Intuitu personae in Honduran distribution law in Honduras

By: José Rafael Rivera

The problem presented by the intuitu personae (referring to those acts or contracts in which the identity or certain personal characteristics of one or both parties are a determining factor for its execution) in the Honduran distribution law in the sense that it is a doctrinal concept that is usually invoked without a specific legal basis, is not unique to such concept in our legal system, but it is the most interesting one.

It turns out that one of the characteristics, which the doctrine points out, distinguishes a distribution contract, is that the principal or distributee in effect grants the consent to the execution of the contract in attention to the personal and commercial characteristics of its distributor (i.e., to its intuitu personae). The legal implications in doctrine of such characteristic are several, the most important being that in the event of a variation in the person of the chosen distributor, the distributee may denounce the contract and terminate it unilaterally without liability, taking into account that the organization of the market with the new distributor is not the contractual cause that reflects the consent granted.

In fact, under such normative logic, intuitu personae is usually invoked in contractual negotiations and even as a just cause for termination in the Honduran distribution law, precisely because of variations in the person of the distributor, without relying on the positive law in force. In the first instance, Article 12 of the Law of Representatives, Distributors and Agents of National and Foreign Companies of Honduras curiously does not contemplate the variation in the person of the local distributor, and even in its shareholding composition when it is a commercial company, as a just cause for unilateral termination. Even in the case of a sole trader who alienates or transmits the mercantile company of which he is the owner, by an inter vivos act or mortis causa, it is not possible to reach the conclusion under the referred law itself, or the laws that may supplement it in the integration of any legal void, that the variation in the person of the same is a just cause of unilateral termination. This is a very interesting situation given the evident normative logic that the aforementioned concept presents in a type of contract that many place in the sphere of atypical commercial contracts, and therefore subject to a greater extent to doctrinal and practical concepts.

Therefore, it is worth asking why the Honduran distribution law does not include such a concept, so deeply rooted in the doctrine in this context? It is our opinion that this rule does not abandon its protectionist approach in favor of both the local distributor and the end consumer, and correctly reflects the regulatory trend reflected in related legal bodies. A case of special attention in this matter is the argument that arises around article 1549 of the Honduran Civil Code in relation to a distribution contract that establishes the death of the local distributor as a cause for the unilateral termination of such contract. Indeed, it is the case that, following the aforementioned normative logic of intuitu personae, this precept is used to establish that, upon the death of the sole trader appointed as distributor, the contract cannot continue with his heirs by way of the transfer of the commercial enterprise.

Again, the rule contained in Article 12 of the Law of Representatives, Distributors and Agents of Domestic and Foreign Companies already related does not contemplate such cause of termination as just for purposes of avoiding indemnification liability under the distribution law. In an attempt to fill the apparent legal void, we resort to the same Article 1549 of the Civil Code already mentioned, which however has suffered tacit derogation in our opinion in this area not only by Article 12 already mentioned, but also by Articles 650 and 659 of the Code of Commerce, which requiring just cause for the termination by the third party contracting and instituting the so-called commercial property, leave without value or effect such contractual agreement. Therefore, we conclude that the intuitu personae becomes a doctrinal concept without firm legal basis in our law, making it dangerous to agree around it in distribution contracts subject to Honduran law.

Article 12.

The following are just causes that entitle the grantor, without liability on his part, to terminate or refuse to renew the agency, representation or distribution contract:

    1. Non-compliance by the grantee of the essential obligations of the contract or of the contractual relationship.
    2. Fraud or abuse of trust in the negotiations entrusted to the concessionaire, without prejudice to the criminal liability incurred and the obligation to compensate the damages and losses that may arise.
    3. The continuous decrease in the sales or placement of goods and services agreed upon, due to the negligence or ineptitude of the concessionaire.
    4. The unfounded refusal of the concessionaire to render the reports and accounts or to perform the liquidations related to the business, in the time and manner agreed upon or established by the commercial use or customs.
    5. The disclosure of previously established confidential information of the industry, business or commerce in question.
    6. Bankruptcy, insolvency, suspension of payments or any other legal disqualification to exercise the commerce.
    7. Any act attributable to the licensee that is detrimental to the introduction to the market or sale of the products or services that are the cause of the contract.

Article 1549.- Contracts only produce effects between the parties that grant them and their heirs; except, as regards the latter, in the case in which the rights and obligations arising from the contract are not transferable, either by their nature or by agreement or by provision of the law.

If the contract contains a stipulation in favor of a third party, the latter may demand performance, provided that he has made his acceptance known to the obligee before the stipulation has been revoked.

Article 650.- Unless otherwise agreed, the person acquiring a business shall be subrogated to the contracts established for the exercise of the activities of that business that are not of a personal nature.

The third party contracting party may, however, terminate the contract within three months following the publication of the transfer, if there is just cause for doing so, in which case the liability of the transferor shall remain unaffected. The same provisions shall apply in relation to the usufructuary and lessee of a business for the duration of the usufruct or lease. (Emphasis added.)

Article 659.- If the business is disposed of or transferred, if a real right is constituted thereon, or if it is leased, the right to the premises occupied by its establishments, derived from a lease contract, shall subsist if its use as an establishment was provided for therein, and if the agreed line of business subsists, if it had been specifically established. An agreement contrary to this provision shall not produce any effect whatsoever. (Emphasis added).