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Distribution Agreement (favouring Distributor)

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This form download outlines the terms of appointment of an exclusive distributor for a supplier/manufacturer.




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eForm
Valid in England, Wales
Price: £57.60
Page Length: 13
File Type: Microsoft Word
File Size: 83 KB

This Exclusive Distribution Agreement, in a “Download Now” Word format, is to be used when a supplier/manufacturer appoints an exclusive distributor for the sale of its products in a defined overseas territory.

As part of the terms of this exclusive distribution agreement, the distributor will be allowed to buy the company’s products and sell them on the distributor's own behalf – unlike an agent who sells products on the supplier/manufacturer’s behalf.

This business contract template agreement is eight pages long (plus five pages of guidance notes) and includes nine main clauses outlining the terms of the exclusive distribution agreement. This includes:

  • The procedure for ordering products from the company
  • Price and payment for the company’s products
  • The distributor's obligations, as the exclusive distributor
  • Intellectual property and patent rights
  • Confidentiality
  • Termination of the Exclusive Distribution Agreement

Drafted by solicitors for straightforward completion, the “Download Now” Exclusive Distribution Agreement includes guidance on how to fill the contract template in.

For further details of the terms included in this Exclusive Distribution Agreement, see the ‘Contents’ tab above.

For a business contract template agreement favouring the supplier, see our Exclusive Distribution Agreement (favouring Supplier/Manufacturer).

Exclusive Distribution Agreement Note:

This Exclusive Distribution Agreement is supplied by ContractStore.com.

For obvious reasons we can't show you the actual contract template before you purchase it, but outlined below are the explanatory notes that go with it. These explain the thinking behind it, and should give you a good idea of the terms of the business contract.

 

Explanatory Notes

Exclusive Distribution Agreement (favouring the Distributor)


This Exclusive Distribution Agreement is for a manufacturer in one country to appoint a Distributor of its goods in another country for the resale of those goods in the local market.

The Exclusive Distribution Agreement covers a fixed initial period which may be subject to renewal.

A Distributor buys for resale and each order placed by the Distributor will constitute a separate business contract. Unlike an agent, a Distributor is selling on his own account and not on behalf of the Supplier/Manufacturer. Both parties will, nonetheless, want to be sure that the Distributor has adequate information and literature concerning the products, as well as having a workforce capable of handling sales and any after sales or maintenance which may be required.

Since this is a cross-border agreement - i.e. each of the parties is in a different territory with different laws - it is important that the Supplier/Manufacturer has the business agreement checked by lawyers in the Distributor's country - and vice versa. In some Gulf States, for example, the law does not recognise a distinction between a distributor and an agent and a distributor agreement could be subject to local agency law and, in some circumstances, the distributor agreement may be registrable and governed by the local law, whatever the document itself may say.

Specific comments on the model form are set out below:

First, please note that this Exclusive Distribution Agreement contains some clauses with alternative wording and some parts of the Exclusive Distribution Agreement are in square brackets [ ]. It is important to ensure that the final Exclusive Distribution Agreement to be signed by the parties contains only wording that is agreed and that all alternative provisions and square brackets have been removed. Similarly, all blanks should be filled in before signature.

DATE

This is the date upon which the Exclusive Distribution Agreement is executed - not necessarily the date upon which it comes into effect - which is dealt with in clause 2.2.

PARTIES

Here set out the full name of each of the parties and the official address of that party - if it is an English limited company, this will be the registered office.

INTRODUCTION

This is self-explanatory and briefly introduces the Exclusive Distribution Agreement.

1. INTERPRETATION

We have inserted four definitions including that of the territory which needs to be defined. The territory may cover a complete country, part of a country or more than one country, but, whatever the case, be sure to define it precisely - do not, for example, say "any country in South East Asia" since there could be an argument as to what is meant by South East Asia. The Distributor often wants a larger territory than the Supplier/Manufacturer, but should beware of taking on too many territories which it cannot control (particularly if the Supplier/Manufacturer insists on minimum sales quantities being met).

Products need to be clearly defined. The Supplier/Manufacturer may try to appoint different distributors for different products, whereas the Distributor may want the right to sell as many different products produced by the Supplier/Manufacturer as he can.

2. APPOINTMENT OF DISTRIBUTOR

The Agreement states that the Distributor is being appointed on an exclusive basis. Clause 2 makes it clear that the Distributor is able to sell/distribute products that differ from the Supplier's/Manufacturer's Products. This is deliberately wide and it is possible that the Supplier/Manufacturer may wish to clarify/limit this provision.

In 2.2 the date upon which the Exclusive Distribution Agreement comes into effect should be stated, as well as the initial period - say two years. If notice of renewal is required, clause 2.2 might say that it will expire at the end of the initial period "unless it is renewed by agreement between the parties at least three months before the expiry date".

3. ORDERS FOR PRODUCTS

This clause sets out the arrangements for ordering and includes provision for the Distributor to give the Supplier/Manufacturer estimated requirements in advance so that he can plan accordingly. Clearly, the precise details of this clause will need to be tailored to the particular arrangements in place within the relevant organisations.

