Newsletter-21

4 NEWSLETTER 2016 Compensation of Damages / Loss of Profit An agency or the distribution contract may explicitly provide for the principal or supplier’s right to claim for damages: In other words, for loss of profit. Pursuant to such provisions, the principal or the sup- plier is entitled to damages in the amount of its loss of profit due to the missing order in the relevant year. If the contract is silent with respect to damages, but the other consequences of non-attainment, such as termination, are expressly specified, one could argue that the parties intended to cover only the specified consequences and exclude the damages. In such a case, whether or not loss of profit may be claimed shall be determined in accordance with the applicable laws. Principals or suppliers choose to explicitly regulate their right to damages in the contract in order to prevent such possible disputes. Another issue to be examined is the situation where the agent or the distributor was not at fault in the failure of its commitment, although damages are specified under the contract. In some jurisdic- tions, e.g. Turkey, the agent or the distributor will be released from liability for damages if the agent or the distributor was not at fault. In order to avoid difficulties in evidencing the damages, and to prevent any possible disputes that may arise in relation to the calcula- tion of the damages, it is common that the principals or the suppliers include in the contract a penalty in the amount of the missing order for the relevant year instead of compensation for damages. Accordingly, in case of failure to meet the guaranteed minimum order, the principal or the supplier would be entitled to the penalty amount determined un- der the contract without the need to evidence the amount of damages. Period for which the Loss of Profit may be claimed In considering definite term contracts, the principal or the supplier is entitled to claim for the loss of profit with respect to the time period until the end of the term of the contract. In indefinite-term contracts, it may bring such claim for the time period until the end of the following notice period for termination.