 years have been recognised depending on the circumstances.
Are exclusive distribution contracts subject to competition law in Switzerland?
Yes. Exclusive distribution contracts may be subject to the Cartels Act (CartA) if they contain competition restrictions. Vertical agreements (between supplier and distributor) may violate cartel law if they fix resale prices (RPM), divide markets abusively, or restrict passive trade. COMCO may impose fines for serious restrictions.
Can a non-compete clause be included in a distribution agreement?
Yes, post-contractual non-compete clauses are common in distribution agreements. Under Swiss law (arts. 340 et seq. CO by analogy), they are valid if limited in time (max. 3 years recommended), in space (reasonable territory), and in activity (products/sectors concerned). An overly broad clause may be reduced by the court or declared void.