Field note · Doing business
A foreign manufacturer terminates its Spanish distributor with exactly the notice the contract required, and receives a claim for goodwill compensation it had never budgeted for. The contract said “distribution”. That turns out not to settle the question.
Spain regulates agency by statute — Act 12/1992 on the agency contract — and does not regulate distribution at all. The gap between the two is where the money is, and it is the single most common unpleasant surprise for foreign principals leaving the Spanish market.
What the statute gives an agent
Article 28 of Act 12/1992 gives an agent, on termination, compensation for goodwill where the agent brought new customers or appreciably increased business with existing ones, the principal continues to derive substantial benefit from that, and the compensation is equitable in the circumstances. The ceiling is the average annual remuneration of the last five years.
For a genuine agency this is close to non-negotiable in advance: the protective provisions of the Act are mandatory, and a clause by which the agent waives goodwill compensation before the relationship ends is not worth the paper.
Why the label on your contract does not decide
Spanish courts characterise the relationship by how it was actually performed, not by what the parties called it. The questions that decide it:
- Who bears the risk? An agent does not take the commercial risk of the transactions it promotes. A distributor buys the goods, owns the stock and carries the risk of not selling it.
- In whose name are contracts concluded? An agent acts in the name and on behalf of the principal. A distributor contracts with customers in its own name.
- Who sets the price? A distributor sets its own resale price and earns a margin. An agent earns a commission on a price it does not set.
- Who owns the customer relationship? Whose invoices do the customers receive, and whose brand do they believe they are dealing with?
A contract labelled distribution, performed with the supplier setting prices, taking the stock risk and invoicing the end customers, is at real risk of being read as an agency — with the mandatory statutory regime attached.
And if it really is distribution?
Then the position is genuinely uncertain, and any adviser who tells you otherwise is overselling.
The Supreme Court accepts that article 28 can be applied by analogy to distribution, but it is not automatic and it is not a right the distributor simply has. The distributor has to prove that it actually created or appreciably increased a customer base, that the customer base passes to and continues to benefit the supplier after termination, and that compensation is equitable. Courts have refused the claim where the distributor could not show that.
Where compensation is awarded, the calculation base is settled: the Supreme Court fixed it as the net margin rather than the gross margin — the profit the distributor actually made after its own costs, not the difference between purchase and resale price. That distinction usually cuts the exposure substantially, and it is worth knowing before you negotiate a settlement.
More recent case law has put the weight back on characterising the contract correctly in the first place, because the characterisation decides the method: average commissions for an agency, average net profit for a distribution relationship. This remains a moving area. It is a genuinely arguable point on both sides, and it is priced accordingly in any negotiation.
Notice, and the cost of getting it wrong
For an indefinite-term agency the statute requires one month’s notice for each year the contract has run, capped at six months. Courts have applied the same yardstick by analogy to long-running distribution relationships. Terminating a fifteen-year Spanish distributor on thirty days’ notice, because the contract said thirty days, is how principals end up paying damages for the notice period on top of any goodwill claim.
Post-contractual non-compete
It can be agreed, and it is worth agreeing, but it is confined. Under the agency statute it must be in writing, it is limited to the geographic area and the class of goods covered by the contract, and it cannot exceed two years from termination. A five-year Spain-wide restriction drafted under another country’s habits is unlikely to survive.
Five things to check before signing for Spain
- Does the performance match the label? Write the contract so the day-to-day reality will match it, then run the business that way.
- Notice. Set a period that a Spanish court would recognise as reasonable for the length of the relationship, not the shortest one your template allows.
- Exclusivity and targets. Define the territory and the customer segments precisely, and make minimum purchase obligations objective and measurable, so that termination for failure to meet them is defensible.
- Stock and equipment on termination. Say what happens to remaining stock, demonstration equipment and spare parts. Silence here produces its own dispute, separate from the goodwill claim.
- Governing law and forum. Choosing another law does not reliably switch off Spanish mandatory rules where the activity is in Spain, and choosing a distant forum makes the claim more expensive for you as well as for them.
The practical point
The cost of a Spanish distribution exit is decided by how the relationship was documented and run at the start, not by how it is terminated at the end. By the time notice is given, the exposure is already fixed.
This is general information on Spanish law as at 31 August 2026, not advice on your contract, and the case law on goodwill compensation in distribution continues to move. If you are appointing a Spanish distributor, or thinking about ending an arrangement with one, submit your project and you will have an answer within two working days.