Distribution Agreement Template

Business-in-a-Box's Distribution Agreement Template

Document description

This distribution agreement template has 15 pages and is a MS Word file type listed under our legal agreements documents.

What is a Distribution Agreement?

In a nutshell, a distribution agreement is a tool you can use to make your businesses partnerships easier! Getting original, specific products from the manufacturer or supplier to the end customer requires direct marketing of said products or services. Most manufacturing companies do not have the necessary access or market presence to ensure the marketing of products and services on their own. Instead, they work with knowledgeable distributors that have a foothold in the target market. To make this collaboration easier, you need the help of reliable distribution agreements.

Definition of a Distribution Agreement

A distribution agreement, also known as a distributor agreement, is an official document that defines the terms and conditions of a specific agreement between two respective parties. The agreement’s purpose is to allow the distributors to sell and market the products of a given supplier. As a legally binding document, a distribution agreement can be defined as a distributor contract. It is signed by all relevant partners and stipulates the individual responsibilities of each of the involved parties, also known as “entities”.

Distribution Agreement Entities

A typical distribution contract is the agreement between the entities responsible for supplying the goods and the entities responsible for distributing the goods. The supplier could be a manufacturer, a vendor or another distributor who is reselling the goods. The distributors can be a single entity or multiple separate entities. They are typically a company or entity that is responsible for managing both the selling and marketing of the product. Sales can be either to the end customers or to other distribution companies.

Need for the Distribution Agreement

When doing business together, supplier and distributor entities typically come up with an informal verbal agreement. Unfortunately, the given verbal contracts often result in major misunderstandings that can be problematic for both your party and all parties involved. The distribution contract defines the specific terms and conditions of an agreement. This might include the total length of the contract, commission rate for goods, cost of the products, location of the distributor’s operation, and other vital details. The creation of a clear and specific formal contract means that all entities involved are fully aware of the specific agreement terms and conditions. Each party can confidently hold up their end of the deal. And, if one party fails to live up to the terms of the agreement, the legally binding contract provides ample protection for the wronged party.

Exclusive vs. Non-Exclusive Contracts

To find the most beneficial distributorship opportunity for you, it’s important you understand the differences between an exclusive and non-exclusive distributorship contract. There are specific pros and cons to each type of contract that you can read up on before you sign.

Exclusive Distributorship

An exclusive distributorship agreement allows the manufacturer or supplier to designate the distribution rights to a single entity. A sole distributor can resell the concerned products or services in a particular marketplace. And, suppliers and manufacturers benefit with freedom from competition of other sellers in the distribution area. A major benefit of working with an exclusive distribution agreement is that for a specified time period, you will be in a partnership when working towards selling the respective products or services in the given market. Exclusive distribution agreements are known to ensure commitment to success by both the manufacturer as well as the exclusive distributor. Each of the entities are given the opportunity to invest in the given relationship while working together on both the sales and marketing processes.

Non-Exclusive Distributorship

In contrast to the exclusive distribution contract, the non-exclusive distributor agreement template allows the manufacturer to provide multiple entities with the distribution rights of reselling the concerned products or services in a particular marketplace. When entering into a typical non-exclusive agreement, you can expect to see competition between each of the multiple distributor entities when selling the products and services. Although non-exclusive distributorships are suspected to lack the overall convenience offered by the exclusive relationship, the non-exclusive opportunities provide essential competition instead. This, in turn, proves to be a great motivator for the entities involved. Another advantage of working in a typical non-exclusive agreement setup is that the entities are able to share the business development process within a specific target market with other non-exclusive distributors or resellers. This helps in significantly reducing the overall marketing and start-up costs.

