Distributorship

We draft and advise on all types of distribution arrangements, as well as screen the international contracts governed by foreign laws as for their compliance with the overriding requirements of the Lithuanian law. In particular, we advise on:

• Exclusivity provisions of distributorship arrangements, remedies available for early termination of a contract, minimal performance of a distributor
• Obligations of a distributor: performance quotas, terms of minimal orders, sales, marketing, display, billing, market research, duties for maintaining the records on sales, storage, training, support and servicing arrangements
• Preservation and protection of intellectual property of the manufacturer, rights and remedies available for the manufacturer
• Guarantees offered by the manufacturer with regards to the quality of goods, refund policies
• Termination clauses, remedies for early termination
• Structuring of payment terms.

Knowledge & Insights

Overriding requirements of the Lithuanian law 

Lithuanian Civil Code considers distribution as an arrangement, when one party – distributor – covenants for a specific period of time or for undefined period purchase goods (services) from the manufacturer (supplier) and resell to an ultimate customer or other distributor as well as to perform other work linked with the resale of goods, and – from the other side - the manufacturer (supplier) agrees to sell the good (services) to a distributor as well as to perform other work related to the distribution.  

By reason of the Lithuanian Civil Code, the parties to the distribution agreement can be businesses only. The agreement concluded between non-businesses is not enforceable. 

Also, the distribution agreement must be concluded in writing. Failure to abide by this requirement makes the agreement ineffective.

The distribution agreement may set out only those restrictive conditions that are not permitted by competition laws. Provided the competition laws are not breached, the parties may agree on the exclusive distributorship arrangements: 

• The obligation of the distributor not to manufacture and not to distribute goods that stand in competition with the goods covered by the distribution agreement;
• The obligation of the distributor to purchase goods from the manufacturer (supplier) only;

The obligation that the distributor not approach customers and not establish a branch or representative offices in the territories other than covered by the distribution agreement. By reason of the Lithuanian law, the terms of the distribution agreement excluding liability of the distributor (supplier) for damages made to consumers by the manufactured goods (services) shall be null and void.

Extension and expiration of the distribution agreement

The distribution agreement concluded for unspecified period of time can be terminated prematurely by issuing a three (3) month termination notice, unless the agreement specifies a longer period. Following the termination of the distribution agreement, the distributor is entitled to claim damages (unearned revenue) for the remaining period of contract when the agreement was terminated prematurely due to the fault of the manufacturer (supplier).

If the agreement is terminated due to the fault of a manufacturer (supplier), the distributor shall also have a right to claim remuneration for additional services provided, unless the distribution agreement sets out otherwise.

The manufacturer (supplier) may claim for damages if the agreement was terminated due to the distributor’s fault, unless the agreement sets out otherwise. If following the expiration of the distribution agreement the parties are continuing their relationship, the agreement – by virtue of the Lithuanian law - shall be deemed as renewed for the same terms under the same terms.