Commercial Agent and Distributor Termination in Morocco: Notice, Compensation and Exit Strategy

Before deciding how to end a Moroccan commercial relationship, one question governs almost everything that follows: is the local partner a commercial agent or a distributor? The two look similar in commercial life but sit under very different legal regimes, and confusing them is the most expensive mistake a principal can make.

A commercial agent is an intermediary who negotiates or concludes deals for the principal and is paid by commission; the agent is protected by a dedicated, largely mandatory framework in the Code de commerce (articles 393 to 404). A distributor buys the products and resells them in its own name and for its own account, bearing the stock and credit risk; there is no dedicated distribution statute, so its relationship is governed by the contract and general law.

This guide works through the termination of each, and — just as importantly — how to tell which one you actually have.

A frequent trap is to assume that calling the partner a "distributor" in the contract removes the commercial-agent protections. It does not. Moroccan courts look at the real relationship and how it actually operated, not only at the words in the title.

The classic scenario: a foreign supplier signs a "distribution agreement", but in practice the local partner does not buy stock, negotiates in the supplier's name, is paid by commission, and builds the customer base for the supplier. That partner may be recharacterised as a commercial agent — with the article 402 indemnity and the statutory notice attaching. Conversely, a genuine buy-and-resell distributor does not become an agent merely because the relationship was long or exclusive. Getting the characterisation right, on the facts, is the foundation of any safe termination.

The second question is the term. A fixed-term contract ends at its term; for a commercial agency, a fixed term that the parties keep performing after expiry becomes an indefinite-term contract, which changes the notice analysis entirely.

For a fixed-term distribution contract, respecting the contractual non-renewal notice is generally enough to bring it to an end at term, without having to give a reason. An indefinite-term relationship, by contrast, is ended by notice — statutory for the agent, contractual and good-faith-bound for the distributor.

For an indefinite-term commercial agency, article 396 sets a statutory notice that increases with the relationship: one month during the first year, two months during the second year, and three months from the third year onward. The parties may agree to longer notice, but the notice imposed on the principal cannot be shorter than that imposed on the agent, and the principal may terminate without notice in case of the agent's serious fault.

Separately, article 397 requires the commercial-agency contract, and any amendments, to be put in writing. These two rules are distinct: article 396 is about notice, article 397 is about form — they should not be treated as one.

Do not transplant the 1/2/3-month agency scale onto a distributor: a true distributor is not covered by article 396, and its notice is a matter of contract and good faith (see below).

On termination, a commercial agent is in principle entitled to an indemnity compensating the harm caused by the termination, and this protection is largely mandatory — a clause purporting to exclude it in advance is exposed. This is one of the main reasons the agent-vs-distributor characterisation matters so much: a true distributor has no such statutory indemnity.

There is no fixed statutory formula. The indemnity is assessed on the actual prejudice and the circumstances of the case; principals should be wary of any figure presented as automatic. In particular, this guide does not state that the indemnity equals a set number of years or months of commissions — that is not a Moroccan statutory rule.

The indemnity can be excluded where the termination results from the agent's serious fault, or where the agent itself ended the contract without a legally relevant justification. Those exclusions are fact-specific and must be supported by evidence, not asserted.

Article 402 also sets a crucial deadline: the commercial agent must inform the principal, within one year of termination, that it intends to claim the indemnity. If the agent lets that year pass without doing so, the entitlement can be lost.

It is essential to read this correctly. This one year is a deadline to give notice of the claim — it is not a one-year limitation period on all commercial-agency litigation, and it does not mean the agent must have obtained a judgment or even filed suit within one year.

It is also a different one-year rule from the one in article 400 below. The two are frequently confused: article 402's year is about preserving the indemnity claim; article 400's year is about which post-termination deals still carry commission. Keep them separate.

Under article 400, a commercial agent can still earn commission on a transaction concluded after termination in two cases: where the transaction is mainly attributable to the agent's activity during the agency and is concluded within one year of termination; or where the customer's order was received (by the principal or the agent) before termination.

The article also addresses the incoming agent: where a commission would be due to the previous agent under that rule, the new agent is not automatically entitled to it as well, though the commission may be shared between the two where that is equitable. For a principal planning a handover, this means the commission pipeline has to be mapped, not assumed to reset at the termination date.

A post-contractual non-compete on a commercial agent is possible but controlled. Under article 404 it must be in writing, and it must be limited to the geographic sector (and/or the clientele) and to the goods or services covered by the agency. A clause that simply bars the agent from working, or that reaches beyond the territory, customers and products of the agency, is vulnerable.

This is a distinct regime from an employee non-compete; the two should not be merged. The scope limits above are the safe reference point — the enforceability of any particular clause depends on how it is drafted against them.

A genuine distributor — one who buys and resells in its own name — is not a commercial agent under another name, and the statutory agency protections (notice, article 402 indemnity) do not apply to it. Its termination is governed by the contract and the general law of obligations, including good faith.

