Our client is a distributor of luxury brand jams, who entered into an agency agreement in 1999 with a French manufacturer. This meant that they agreed to act on behalf of the company, to promote and sell their products in the UK and Republic of Ireland. The contract was on a five-year rolling term which renewed each day. In other words, it had no set end date and was set to continue to renew automatically on a daily basis.
This contract was very important to our client, as their primary source of business. If the contract was terminated without notice, it would leave the business unable to trade, which would have a huge impact on the directors’ livelihoods.
The manufacturer tried to serve three months’ notice to our client, alleging a material breach of contract (a failure to meet the terms of the contract) despite a five year fixed term.
The client denied that they had breached the contract, but they accepted that there is a new business strategy and that there has been a breakdown in the business relationship.
They expect to be compensated for five years’ worth of lost profits (around £1m) should the manufacturer terminate the contract without the proper notice period.
We advised the client at short notice on the enforceability of the fixed term and on whether there had been a material breach of contract allowing for immediate termination. We have set our client’s position out in detailed correspondence to the lawyers acting for the manufacturer. We have suggested a without prejudice meeting to resolve matters and avoid going to court before the dispute escalates further.