Law firm guidesCorporate and commercial

Your distribution is cut off: what you can claim

Last updated 2026-09-01 · Reviewed by Jaime Piñeira Pardo, registered with the ICAM bar, no. 138826

The short answer

Two different things are claimed: goodwill compensation and the loss caused by the absence of notice, before the Commercial Section of the Tribunal de Instancia (the first-instance court). Article 31 of the Agency Contract Act gives one year from termination of the contract, and that is the period we work with in distribution cases.

For twelve years you have been the exclusive distributor of a manufacturer's brand across four provinces. You have grown from eighteen clients to two hundred, built a warehouse and hired six sales staff because the manufacturer asked you to, and last year you invoiced 1,400,000 euros of its products. One Tuesday you receive an email ending the relationship at the end of the month. You are left with 180,000 euros of stock in the warehouse, a unit leased for three more years and a workforce with nothing to sell.

The case, in five lines

What is brought: A claim for goodwill compensation and for the loss caused by termination without notice, using the criteria in articles 28 and 29 of the Agency Contract Act and supported by articles 1101 and 1124 of the Civil Code.
Before which court: The Commercial Section of the Tribunal de Instancia (the first-instance court), with a later appeal before the Audiencia Provincial (the provincial appeal court), unless the contract imposes arbitration or a valid submission to another forum.
Deadline: One year from termination of the contract, under article 31 of the Agency Contract Act, both for goodwill compensation and for damages. It is the date of termination, not the date of the announcement, that starts the count.
Who can bring it: The distributor who suffered the termination, whether an individual or a company, against the manufacturer or supplier who decided it. Where the relationship ran through several group companies, the real contractual counterparty must be identified.
Financial risk: If the claim is dismissed you may be ordered to pay the other side's costs, having advanced an economic expert report that is not cheap. The manufacturer usually argues that the contract allowed termination and that you brought in no new clients, and both points are met with documents, not with narrative.

Distribution has no statute of its own, hence this approach

In Spain the agency contract has its own statute, Ley 12/1992, and the distribution contract does not. A distributor buys and resells in its own name, bears the stock risk and is not an agent, so the relationship is governed by what was agreed and by the general rules of obligations. That gap is why many manufacturers believe they can cut the relationship whenever they like.

The claim is built on two pillars. The first is the set of criteria in articles 25, 28, 29 and 31 of the Agency Contract Act, which measure notice, goodwill, damages and the time limit, and which are carried over to distribution because of the economic similarity where the distributor has been integrated into the manufacturer's network.

The second pillar is the Civil Code. Its article 1101 subjects to compensation for loss anyone who, in performing their obligations, acts with intent, negligence or delay, and anyone who in any way contravenes their terms. And its article 1124 treats the power to terminate as implicit in reciprocal obligations where one of the parties fails to perform what falls to it.

One month of notice per year, capped at six months

Article 25 of the Agency Contract Act provides that an open-ended contract is terminated by unilateral notice from either party, given in writing, and sets that notice at one month for each year the contract has been in force, up to a maximum of six months. If the contract lasted less than a year, the notice is one month.

With twelve years of dealings, the six-month cap is the one that applies, and an email ending the relationship at the end of the month leaves five months uncovered. The same article adds that the parties may agree longer periods, provided the notice required of the other side is no shorter than the principal's, and that, failing agreement otherwise, the period ends on the last day of the month.

Notice is not a courtesy: it is the time you need to clear stock, redirect the business and find another brand. Where it is not given, the loss is calculated on what you would have earned during those months and on the costs you could not avoid, starting with the leased unit and the staff left with no product to sell.

Goodwill is paid if the manufacturer keeps benefiting

Article 28 of the Agency Contract Act requires three things. That you brought in new clients or significantly increased business with the existing customer base. That your past activity can continue to produce substantial advantages for the principal. And that compensation is equitably appropriate because of non-competition covenants, of the commissions you lose, or of the other circumstances of the case.