There is no statutory minimum notice for a distributor, but an abrupt termination without sufficient notice can be challenged — under good faith and abuse of rights — particularly where the distributor made significant investments on the strength of a long relationship. Whether any compensation is owed depends on the contract terms or a court's assessment of fault; there is no automatic distributor indemnity.

The practical questions on a distributor exit are largely contractual and operational: the term and any renewal clause, the notice, exclusivity, minimum-purchase or sales-target obligations, remaining and unsold stock, outstanding invoices, after-sales and warranty obligations, use of the brand and marketing materials, confidential information, return of materials, and the timing of a replacement distributor. Each should be addressed by the contract or negotiated at exit.

Exclusivity — a protected territory, customer category or product scope — is common and lawful in itself, but it interacts with Moroccan competition law (loi 104-12, as amended). An exclusivity arrangement can become problematic where it significantly restricts competition on the relevant market; standard exclusivity for moderate market positions is generally unremarkable.

On termination, exclusivity raises specific questions: is the relationship being terminated or simply not renewed, does the exclusivity survive any notice period, and can another distributor be appointed and when. These are contract-and-competition questions together, best mapped before notice is sent. The wider framework is covered in our overview of commercial law in Morocco.

A supplier should be careful about how it influences the prices at which a distributor resells. Under Moroccan competition law, imposing a minimum or fixed resale price is prohibited. Recommending a price, or setting a maximum, is treated differently from imposing a minimum or fixed one — but the line matters, and pricing pressure around a termination or a network restructuring is exactly where disputes and enforcement risk arise.

Where the principal wants to terminate for the partner's serious fault — which, for a commercial agent, can remove the notice requirement and the article 402 indemnity — the allegation has to be real and provable. Situations that may raise it include failure to remit collected funds, unauthorised discounts, diversion of customers, breach of exclusivity, handling competing products, breach of confidentiality, fraudulent reporting, or persistent failure to perform contractual obligations.

None of these is automatically a serious fault. The court assesses the gravity, the proportionality and the context, and the burden is on the party alleging it. Poor sales results alone, in particular, are not automatically a serious fault. This is why the evidence has to be assembled before the decision, not after.

The most common high-stakes scenario is a foreign manufacturer or supplier that appointed a Moroccan agent or distributor and now wants to replace them. Foreign ownership does not switch off the Moroccan rules where they apply, and the safest exits are the ones planned before any notice is sent.

A sound pre-termination review characterises the relationship (agent or distributor), reads the contract, confirms the term and any renewal mechanism, identifies the termination clause, calculates the agency notice where relevant, weighs any serious-fault evidence, reviews outstanding and post-termination commissions, assesses the article 402 exposure, checks exclusivity, reviews stock and inventory, verifies brand/IP permissions, maps the customer and order pipeline, checks the governing-law and dispute-resolution clauses, preserves the evidence, and plans the transition to a replacement partner. Where the network is being transferred as part of a wider deal, the diligence overlaps with our guide on buying a company or hotel in Morocco.

Cross-border agreements often choose a foreign governing law and a foreign court or arbitration. Neither extreme is correct: a foreign-law clause does not automatically override Moroccan mandatory rules, and Moroccan law does not automatically invalidate a foreign governing law. A choice-of-law clause calls for a conflict-of-laws analysis, and the commercial-agent protections — article 402 in particular — have mandatory characteristics that may remain relevant where the agent operates in Morocco. How a Moroccan court treats a foreign governing-law clause, and how foreign law is established before it, is the subject of our guide to choice-of-law clauses in contracts involving Morocco.

The dispute-resolution clause needs the same care. Check whether the contract points to a court or to arbitration, and then the seat, the language, the applicable rules, interim relief and — decisively — enforcement. It is not correct to say that all agency disputes go to the commercial court, nor that a foreign company must always arbitrate; it depends on the clause and the facts. Where the stakes are high, this analysis should happen before termination, not after a dispute has crystallised.

Where the clause points to a foreign court, whether a Moroccan court will give it effect — or whether Moroccan jurisdiction can still apply — is analysed in our guide to choice-of-court clauses and Moroccan jurisdiction.

Two different timing rules should be kept in mind, and kept apart. The article 402 one-year notification (above) is the deadline for the agent to signal its indemnity claim. Separately, commercial claims are generally subject to a five-year prescription under article 5 of the Code de commerce, subject to special rules.

These are distinct rules addressing different things, and this guide does not present them as an automatic sequence. The practical point for a principal is simply to act on time and to take advice on the specific deadlines that apply to the specific claim in issue.

Many terminations can be planned internally once the characterisation and the notice are clear. But for a high-value termination — one involving exclusivity, an article 402 indemnity exposure, a possible reclassification, a foreign-law clause, or arbitration — a commercial lawyer in Morocco can review the structure before notice is sent, which is exactly when the analysis is most useful and the risk most controllable.

The value is in characterising the relationship correctly, mapping the notice, commission, indemnity and stock consequences, checking the competition-law and cross-border angles, preparing the notice and the evidence, and, where sensible, structuring a negotiated exit. It is analysis and sequencing, not a promise of any particular outcome, which always depends on the facts and the evidence.