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Appointing a distributor is one of the most effective ways to grow into new markets without the overhead of building your own sales operation. But a distribution agreement that’s vague on territory, silent on minimum performance, or loose on termination can create serious problems further down the line. We draft, review, and negotiate distribution agreements for suppliers and distributors across a wide range of sectors, making sure your arrangement is commercially practical and legally sound from the start.
Get a free, no-obligation chat with our commercial team, call us on 02920 829 100 or use our Contact us form.
Excellent rating by Review Solicitors | Ranked in Legal 500 and Chambers & Partners.
A distribution agreement sits at the heart of many commercial relationships. Under it, a supplier sells goods to a distributor, who then resells them to customers in a defined territory, taking their own margin. The supplier gets market reach without the cost and risk of direct sales infrastructure. The distributor gets a product to sell and, often, exclusivity in their patch.
It sounds straightforward. The reality is that distribution relationships are a common source of commercial disputes, particularly when the agreement doesn’t clearly address what happens when performance falls short, when a party wants to terminate, or when one side starts selling into territory the other thought was protected.
We advise both suppliers and distributors at every stage: structuring the arrangement, negotiating the terms, drafting the agreement, and handling disputes if they arise. Whether you’re expanding into a new market for the first time, taking on a distributor relationship, or reviewing an existing agreement that no longer fits your business, we can help.
We draft bespoke distribution agreements tailored to your business, your product, and your market strategy. We don’t produce generic templates with your name on them. We take the time to understand the commercial relationship you’re trying to create, then produce an agreement that reflects it clearly and gives you the protections you actually need.
If you’ve been sent a distribution agreement by the other side and asked to sign, get it reviewed first. The supplier’s standard form is designed to protect the supplier. A distributor’s proposed terms will be weighted the same way. We’ll identify the clauses that carry real commercial risk for your business, tell you what’s worth negotiating, and handle that negotiation professionally.
Expanding into overseas markets through a distributor adds a layer of complexity. Governing law, jurisdiction, competition law compliance in the relevant territory, currency, tax, customs, and import obligations: all of these need to be considered alongside the core commercial terms. We advise on international distribution arrangements and can flag the issues that commonly catch businesses out when their first overseas distribution agreement is drafted to English and Welsh law standards but then relied on in a different jurisdiction.
Ending a distribution agreement without following the right process, or without a properly drafted termination provision in place, can be costly. We advise on notice periods, performance-based termination triggers, post-termination restrictions, stock return obligations, and the treatment of any IP the distributor has been using. Getting termination right protects both parties.
If a distribution relationship has broken down, or one party believes the other has breached the agreement, we work with our dispute resolution team to advise on the options. That includes assessing the strength of your position, sending a formal letter before action, and pursuing or defending a claim through negotiation, mediation, or litigation.
View more on Commercial Dispute Resolution
Distribution agreements and agency agreements are often confused, but they work very differently in law. Under a distribution arrangement, the distributor buys the goods and owns them: the risk passes to them, and they contract directly with their customers. Under an agency arrangement, the agent acts on behalf of the supplier and does not own the goods. Agents are protected by the Commercial Agents Regulations 1993, which give them rights to compensation or an indemnity payment on termination that distributors do not automatically have. Choosing the right structure at the outset has significant commercial and legal implications. We’ll help you make that decision with a clear understanding of the consequences.
The supplier agrees to sell its products only to one distributor within a defined territory and will not appoint other distributors or sell directly to customers there. This is commonly used when entering a new market and gives the distributor the confidence to invest in building up sales. The trade-off for the supplier is reduced flexibility and the risk of being locked into a poorly performing distributor.
Similar to exclusive distribution, but with one key difference: the supplier retains the right to sell directly to customers in the territory, even though it won’t appoint other distributors. This gives the distributor a degree of protection without giving away the supplier’s ability to trade directly.
The supplier can appoint multiple distributors in the same territory and can also sell directly. This gives the supplier maximum flexibility but offers the distributor less commercial protection, which may make it harder to secure a motivated, well-resourced distributor.
The supplier appoints distributors only if they meet specific criteria, typically relating to the level of service, expertise, or sales environment they can offer. This is common for premium or technical products where brand presentation and post-sale support matter. Selective distribution arrangements need to be carefully structured to comply with competition law.
A well-drafted distribution agreement needs to address all of the following clearly:
Products. What exactly is the distributor authorised to sell? Are future products included automatically, or do they need to be added by amendment? Can the distributor modify or repackage the products?
Territory. Where is the distributor permitted to sell? Is the territory exclusive, sole, or non-exclusive? Is the territory defined by geography, by customer type, or both? What happens if customers in the territory approach the supplier directly?
Term. Is this a fixed-term agreement, a rolling one, or both? Are there initial probationary periods before the arrangement becomes more secure for either party?
