Puerto Rico’s Act 75 of June 24, 1964 was enacted to protect Puerto Rican distributors or dealers from arbitrary terminations to a distribution agreement. It essentially provides that, regardless of any contractual provision to the contrary, a dealer or distribution agreement may not be terminated, impaired or not renewed by the principal, unless there is “just cause” (as defined in Act 75) for such termination.
Moreover, if the distribution agreement is terminated without “just cause,” the principal is liable for damages pursuant to a statutory formula that includes five years of profits and the goodwill of the distributor.
As a result, distribution agreements in Puerto Rico are evergreen. In addition, the distributor can allege constructive termination (impairment) if it believes the principal is treating it unfairly and seek damages.
Act 75 provides Puerto Rican distributors with powerful protections and has been the source of substantial litigation over the years.
Find out more about the implications of Act 75.