Terminating long-term distribution agreements; the court’s approach to injunctions to prevent termination

The termination of a long-term distributor or licensing agreement is a serious step for any distributer or supplier. When termination is not by agreement, the terminated party may consider seeking an injunction to continue the contract for a period while the court considers the issues between the parties.

The injunction is intended to preserve the supply of a product where a party relies on the terminated contract to service/supply its own customers and cannot source an equivalent product; where customers are forced to go to another supplier, the terminated party could lose its market share entirely and its business may be destroyed.

The claimant licensee and defendant licensor entered a licensing agreement for the provision of an internet-based service for buying and selling goods in October 2005. In June 2013, the licensor gave the licensee notice that it was terminating the agreement in accordance with its termination clause. The licensee rejected the licensor’s entitlement to terminate making a request for arbitration and applying for an injunction to restrain the termination…

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