Minimum purchase obligations. Does the distributor commit to buying a minimum volume or value of goods? What happens if they fall short? Minimum performance obligations are one of the most commonly disputed areas in distribution relationships.
Pricing and payment. How are prices set? What are the payment terms? Is there a retention of title clause in relation to the goods to protect the supplier if the distributor doesn’t pay?
Marketing and brand use. What obligations does the distributor have around promoting the products? What control does the supplier have over how the brand is presented? Who owns any marketing materials produced by the distributor?
Intellectual property. What IP rights are the distributor being granted (trademarks, brand guidelines, technical documentation)? What restrictions apply, and what happens to those rights on termination?
Competition law. Distribution agreements, particularly exclusive ones, can be subject to UK competition law (the Competition Act 1998) and, for international arrangements, EU competition rules. Certain types of restriction can be prohibited. We’ll advise on where the risks lie and how to structure the agreement to benefit from the relevant block exemptions.
Termination. What are the grounds for termination? What notice is required? What happens to stock, tooling, IP, and customer relationships on termination? Is there a non-compete restriction?
Governing law and jurisdiction. Which country’s law governs the agreement? Which courts have jurisdiction if there’s a dispute? These questions matter especially in international arrangements.
Choosing the right solicitor to draft or review your distribution agreement matters. You want someone who understands both the commercial reality of distributor relationships and the legal detail that protects your position.
You’ll speak directly to the solicitor handling your matter. No layers, no handoffs. You’ll have their direct contact details from day one, and they’ll understand your business without you having to re-explain it every time.
Distribution agreements often touch on IP, employment, competition law, and dispute resolution. We work across departments and share knowledge, so you get joined-up advice without managing multiple firms.
Commercial deals don’t wait. We’re set up to move at pace, and our flexible approach means you’ll hear from us quickly when a decision needs to be made.
We get to know your business. When you come back to us with a variation, a renewal, or a dispute down the line, we already understand the context. We’re not starting from scratch each time.
You’ll always get a clear view of your options and the risks attached to each. No endless caveats, no advice that leaves you more confused than when you started. Just practical guidance that helps you make the right commercial decision.
We’re the only commercial law firm with offices in South and North Wales offering full Welsh language legal services at every level of the firm, from trainees right through to partners.
We’ll keep you updated throughout and make sure you understand what you’re signing before you sign it. Distribution agreements are long-term commercial commitments. It’s worth taking the time to get them right.
Over 20 years of Commercial experience | Excellent rating by Review Solicitors | Ranked in Legal 500 and Chambers & Partners.
We start with a conversation about your business and what you need. We’ll tell you what type of distribution arrangement makes commercial sense, what the agreement needs to cover, and what we’d charge. No commitment needed for that first call.
A good distribution agreement reflects how the commercial relationship is intended to work in practice, not just what sounds good in a template. We’ll ask the questions that help us understand the arrangement properly before we draft anything.
We produce agreements that are clear, properly structured, and commercially grounded. If we’re reviewing the other side’s draft, we’ll give you a focused assessment of the issues that matter, not a line-by-line commentary on every clause, unless that’s what you want.
If there are points to negotiate, we’ll handle that professionally and pragmatically. Our goal is an agreement both sides can commit to, without dragging out negotiations over points that don’t carry real commercial significance.
We’re straightforward about costs before we start. For distribution agreement drafting and review, we’ll agree a fee arrangement that works for your business, whether that’s a fixed fee for a defined scope or a time-based arrangement for more complex negotiations. No surprises.
There's a tremendous amount of very knowledgeable and proficient lawyers within the practice. They are very skilled in commercial law with various specialised lawyers able to tackle any problem.
Chambers and Partners
With lawyers who are conversant across both transactional and commercial contract matters, the ‘flexible and responsive’ team at Darwin Gray LLP remains a very popular choice among SMEs based in South Wales and the South West of England.
Legal 500
A distribution agreement is a legal contract between a supplier (or manufacturer) and a distributor, under which the distributor is authorised to buy products from the supplier and resell them to customers in a defined territory. Unlike an agent, the distributor buys the goods outright and takes on the commercial and financial risk of reselling them. The distribution agreement governs the terms of that relationship: the products covered, the territory, the pricing and payment terms, any minimum purchase obligations, how the brand can be used, and what happens when the arrangement ends.
The key difference is who takes title to the goods. Under a distribution agreement, the distributor purchases the products from the supplier and owns them. They contract directly with their customers and carry the commercial risk of resale. Under an agency agreement, the agent acts on behalf of the supplier, never owns the goods, and the supplier contracts directly with the end customer. This distinction has significant legal consequences. Commercial agents in the UK are protected by the Commercial Agents (Council Directive) Regulations 1993, which give them the right to compensation or an indemnity payment when the agency ends. Distributors have no equivalent statutory protection. Choosing the wrong structure can be a costly mistake: businesses that structure an arrangement as a distribution agreement but where the economic reality is that of agency may find the Regulations apply anyway.
