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Distribution Agreements

What is a distribution arrangement?

Under a distribution arrangement, a supplier or manufacturer sells its products to a distributor, who then sells the products on to its customers; usually within a particular geographical location. The end customer therefore has a direct contract with the distributor. Suppliers often use distributors to expand their business into new markets or territories.

What is the purpose of a written distribution agreement?

The purpose of a distribution agreement is to determine the rights and obligations of the parties. It is important to record precisely the terms on which the distributor is appointed, including any restrictions on resale and territory, to ensure that the arrangement does not fall foul of competition law. Lack of clarity may lead to unnecessary disputes.

What should the distribution agreement include?

The terms of the distribution agreement will be dependant on the relevant facts and circumstances, including the commercial relationship between the parties.

Terms that are common to all distribution agreements include:

  • terms of the distributor’s appointment – including whether the distributor is to be granted exclusivity.
  • supply of the contract products by the supplier to the distributor – including any minimum purchase obligation on the distributor.
  • the price payable by the distributor for the contract products and the mechanics of payment.
  • respective obligations on the parties in terms of advertising and promoting the products under the agreement.
  • the grant of any licence or right for the distributor to use the supplier’s trade marks and other intellectual property rights for the purposes of marketing and selling the products.

Does the agreement need to be professionally drafted?

There is no obligation to use a lawyer to draft the distribution agreement. However, a professionally drafted agreement can avoid disputes arising, and in the unfortunate case that they do arise, specify ways for the parties to resolve the dispute or, if required, exit the arrangement.

It is also important to note that laws governing the appointment and operation of a distributor vary from country to country. A supplier should therefore always seek advice from a local lawyer on any particular local requirements.

If you need any advice on distribution agreements please contact a member of our corporate and commercial law team in confidence here or on 02920 829 100 for a free initial call to see how they can help.

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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