EXCLUSIVE DISTRIBUTORSHIP AGREEMENTS IN TURKISH LAW

EXCLUSIVE DISTRIBUTORSHIP AGREEMENTS IN TURKISH LAW

Although referred to by different names such as exclusive distributorship, sole distribution, or dealership, these terms fundamentally describe the same legal relationship. Particularly in the realm of international trade, exclusive distributorship agreements constitute a highly significant contractual arrangement. These agreements often arise from the necessity of technical or intellectual property considerations, where the manufacturer, unable or unwilling to produce the product in the target country, contracts with a single distributor, committing to sell the products solely to that distributor while allowing sales in a limited geographical area under the distributor’s own name and account.

Elements of a Exclusive Distributorship Agreement

The Turkish Code of Obligations explicitly defines certain contracts, referring to them as “nominate contracts.” However, there are also contracts that lack a statutory definition and have emerged through commercial practice, known as “innominate contracts.” Some of these contracts incorporate elements of various nominate contracts, while others develop uniquely based on the parties’ intentions, making them sui generis in nature.

Although exclusive distributorship agreements are not explicitly regulated under Turkish law, their fundamental elements can be identified through Turkish jurisprudence. In its decision dated May 26, 1992 (Case No. 1990/8223, Decision No. 1992/7964), the 11th Civil Chamber of the Turkish Court of Cassation defined distributorship agreements as follows:

“The concept of sole distribution must first be examined in resolving the dispute between the parties. As recognized in legal doctrine, a sole distributorship agreement is a framework contract regulating the legal relationship between the manufacturer and the sole distributor. Under this contract, the manufacturer undertakes to supply all or part of its products exclusively to the distributor within a designated territory in exchange for payment.

Conversely, the distributor is obliged to sell the products in its own name and on its own account, engaging in promotional and marketing activities to increase sales. As evident from this definition, the obligations and commitments under a sole distributorship agreement are reciprocal between the manufacturer and the distributor, and as a rule, do not impose obligations on third parties. Granting exclusivity within a designated territory remains a contractual obligation on the manufacturer’s part.”

In light of the settled jurisprudence of the Court of Cassation, the essential elements of a sole distributorship agreement can be summarized as follows:

• A continuous legal relationship is established.
• The agreement is structured as a framework contract.
• Exclusive sales rights within a designated territory are granted.
• The distributor acts in its own name and on its own account.
• The distributor undertakes marketing, sales, and promotional activities.

Key Features of a Distributorship Agreement

→ Establishment of a Continuous Legal Relationship

One of the primary distinctions between a distributorship agreement and a simple sales contract is its continuous nature. This continuity does not merely entail the shipment of goods in multiple installments following a single order but rather involves an ongoing business relationship where one party regularly places orders and makes payments over time.

→ Framework Nature of the Agreement

Since exclusive distributorship agreements are not expressly regulated under the Turkish Code of Obligations, they are considered atypical contracts. According to settled case law and commercial customs, even if a written contract is not executed, an exchange of emails or other documentation evidencing the parties’ intentions may suffice to establish a legally binding agreement. Additionally, as product quantities and pricing may fluctuate over time, exclusive distributorship agreements typically outline general principles, while individual transactions are conducted through purchase orders.

→ Granting of Exclusive Sales Rights in a Specific Territory

One of the defining characteristics of a exclusive distributorship agreement is the grant of exclusive sales rights within a specified region. Within the boundaries set by the manufacturer, the distributor exclusively undertakes the sale of the products, developing its own distribution network, branches, or even sub-dealers to facilitate sales across the designated area.

→ Distributor’s Independence in Acting on Its Own Name and Account

The distributor operates independently from the manufacturer, entering into contracts in its own name and for its own account. This independence differentiates exclusive distributorship agreements from agency contracts, where the agent acts on behalf of the principal. The distributor maintains its own financial records, builds its own sales network, and is not subject to direct instructions or orders from the manufacturer, unless otherwise agreed in the contract.

→ Distributor’s Engagement in Marketing, Sales, and Promotional Activities

While the distributor remains independent, it is contractually obligated to promote sales and engage in marketing activities within the exclusive territory. These activities may be undertaken jointly with the manufacturer or separately. In practice, distributors often conduct their own marketing campaigns. However, instances where the distributor carries out promotional activities and subsequently invoices the manufacturer for reimbursement are also observed.

Dispute Resolution in Turkey and the Role of Arbitration

If the parties so agree, disputes arising from the exclusive distributorship agreement may be resolved through arbitration. Given the complexities of arbitration, it is advisable to engage  arbitration lawyer in Turkey specialized in international arbitration law, particularly for cross-border disputes, and possess fluency in English for Dispute Resolution in Turkey.

Exclusive distributorship agreements are a widely preferred legal arrangement, especially for foreign investors seeking to enter developing markets such as Turkey. Establishing a business in Turkey can be a lengthy and complex process. To facilitate this process and ensure legal security, working with English-speaking lawyers who specialize in Turkish commercial law is highly recommended.

Ankara Law Office Ongur Partners

It looks like there was an issue retrieving the latest information. However, Ongur & Partners is a well-known law firm in Turkey specializing in dispute resolution, arbitration, and litigation. Ankara law office provide legal services in commercial disputes, international arbitration, and alternative dispute resolution (ADR) methods.