Termination of a dealership contract due to the breach of another contract

The termination of a motorbike dealership contract can be justified by the breach of a confidentiality clause inserted in another contract signed with the manufacturer. (Court of Cassation, 6 April 2022 n°20-18135).

A company signed a dealership contract with an importer of the DUCATI brand for France.

The dealer took part in a convention where the new models were presented. He signed a confidentiality clause with the manufacturer of DUCATI motorbikes in order to participate to this convention. This clause imposed the dealer not to disclose any information about the new motorbike models.

The dealer did not comply with this confidentiality obligation. Information about new models were disclosed on social networks, even after the dealer had been given notice.

Due to the breach of this confidentiality obligation, the DUCATI importer terminated the dealership contract.

The dealer challenged this termination. He argued that he did not violate a rule of the dealership contract but simply the clause of another contract signed with the manufacturer directly to participate in the agreement. Therefore, the dealer could not terminate the dealership agreement on the basis of a breach of another agreement.

However, the Court of Appeal and the Court of Cassation approved the termination of the contract.

For the Court of Cassation, it is true that the breach concerned an obligation provided for in another contract, but the conduct was detrimental to the interests of the network.

The dealer’s failure to comply with the contract, which harmed the network as a whole and continued despite a formal notice to cease, allowed the DUCATI importer in France to terminate the dealership contract.

This decision broadly interprets the contractual scope of the dealership contract.

This decision allows breaches of other contracts to be included in the contractual scope of the contract if they are detrimental to the interests of the network as a whole.

Failure to comply with a contract ancillary to the concessionaire’s or distributor’s mission may result in the termination of the concession contract if this failure is detrimental to the distribution network.

This decision will certainly be welcomed by the distribution network operators who will be able to protect the interests of their network in a rather extensive way and especially to terminate the contract in the name of the interest of the network.

By Olivier VIBERT

Lawyer, Paris

IFL AVOCATS

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