Major Consideration for Exclusive & Non-Exclusive Distribution Agreements

Distribution agreements tend to be comprehensive. There are numerous major factors for you to consider before signing your exclusive or non-exclusive agreement. Some typical components include:

  • Term: When exactly does the exclusive or non-exclusive agreement commence? When does it end?
  • Supplier Obligations: What are the obligations of the manufacturers to the concerned distributors? More importantly, do the obligations meet the expectations of the distributors outlined in the agreement?
  • Distributor Obligations: What obligations do the distributors have to the manufacturers? And, do they meet the expectations of the manufacturers as outlined in the agreement?
  • Payment Terms: What are the agreed upon payment terms for the specified products and services?
  • Order Procedure: What is the process of placing orders with the supplier or manufacturer for exclusive and non-exclusive distributors? Is that process effective? (A common issue for distributors is not being able to deliver merchandise on time to end consumers.)
  • Confidentiality Obligations: Are there any confidentiality concerns during or after the termination of the exclusive or non-exclusive agreement?
  • Limitations and Exclusions of Liabilities: Are there any specific limits or restrictions of liabilities from the suppliers in the exclusive or non-exclusive agreement?
  • Warranties: Is there provision of warranty protection for the products or services being sold during the exclusive or non-exclusive distributorship? How long for?
  • Termination: What are the obligations if one of the participating entities decides to end the exclusive or non-exclusive agreement? How should the notice be provided? Whether you should enter an exclusive or non-exclusive distribution agreement depends on your specific needs. It is important you carry out your own in-depth research to make sure you will have ample support from the other parties throughout the period of your contract. If you want to build a successful partner relationship, you should ensure that there is an effective measurement system in place. With the right organization, each of the parties can track the overall progress of the exclusive or non-exclusive agreement and ensure that none of the agreed upon components are missing.

International Distribution Agreement

When you enter a distribution agreement that involves the resale of products and services internationally, the contract is referred to as the “international distribution agreement.” Distributors and manufacturers or suppliers entering an international distribution agreement require a written contract to formalize the understood terms between each of the entities. To get the most out of your international relationships, the international distribution agreement template is available for you to download instantly. You can discover the comprehensive step-by-step simple distribution agreement PDF from a number of service providers. If you’re interested in the exciting prospect of global expansion, you can hire an international business attorney to provide suggestions and help you navigate the international legal landscape. Some examples of key terms of the international distribution agreement on commercial grounds include:

  • What is the starting price? How and when will the pricing adjustments take place?
  • Does the given pricing structure include custom duties and taxes?
  • How much notice is required to be provided for necessary adjustments?
  • How can the currency fluctuations be handled?
  • In which currency will the pricing be quoted?
  • Will there be an offering related to the volume discounts of the given distributorship or any other special pricing program that might be dependent on coming across particular performance targets?
  • When and how will the adjustments be created in case a specific product might be heavily dependent on the fluctuating prices of the given raw materials?
  • On what terms will the manufacturer sell the merchandise to the respective distributors?
  • How will the late payments in the contract be handled?
  • How will the new product launches be handled?
  • What is the warranty offered on the given products or services?

Licensing and Distributorship

Licensing and distributorship agreements can be a useful tool for suppliers when distributing their products or services. In this setup, there is no obligation to provide the typically required full capital investment when setting up a business in a given jurisdiction. At the same time, licensing and distributorship agreement templates can help in providing excellent opportunities for commercial activities for both the distributors and business enterprises in the respective jurisdictions. Particularly when the local distributor is able to secure exclusive distribution rights for marketing and selling high-demand merchandise. In this scenario, there is no need for the distributor to make a significant investment in the process of product development.

Types of Licensing & Distributorship Agreements

There are several types of licensing and distributorship agreements you can take advantage of. From a simple royalty sales agreement to a global licensing agreement, you will be able to find the perfect choice of contract for your manufacturer-distributor relationship. Naturally, contracts come with the risk of legal challenges. But, if you do your research and make sure you are aware of potential risks, you can swap wasted investments for successful returns. Seize the opportunity and choose the ideal licensing and distributorship agreement template for you.

International Licensing & Distributorship Agreements

When entering an agreement it's your responsibility to analyze its respective challenges. And, you should also be looking into particular considerations that might arise out in the case of international licensing & distributorship agreements. Some of these are:

  • Monitoring capabilities to effectively measure the performance of the distributor or the license.
  • The availability of specified products and the relevant technical support from offshore suppliers.
  • Domestic validity or compliance of the intellectual property rights of the supplier in the given jurisdiction
  • The ability of the supplier to control the overall use of the products or mark when the particular license or distributorship ends.
  • Parallel importing.
  • Governing law of the agreement.
  • Processes related to dispute resolution and the capability of enforcing the contractual terms in the right jurisdiction. Sign up to get your hands-on full-length distribution agreement clauses and templates now!

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