Distribution Agreements

What is a Distribution Agreement?

A distribution agreement is a contract between a supplier (manufacturer or brand owner) and a distributor. It outlines the terms under which the distributor will promote, sell, and distribute the supplier's products within a specific territory.

Key Terms to Consider with distribution agreements

• Exclusivity - does the agreement grant the distributor exclusive rights to sell the goods within a defined territory? Or is it non-exclusive, allowing competition from other distributors or even the supplier itself?

• Minimum order quantities - are there minimum purchase requirements for the distributor to maintain? This ensures predictable revenue for the supplier while motivating the distributor to actively sell.

• Pricing and margins - how are prices and profit margins determined? Fixed prices might provide stability, while flexible pricing can offer negotiation room and market adaptability.

• Product scope - detailed specifications, variations allowed, and future product inclusion mechanisms

• Marketing and sales  - who is responsible for marketing and sales? The agreement should define shared or individual responsibilities, ensuring coordinated efforts towards market penetration.

• Intellectual property rights - how are intellectual property rights, such as trademarks and patents, protected? Protection measures generally including counterfeit prevention, parallel import handling, and infringement reporting. Customer database ownership and usage restrictions and rights are also important.

• Risk allocation and mandatory legal protections - a clear liability framework is essential including any agreed liability limits reflecting risk allocation, insurance required coverage types and levels and indemnities for product liability, IP infringement, and regulatory compliance.

• Termination clauses - when and how can the agreement be terminated? Clear exit strategies protect both parties and prevent future disputes.

How we can help

If you need solicitors to draft a distributor agreement, please do get in touch. We also review agreements and advise on legal disputes relating to distributor contracts.