Distribution Agreements are legal contracts used to define the relationship and terms and conditions in which a distributor or dealer may sell a product created by a supplier or manufacturer. The contract is designed to layout the responsibilities of both parties. A Distribution Agreement should be clear and in writing to avoid future disputes and to address any major issues before they arise. Below are some examples of what should be included in a Distribution Agreement:
Parties
Identify the parties involved using legal names of the entities or individuals, and addresses for both.
Terms of the Agreement
This section should include the length of the contract as well as the terms for terminating to contract. Also included in this section can be transfer of risk of goods,
Territory
This section outlines the geographic area the products can be distributed, and what the penalty is for selling outside the designated territory.
Products
Identify the goods or products to be distributed. This section should also include the agreement if the product or good is discontinued. This section could also include an exclusivity of goods, which means the distributor has sole rights to distribute the product or good.
Performance
This outlines the number of customers the distributor agrees to keep within a territory and how much the distributor agrees to sell in the specific territory. Lack of performance is typically grounds for terminating the contract.
Price and Payment Terms
This section outlines the price charged to the distributor, who sets the price charged to the consumer, if the distributor is able to set their own price, and what the payment terms are for the distributor. Other factors to consider in this section are cost increase, price reductions, and any type of price rebates.
Warranty of Products
This section outlines if the manufacturer provides a warranty, if the distributor is able to repair the products, and if the manufacturer supplies that training.
Delivery terms
This section should include the delivery location, delivery dates, and the shipping terms.
Restrictions
This section outlines the agreement of distribution particularly associated with the carrying of competitive products.
A contract attorney should be used to draft and construct the agreement to ensure the relationship between the manufacturer and the distributor is healthy and successful. Hiring an attorney to carefully draft a Distribution Agreement will help avoid any complications in the future because typically the parties get into the nitty gritty of any potential problems and address them in the contract.