An exclusive distribution agreement is one where the supplier agrees to appoint only one distributor in a defined territory and will not sell directly to customers there either. This gives the distributor confidence to invest in the market, knowing they won’t face competition from the supplier or from other appointed distributors. In return, suppliers typically require minimum purchase commitments and performance obligations. Exclusive distribution arrangements need to be carefully structured to comply with UK competition law, particularly the Competition Act 1998 and the vertical agreements block exemption.
A distribution agreement should clearly cover: the products being distributed; the territory (and whether distribution is exclusive, sole, or non-exclusive); the term of the agreement; pricing and payment terms; minimum purchase obligations; marketing and brand use requirements; IP rights and restrictions; liability and indemnities; termination rights and notice periods; post-termination obligations such as stock return and non-compete; and governing law and jurisdiction. For international agreements, there are additional considerations around competition law compliance, import and export obligations, and how the agreement will be enforced in the relevant territory.
Yes, in some respects. Distribution agreements, particularly exclusive ones, can restrict competition and therefore need to be structured in a particular way so tat they don’t fall foul of the relevant competition laws. For international arrangements, EU competition rules may also be relevant. We advise on competition law compliance as part of drafting distribution agreements, so you don’t inadvertently include terms that create legal risk.
Termination raises a number of practical issues that a well-drafted agreement should address in advance. These include: how much notice is required and whether termination can happen immediately for certain breaches; what happens to unsold stock (can the distributor return it, and on what terms?); what IP rights, brand materials, and documentation need to be handed back or destroyed; whether any non-compete or non-solicitation restrictions apply after termination; and how any outstanding customer orders are handled. Distributors in the UK do not have a statutory right to compensation on termination, unlike commercial agents, but the agreement itself may create rights and obligations that need to be carefully managed on exit.
It depends on the terms of the agreement. Many distribution agreements include provisions allowing either party to terminate without fault on notice (often three to twelve months depending on how established the relationship is) and to terminate immediately in certain circumstances, such as insolvency, material breach, or change of control. If you want to exit an agreement early and it doesn’t include a clear right to do so, you may face a claim for breach of contract if you unilaterally terminate without the legal right to do so. We advise on termination options and manage the process to reduce the risk of a dispute.
A minimum purchase obligation (sometimes called a minimum order quantity or minimum annual purchase commitment) is a clause requiring the distributor to buy at least a certain volume or value of products within a given period, typically each year. For the supplier, it provides revenue predictability and ensures the distributor is actively selling. For the distributor, it sets a floor on their commitment, but also creates financial risk if market conditions change. What happens when the minimum is missed, whether the supplier can terminate, reduce the territory, or lose the exclusivity, needs to be set out clearly. It’s one of the most frequently disputed areas in distribution relationships and one of the most important to get right at the drafting stage.
You don’t have to, but the consequences of getting it wrong can be significant. Distribution agreements govern long-term commercial relationships and often involve significant investment of time and money on both sides. A poorly drafted agreement that fails to address territory disputes, minimum performance, IP ownership, or termination cleanly can make a costly dispute almost inevitable. We work efficiently and the cost of professional advice upfront is usually small compared to the cost of unravelling a poorly structured arrangement later. We’re happy to talk through your situation in a no-obligation call before you decide.
Yes. We advise on distribution arrangements with both UK and overseas distributors, and we flag the issues that arise specifically in international arrangements: choice of governing law and jurisdiction, competition law compliance in the relevant territory, the treatment of currency and pricing, import and export obligations, and how the arrangement interacts with local law in the distributor’s country. For agreements that are subject to foreign law jurisdiction (outside of England and Wales), we can also work with local lawyers to make sure the agreement works in practice where it needs to be enforced.
We’re based in Wales with offices in Cardiff and North Wales, and we advise businesses on distribution agreements across England and Wales. Most of this work is handled by phone, email, and video call, so your location isn’t a barrier to working with us.
We’re particularly well-placed to advise Welsh businesses and Welsh-speaking clients. If you’d prefer to work in Welsh throughout, we can match you with a solicitor who can advise you fully in your language of choice.
Head Office (Cardiff)
9 Cathedral Road, Cardiff, CF11 9HA
North Wales Office
Unit F12, InTec, Ffordd y Parc, Parc Menai, Bangor, LL57 4FG
Whether you’re appointing a distributor for the first time, reviewing an existing arrangement, or dealing with a dispute, we can help. Get in touch for a free, no-obligation chat and we’ll tell you exactly where you stand.
Get a free, no-obligation chat with our commercial team, call us on 02920 829 100 or use our Contact us form.
Or visit us at our Cardiff or North Wales offices.
To speak to one of our experts today, please contact us on 02920 829 100 or by using our Contact Us form for a free initial chat to see how we can help.
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