FASHION LAW
Why is 3 months’ notice reasonable when terminating a 40-year distribution agreement?
Where a distribution agreement contains no express right of termination, the law generally implies a term that either party may end the agreement by giving reasonable notice. The challenge is determining what “reasonable” means in practice…
R
ecent guidance from the Privy Council, in a dispute between an international brewery and its Bahamian distributor, clarifies how courts approach this issue. The case concerned the termination of an unwritten distribution arrangement that had existed for around 40 years. Despite the extraordinary duration of the relationship, the Privy Council concluded that approximately three months’ notice was reasonable.
The purpose of reasonable notice The Privy Council stressed that reasonable notice is not intended to compensate a distributor for the loss of future profits or reward it for years of loyalty. Its purpose is practical: to give the party receiving notice enough time to reorganise its business and adapt to the termination. The assessment is highly fact-specific. There is no fixed formula and no rule that a longer relationship automatically requires a longer notice period. Instead, the court considers what period is reasonably necessary for the distributor to adjust to the loss of the arrangement.
The Privy Council identified several relevant considerations: ¡ the duration of the relationship; ¡ the nature of the parties’ dealings; ¡ the extent of investment made in reliance on the arrangement; and ¡ the time reasonably needed to put alternative arrangements in place.
These factors are not exhaustive and will vary in importance depending on the circumstances. However, they are all directed towards the same central question: how difficult will it be for the distributor to adapt?
The judgment identified the most significant consideration as the importance of the agreement to the distributor’s business.
This involves more than simply measuring how much revenue the supplier’s products generate. The court will examine whether the distributor’s business is built around the relationship, whether substitute products are available, and how easily the distributor can replace the lost business. A distributor heavily dependent on a single supplier may require a longer notice period. By contrast, a distributor with a broad portfolio and the ability to switch to alternative products may be able to adjust relatively quickly.
46 • FOOTWEAR & FASHION TODAY • JUNE 2026
unwritten and contained no express provisions dealing with duration or termination was also relevant.
However, none of these factors outweighed the key point that the distributor could adapt within a relatively short period.
The conclusion
What does not justify lengthy notice?
Although the agreement had existed for four decades, the Privy Council refused to treat longevity as decisive. The length of the relationship mattered only to the extent that it showed reliance and affected the time needed to reorganise.
The court found that the distributor was not substantially dependent on the brewery’s products because: ¡ it distributed a variety of other brands; ¡ the brewery’s products formed only a modest part of overall turnover; ¡ there was no evidence of major sunk investment tied specifically to the arrangement; ¡ the distributor was not locked into operational arrangements that prevented it from adapting. As a result, while termination would have commercial consequences, it would not fundamentally damage the distributor’s business or require a lengthy restructuring process. This was central to the conclusion that a relatively short notice period was sufficient despite the long history between the parties. The Privy Council also considered whether the distributor had made significant investments specifically connected to the agreement and whether those investments required time to recover or redeploy.
It examined practical issues such as stock management, sourcing replacement products, and the operational realities of the distribution business. The fact that the agreement was
The Privy Council ultimately held that approximately three months’ notice was reasonable in the circumstances. The decision demonstrates that reasonable notice is not determined by the age of the commercial relationship alone. Even a 40- year arrangement may be terminable on short notice if the distributor is not heavily reliant on it and can reorganise without major difficulty. For suppliers, the decision highlights the importance of understanding how central their products are to a distributor’s business. If a distributor is highly dependent on the relationship, terminating without substantial notice may breach the implied term requiring reasonable notice. On the other hand, where the distributor has a diversified business and can readily replace the products, a shorter notice period may be justified. For distributors, the case demonstrates the risks of relying on informal or indefinite arrangements. A long-standing relationship does not automatically protect against short- notice termination. The strongest arguments for longer notice will come from evidence of genuine reliance, significant investment, and real difficulty in replacing the supplier’s products. The case also underlines the commercial value of express contractual termination provisions. Clear clauses dealing with notice periods and termination rights reduce uncertainty and minimise the risk of disputes over what constitutes reasonable notice.
Stephen Sidkin is a commercial law partner at Fox Williams LLP (
www.fashionlaw.co.uk;
www.foxwilliams.com).
DOWNLOAD THE FOOTWEAR & FASHION TODAY APP NOW SPONSORED BY
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48
