COMMERCIAL LAW

DISTRIBUTION AGREEMENTS

A distributor purchases goods or products from a supplier and sells them to their customers. Ownership of the products (and consequently any risk) passes at each stage, from the supplier to the distributor and then from the distributor to the customer.

Distribution agreements can be a cost-effective way of scaling up a supplier’s business. However, the supplier needs to be aware of the potential risks involved (such as reputational damage) and this is why distribution agreements need to be carefully drafted. At Birch Law our commercial solicitors can assist with all aspects of a distribution agreement from initial advice to the preparation and amendment of a formal written agreement.

If you would like to discuss any of our services with us, feel free to contact us using the form below or give us a call at 0161 669 4621 for a free no obligation chat. We look forward to assisting you with your legal concerns.

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Type of distribution relationships.

There are three main types of distribution relationships, each with its own set of specific nuances:

Exclusive distribution arrangement. Where there is only one distributor in a territory and they have exclusive rights to sell the products in that territory.
Sole distribution arrangement. Where there is only one distributor in a territory but the supplier can also sell their products to customers in the territory.
Non exclusive distribution. Where there are multiple distributors in a territory and where the supplier can also sell their products in that territory.

The terms of a distribution agreement largely depend on the type of relationship the parties agree on.

What is a distribution agreement?

A distribution agreement is a written commercial contract setting out the terms and conditions and the relationship between the manufacturer or supplier and the distributor.

The key terms in a distribution agreement?

The terms of a distribution agreement should be clear and comprehensive to avoid potential disputes and reduce the risk of litigation in the future. The key terms of a distribution agreement would include:

Description of products. The products to be covered by the agreement must be clearly set out. The description will depend on the products being sold. In addition to product description, the number of units to be supplied and the timing of deliveries should also be set out in the agreement.
Territory or customer type. The agreement should clearly define the territory or the customers covered by the arrangement. If the agreement provides for exclusive distribution, the position regarding additional territories not covered by the distribution arrangement should also be set out.
Term. The duration of the agreement should be set out in the agreement. The parties should also include probationary periods and whether the agreement is to be for a fixed term or whether it is to be a rolling agreement.
Details of payment. The payment terms should be clearly set out in any agreement. A supplier may also require some form of security, such as a letter of credit or the supplier may insist on a retention of title clause to be included in the agreement. Should payment not be made the supplier has therefore some form of security.
IP clause. A supplier will want to retain control of its intellectual property rights, such as trademarks, design rights, and copyright. From the supplier’s point of view, it is important that the agreement provides them with sufficient protection in case of a breach.
Termination. The parties need to agree on when the agreement can be terminated. For example can either party terminate the agreement on notice and how long should that notice be for? Additional consideration should be given as to whether one party could terminate the agreement for breach of the terms of the agreement or on the occurrence of a default event, such as the insolvency of the other party.

How Birch Law can help?

At Birch Law our commercial solicitors have experience working with both suppliers and distributors. We can assist with all aspects of a distribution agreement. From providing initial legal to preparing and amending a distribution agreement. For a free no obligation chat please feel free to contact us on 0161 669 4621 or by email at sbirchall@birchlaw.co.uk.

Whichever funding route you choose, you can rest assure that our experienced solicitors will always do their utmost to keep costs as low as possible. If you would like to discuss any of our services with us, feel free to contact us using the form below or give us a call at 0161 669 4621 for a free no obligation chat.

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