Intertrade Europe Srl v Clive Christian Perfume Ltd

An oral distributorship agreement may comprise general terms governing all orders, supplemented by later variations established through agreement or conduct. A supplier obliged to accept reasonable orders may reject orders that are excessive or not reasonably required, particularly where relevant stock information is reasonably requested. A distributor may owe an implied obligation to spend a reasonable amount on marketing and to provide details of that expenditure. It may also owe an implied obligation to provide reasonable information necessary to operate the brand. Repeated failures to provide information, unauthorised conduct and unauthorised discounting may cumulatively amount to repudiatory breach. An exclusive distributorship does not, without express agreement, prevent the manufacturer from making direct internet sales.

Intertrade was the European distributor of Clive Christian perfumes under an oral agreement made in 2003. In 2010 Clive Christian gave twelve months’ notice to terminate, but subsequently refused four orders placed by Intertrade, totalling approximately £220,395, unless different terms were accepted. Intertrade treated the refusal as repudiatory breach and claimed damages. Clive Christian counterclaimed for unpaid invoices, marketing expenditure and profits arising from unauthorised sales of testers.

The principal issues were the terms of the distributorship, whether either party had committed repudiatory breaches, whether the orders were reasonable, and whether direct website sales breached Intertrade’s exclusivity.

1. Contract and orders. The parties had one oral distribution agreement, evidenced by the 2003 documents and subsequent conduct, rather than separate contracts for each order. Clive Christian had no general discretion to refuse orders, but was obliged to accept orders that were reasonably required. The four orders placed in July and August 2010 were excessive, were not reasonably required for Intertrade’s current business needs, and could properly be rejected or made subject to different terms.
2. Marketing and information. There was no agreed fixed minimum marketing percentage in 2003. An implied term required Intertrade to spend a reasonable amount of its margin on marketing, assessed as being of the order of 10% annually, and to provide proper details of expenditure. There was also an implied obligation to provide reasonable information relevant to running the brand. In the circumstances existing from April 2010, stock-level information was reasonably required, but was withheld.
3. Other breaches. Intertrade breached the agreement by authorising counters without the required approval and by permitting unauthorised discounting. Late payment was a breach but was not repudiatory. Changing the principal marketing message without permission and failing to inform Clive Christian promptly about the Taizo litigation damaged trust but did not independently amount to repudiation. Direct website sales were not prohibited by the exclusive distributorship.
4. Repudiation and relief. The failures to provide marketing and stock information, unauthorised counters and discounting were continuing and, cumulatively, would have entitled Clive Christian to accept repudiation. The excessive orders constituted an additional repudiatory breach. Clive Christian was entitled to rely on that conduct and the contract ended through Intertrade’s conduct. The claim was dismissed. The counterclaim succeeded in part: Clive Christian was entitled to an account of marketing expenditure, an account concerning unauthorised tester sales, and £30,720 for an unpaid order, but not an account for currency gains.