Court upholds car distributor’s right to out-of-court unilateral refusal to perform dealer agreement
- Author: Irina Akimova
- Services: Commercial arbitration and out-of-court dispute resolution, Antitrust Legislation
- Date: 21.09.2016
On August 26, 2016, the Commercial Arbitration Court of Moscow ruled to deny claims of a dealer of a leading global car distributor (plaintiff) to force the car distributor (defendant) to amend an addendum to a dealer agreement.
The plaintiff requested that the dealer agreement be amended by excluding and changing some of its language. In particular, the dealer tried to dispute such terms and conditions of the dealer agreement as the car manufacturer’s right to out-of-court unilateral refusal to perform the agreement, restrictive terms concerning the dealer selling other products, etc.
The plaintiff believed that terms of the agreement are subject to change since the specified agreement could be qualified as an agreement of adhesion that clearly contains exacting terms for the plaintiff. In the plaintiff’s opinion, when signing the agreement the dealer was in a weaker position during negotiations and therefore could not influence the agreement terms.
However, after examining circumstances of the case, the commercial arbitration court rejected the dealer's claims, as the dealer did not provide evidence that the disputable agreement is an agreement of adhesion.
According to the court decision, subject to the legal nature of the dealer agreement, it cannot be qualified as an agreement of adhesion. The fact that a car manufacturer/distributor proposes similar conditions for concluding the agreement with other dealers cannot serve as evidence of conclusion of an agreement of adhesion.
The court in its judgement explained that changes in the terms and conditions of the agreement that were proposed by the dealer are in fact aimed at releasing the dealer from part of its obligations, and therefore satisfying such claims would lead to upsetting the balance of interests of the dealer and the car manufacturer. Meanwhile, protection of one party’s interests cannot be achieved by violating interests of the other party.
It should be noted that this judgement will be of great importance for the law enforcement practice as concerns regulation of relations between dealers and car manufacturers.
In practice, dealers often appeal to the dealer agreement being an agreement of adhesion, with car manufacturers abusing their rights and position on the market by forcing unfavorable terms of cooperation on dealers. This argument is often used in the course of the antitrust authority examining similar cases when dealers refer to their weaker position as compared to the car manufacturers’ position.
Pursuant to Article 428 of the Russian Civil Code, an agreement is recognized to be an agreement of adhesion if its terms and conditions are established only by one partу and can be accepted by the other party only by joining the proposed agreement.
Therefore, the party which joined the agreement can easily dispute the content of such agreement by stating that it is the weak party in the agreement as it could not initiate changes to this agreement in the course of signing it.
However, in the case in question, the court pointed out that the dealer agreement is not an agreement of adhesion by its nature and therefore it is concluded by parties equal in rights, which minimizes the risks that such agreements can be disputed by dealers. In addition, it should be noted that the court recognized the parties under the dealer agreement to be on equal terms.
It can be assumed that the specified legal position will also be taken into account by the antitrust authority when examining cases of such kind. Moreover, this position can likewise be taken into account when examining similar cases on other commodity markets.
However, please note that this judgement was adopted by a court of first instance, which means it can be challenged in courts of higher instances. We will keep you informed about further outcomes of this case during examination in higher courts.
Head of Antitrust Practice
Should any questions arise in connection with the above or if you need any additional materials, please contact Irina Akimova or Dmitry Gavrilenko, Moscow Office of Capital Legal Services.
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