Going from eighteen clients to two hundred meets the first requirement with documents, not impressions. The second is proved by showing that those clients keep buying the brand, now through the new distributor or from the manufacturer itself. The third rests on the non-competition clause you signed, if there is one, and on the margin you stop earning from clients you can no longer serve.

Article 28.3 sets the ceiling: compensation may not exceed the average annual amount of the remuneration received over the last five years, or over the whole contract if it was shorter. In distribution the equivalent figure is not commission but the gross margin earned on the brand's products, and that equivalence must be sustained with an expert report from the very first pleading.

Stock and unamortised investment are a separate loss

Article 29 of the Agency Contract Act is clear on a point that is very often confused: compensation for the loss suffered is owed without prejudice to goodwill compensation. They are two separate heads of claim that add up to each other, and inadvertently waiving one of them while negotiating the other is among the most expensive mistakes to be made in this field.

The same article describes the typical loss: a principal who unilaterally terminates an open-ended contract must compensate the harm caused by early termination, provided that termination does not allow the other party to amortise the expenses it incurred, on the principal's instructions, in performing the contract. The warehouse, the six sales staff and the unit leased at the manufacturer's suggestion fall exactly there.

Alongside that is the stock. The 180,000 euros of goods left in the warehouse are claimed as loss flowing from the break where the contract provides for no buy-back and the manufacturer refuses to take them, and their valuation rests on the inventory, the purchase invoices and the price at which those goods can really be liquidated once the brand is gone.

You have one year from termination, not from the email

Article 31 of the Agency Contract Act provides that the action to claim goodwill compensation or compensation for loss prescribes one year from termination of the contract. That is a very short period for a case requiring an inventory, five years of accounts and an economic expert report, so the work starts the same day the communication arrives.

The date that counts is the date of termination, not the date of the announcement, and the two hardly ever coincide. If the email arrives in March and the relationship ends on 30 April, the year runs from April. Where orders keep being served or stock is cleared for months after the communication, the real termination date becomes contentious, and it is better fixed in writing than left to chance.

There is one more reason not to wait. With every month that passes the manufacturer consolidates its new network, clients get used to another contact, and the substantial advantages required by article 28 become harder to demonstrate. An early claim, with figures rather than complaints, is also what really opens a negotiation with the other side.

How we run the case, step by step

1
We fix the termination date and read the whole contract
We determine when the relationship actually ended, which is what starts the year under article 31 of the Agency Contract Act, and we review exclusivity, duration, agreed notice, non-competition, stock buy-back and any submission or arbitration clauses.
2
We quantify goodwill with five years of figures
We reconstruct the client base you brought in, the growth in business and the gross margin earned on the brand over the last five years, which is the figure on which the ceiling in article 28.3 of the Agency Contract Act operates.
3
We value the missing notice, the stock and the investment
We calculate the months of notice that were missing under article 25, the margin lost over that period, the outstanding inventory and the expenses incurred on the manufacturer's instructions that could not be amortised, in the terms of article 29.
4
We claim in writing and negotiate with closed figures
We send the manufacturer a claim with the settlement broken down head by head and its legal basis. Most of these matters close here, because the supplier would rather buy back the stock and pay than face a contested expert valuation.
5
We sue before the Commercial Section
If no agreement is reached, we bring the claim with the economic expert report, joining goodwill compensation and compensation for loss, which article 29 declares compatible, before the year from termination runs out.

The evidence that decides the case

The signed distribution contract with its annexes, addenda and renewals, including the exclusivity, notice and non-competition clauses.
The termination communication with its date and the effective date on which supplies stopped.
The client list with each account's start date, showing which ones you brought to the brand.
The accounts and ledgers of the last five years showing the gross margin earned on the manufacturer's products.
The emails and meeting notes in which the manufacturer asked you to open a warehouse, expand staff or take on investment.
The inventory of remaining stock valued at purchase price, with the invoices backing it up.

