Distributorship Agreements In Turkish Law

Distributorship agreements, also known by various terms such as exclusive dealership, sole distribution, or simply distributorship, fundamentally describe the same legal relationship. In the context of international trade, these agreements hold significant contractual importance. They often stem from technical or intellectual property considerations, where a manufacturer, either unable or unwilling to produce goods in the target market, enters into a contract with a single distributor. Under this arrangement, the manufacturer commits to supplying its products exclusively to that distributor, who, in turn, sells them under its own name and account within a designated geographical area.

Elements of a Distributorship Agreement

The Turkish Code of Obligations explicitly recognizes certain contracts, referring to them as "nominate contracts." However, there are also contracts that lack statutory regulation but have developed

through commercial practice, known as "innominate contracts." Some of these agreements incorporate aspects of various nominate contracts, while others evolve uniquely based on the parties' intentions, making them sui generis in nature.

Although Turkish law does not explicitly regulate distributorship agreements, their fundamental elements can be derived from jurisprudence. In a ruling 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:

"To resolve the dispute between the parties, the concept of sole distribution must first be examined. As recognized in legal doctrine, a sole distributorship agreement is a framework contract governing 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. In return, the distributor is obligated to sell the products in its own name and on its own account, while also engaging in marketing and promotional efforts to enhance sales. As this definition illustrates, the obligations under a sole distributorship agreement are reciprocal between the manufacturer and the distributor and do not, as a rule, impose obligations on third parties. The manufacturer’s commitment to exclusivity within a designated territory remains a contractual obligation."

Based on established jurisprudence, the key elements of a sole distributorship agreement can be summarized as follows:

• The agreement establishes a continuous legal relationship.

• It is structured as a framework contract.

• The manufacturer grants exclusive sales rights within a defined territory.

• The distributor operates in its own name and on its own account.

• The distributor assumes responsibility for marketing, sales, and promotional activities.

Key Features of a Distributorship Agreement

1. Establishment of a Continuous Legal Relationship

A key distinction between a distributorship agreement and a standard sales contract is its ongoing nature. This continuity goes beyond fulfilling a single order through multiple shipments; rather, it reflects a sustained business relationship in which the distributor regularly places orders and makes payments over time.

2. Framework Nature of the Agreement

Since the Turkish Code of Obligations does not explicitly regulate distributorship agreements, they are considered atypical contracts. According to well-established case law and commercial customs, even in the absence of a formal written contract, an exchange of emails or other documented communications demonstrating the parties' intentions may suffice to establish a legally binding agreement. Furthermore, given that product quantities and pricing may vary over time, distributorship agreements typically set out general principles, while specific transactions are executed through individual purchase orders.

3. Granting of Exclusive Sales Rights in a Specific Territory

A defining characteristic of distributorship agreements is the granting of exclusive sales rights within a designated region. The distributor is entrusted with selling the products within this area and may establish its own distribution network, branches, or even sub-dealers to facilitate sales.

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

Unlike agents, who act on behalf of a principal, distributors operate independently from the manufacturer. They enter into contracts in their own name and for their own account, maintain separate financial records, and develop their own sales networks. Unless otherwise agreed in the contract, the distributor is not subject to direct instructions from the manufacturer.

5. Distributor’s Engagement in Marketing, Sales, and Promotional Activities

While the distributor operates independently, it is contractually responsible for promoting sales and conducting marketing activities within the designated territory. These promotional efforts may be undertaken either jointly with the manufacturer or independently. In practice, distributors frequently run their own marketing campaigns, although in some cases, they may carry out promotional activities and later invoice the manufacturer for reimbursement.

Dispute Resolution and Arbitration

If both parties agree, disputes arising from a distributorship agreement may be resolved through arbitration. Given the complexities involved, particularly in cross-border disputes, it is advisable to engage arbitration lawyers with expertise in international arbitration law and fluency in English.