3.3 makes is clear that each sale constitutes a separate order for goods. Each order may be governed by the Supplier's/Manufacturer's standard Terms Conditions of Sale or (as stated here) the Distributor's Terms Conditions of Purchase, or perhaps an agreed set of conditions will be developed. It may be sensible to state that a copy of the agreed terms is annexed to the Distributor Agreement so that there is no doubt as to the terms which are to be incorporated.

3.5 gives the Supplier/Manufacturer the right to modify products and to change product lines. Clearly, it is in both parties' interests to ensure that early notice is given of any changes.

4. PRICES & PAYMENT

4.1 assumes that the standard list price of the Supplier/Manufacturer will apply to all sales but there may be some pre-agreed discounts, in which case the words in square brackets at the end of the clause should be incorporated in the document. It is not uncommon for the discount to be referred to in an appendix to the Exclusive Distribution Agreement.

4.2 deals with additional payments over and above the list price which may be payable.

4.3 provides for payment to be within a specified period. (A Supplier/Manufacturer is likely to require payment on a letter of credit but we have not specified this in this version of the Exclusive Distribution Agreement. See, by contrast, our Exclusive Distribution Agreement (favouring the Supplier/Manufacturer).

4.4 deals with currency and this need to be specified here.

4.5 makes it clear that the Distributor is responsible for all charges and customs clearances at the port of arrival.

5. DISTRIBUTOR'S OBLIGATIONS

The list of obligations is fairly general and reasonably self-explanatory (our Exclusive Distribution Agreement (favouring the Supplier/Manufacturer) contains a more comprehensive list of obligations on the Distributor).

Clause 5.4 assumes that the Supplier/Manufacturer will arrange for visits to the Distributor's territory from time to time - from a commercial point of view this is certainly to be recommended.

6. SUPPLIER'S/MANUFACTURER'S OBLIGATIONS

This clause contains a number of obligations on Supplier/Manufacturer with respect to marketing literature, training, technical support, etc.

7. PATENTS & INTELLECTUAL PROPERTY

It is usual for a Supplier/Manufacturer to try to protect its intellectual property rights and such a clause has been included here.

The main purpose of 7.2 is to ensure that the Supplier/Manufacturer is notified by the Distributor if, for example, counterfeit goods appear in the territory.

8. CONFIDENTIALITY

To the extent that information passing between the Supplier/Manufacturer and the Distributor is confidential, this clause imposes confidentiality obligations on both parties. It is also important in such circumstances to ensure that each party gets its employees, and others who need to have that confidential information as part of their job, to sign appropriate undertakings in a similar form.

9. TERMINATION

Clause 9.1 sets out the grounds on which either party can terminate the Exclusive Distribution Agreement. It is drafted so as to be fairly balanced.

It is useful to specify the consequences of termination and these are dealt with in 9.2 to 9.5. Note, in particular, the provisions of clauses 9.2.2 and 9.5: as currently drafted the Supplier's/Manufacturer's liability to the Distributor for termination other than as a result of a breach of the Exclusive Distribution Agreement by the Distributor is wide-ranging and includes claims for loss of anticipated profits. This area is likely to be the subject of negotiations between the Supplier/Manufacturer and Distributor and it is possible that the Supplier/Manufacturer may wish to impose a cap on its liability. Local legal advice should be taken as to the rights of each party on termination and the effectiveness of any cap or limitation of liability. See our Exclusive Distribution Agreement (favouring the Supplier/Manufacturer) for an example of a business agreement which favours the Supplier/Manufacturer upon termination.

10. GENERAL

This covers a number of issues:

10.1 Assignment. The relationship is one which would not normally be assignable and an express prohibition on assignment is included subject to the other party's written agreement.

10.2 Sub-contracting. This is drafted so as to make it clear that the Distributor has the right to subcontract its role to others but must notify the Supplier/Manufacturer.

10.3 Notices. This is a mechanism for giving formal notices under the Exclusive Distribution Agreement and is usually advisable.

10.4 Language. This specifies the ruling language. Where the Exclusive Distribution Agreement is translated into another language and both versions are signed, it is advisable to specify which is the ruling version, in case of any discrepancy. Equally important, when this happens, an independent check of the translation should be made to ensure that it is an accurate translation.

10.5 Entire Agreement. Quite often a distributor agreement is only entered into after a course of dealings and/or an exchange of letters. The purpose of this clause is to make it clear that the Exclusive Distribution Agreement replaces those earlier arrangements.

10.6 Resolution of Disputes. The Supplier/Manufacturer objective of this clause is to have any disputes which may arise resolved by an independent tribunal, not necessarily in the territory of either Supplier/Manufacturer or Distributor. This clause proposes arbitration in accordance with the UNCITRAL (United National Commission on International Trade) Rules. 

10.7 Governing Law. The law of the Distributor's territory would normally be selected by the Distributor as the most appropriate.

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