What closes the door

Letting the year in article 31 of the Agency Contract Act run out while negotiating. Talks do not stop the clock by themselves, and many manufacturers know it.
Signing off the stock settlement with a general waiver of all claims. Article 29 declares goodwill compensation and damages compatible, and a hasty signature closes both.
Claiming goodwill without proving you brought in new clients or significantly increased business, nor that the manufacturer keeps drawing substantial advantages from that client base.
Never documenting the investments the manufacturer asked for. Without emails or minutes, the unamortised expenses of article 29 come down to your word against theirs.
Continuing to serve orders for months after the break without reserving your claims in writing, and handing over the argument about when the contract really ended.

The law that applies

Art. 25 Ley 12/1992 del contrato de agencia. Requires written notice to terminate an open-ended contract and sets it at one month for each year in force up to a maximum of six, one month where it lasted less than a year, allowing longer agreed periods provided neither party's notice is shorter than the other's. BOE-A-1992-12347
Art. 28 Ley 12/1992 del contrato de agencia. Grants goodwill compensation to a party who brought in new clients or significantly increased business, where that activity can keep producing substantial advantages for the principal and compensation is equitably appropriate, capped at the average annual remuneration of the last five years. BOE-A-1992-12347
Art. 29 Ley 12/1992 del contrato de agencia. Requires compensation, without prejudice to goodwill compensation, for the loss caused by early termination of an open-ended contract where it prevents amortisation of the expenses incurred in performing it on the principal's instructions. BOE-A-1992-12347
Art. 31 Ley 12/1992 del contrato de agencia. Subjects both the action for goodwill compensation and the action for damages to a one-year prescription counted from termination of the contract. BOE-A-1992-12347
Art. 1101 Código Civil. Subjects to compensation for loss anyone who, in performing their obligations, acts with intent, negligence or delay, and anyone who in any way contravenes their terms. BOE-A-1889-4763
Art. 1124 Código Civil. Treats the power to terminate as implicit in reciprocal obligations where one party fails to perform what falls to it, and lets the injured party choose between demanding performance or termination, with compensation and interest in either case. BOE-A-1889-4763

Each article checked against the consolidated text published in the BOE (the Spanish official gazette).

Frequently asked questions

I bought and resold. Can I rely on the agency statute?

Ley 12/1992 governs the agency contract, and you are not an agent. What is done is to claim using its criteria on notice, goodwill, damages and time limits, because the distribution contract has no statute of its own and the relationship is economically similar where the distributor is integrated into the manufacturer's network. That similarity must be proved with the contract and the actual dealings, not assumed.

How much notice was I owed after twelve years?

Article 25.2 of the Agency Contract Act sets one month of notice for each year in force, up to a maximum of six months, so after twelve years the reference is the six-month cap. If the contract agreed a longer period, the agreed one applies. And failing agreement otherwise, article 25.4 makes the notice period end on the last day of the month.

How much can I claim for the client base I built?

Article 28.3 of the Agency Contract Act caps it at the average annual remuneration received over the last five years, or over the whole contract if it was shorter. In distribution that figure translates into the gross margin earned on the brand's products. Within that ceiling, the amount depends on the clients you brought in and on the advantages the manufacturer keeps obtaining.

And the 180,000 euros of stock left in my warehouse?

It is claimed as loss flowing from the break where the contract provides for no buy-back and the manufacturer refuses to take the goods. It is a separate head from goodwill: article 29 of the Agency Contract Act declares damages compatible with it. It is valued with the inventory, the purchase invoices and the real liquidation price of goods that can no longer be sold with the brand behind them.

We have been negotiating for months. Is time still running?

Yes, and that is where most of these cases are lost. Article 31 of the Agency Contract Act gives one year from termination of the contract, and open negotiations do not stop it by themselves. The prudent course is to formalise the claim in writing so as to interrupt the period, and to calculate the deadline from day one instead of relying on the other side's goodwill.

This guide explains how the action works in general. It does not replace the study of your own case: deadlines depend on when things happened and on what you have done since.