Distributor must pay damages for breach of contract

A distribution company has been ordered to pay damages to a perfume manufacturer after it failed to meet several requirements of a longstanding contract.

The two parties had an agreement dating back to 2003. The relationship soured and so in July 2010, the manufacturer gave 12 months notice to terminate the agreement. The distributor responded by placing exceptionally large orders in August and September. When the manufacturer refused to supply the orders, the distributor claimed the refusal amounted to a repudiatory breach of contract.

Both sides claimed damages from the other.

The court found in favour of the manufacturer. It held that the distributor had breached the agreement by refusing to provide the manufacturer with details about its stock levels and about its marketing spend.

It had also failed to provide information about the installation of perfume counters in retail outlets as required under the agreement. This made it difficult for the manufacturer to protect the reputation of its brand.

The court held that these failures taken together amounted to a repudiation of the contract.

It dismissed the distributor’s claim that the manufacturer had breached the contract by refusing to supply the large orders made in August and September. It held that the orders were too large to be genuine and had simply been made by the distributor in an attempt to protect its position after the manufacturer had given notice to terminate.

The distributor was ordered to pay damages for loss of profits.

Please contact Neil O’Callaghan if you would like more information about any aspect of company litigation.