This distribution agreement is between
The Supplier is engaged in the marketing and sale of the Products (as defined below and listed in Exhibit A).
The Distributor is experienced in the promotion, distribution, and sale of products similar to the Products.
The Supplier wishes to appoint the Distributor as its
The parties therefore agree as follows:
1. PURPOSE, APPOINTMENT, AND EXCLUSIVITY.
2. TERM AND TERMINATION.
3. RESPONSIBILITIES.
4. TERRITORY.
5. CUSTOMERS.
6. PRICE.
7. MINIMUM COMMITMENTS.
The Distributor shall order and provide buyers for, during each of the periods set forth in Exhibit A, at least the minimum quantities of each Product indicated in Exhibit A for such periods. The Supplier, at its sole discretion, may amend Exhibit A on 30 days' prior written notice to the Distributor. If the Distributor fails to order and find buyers for the minimum quantities during any period, within 30 days of the end of that period it will provide the Supplier with a written report explaining its failure to meet its minimum quantity, and the Supplier will determine in its sole discretion which of the following steps is appropriate:
8. PRODUCT WARRANTY.
The Supplier makes no warranty or representation about the Products, except those, if any, made under its standard warranty.
9. PRODUCT RECALLS.
10. NO CONFLICT OF INTEREST.
11. NATURE OF RELATIONSHIP.
The relationship of the parties under this agreement is one of independent contractors, and no joint venture, partnership, agency, employer-employee, or similar relationship is created in or by this agreement. Neither party may assume or create obligations on the other party's behalf, and neither party may take any action that creates the appearance of such authority.
12. SUPPLIER REPRESENTATIONS.
The Supplier hereby represents that the Product:
13. RETURN OF PROPERTY.
Within
14. INDEMNIFICATION.
15. USE OF TRADEMARKS.
16. CONFIDENTIAL INFORMATION.
17. GOVERNING LAW.
18. AMENDMENTS.
No amendment to this agreement will be effective unless it is in writing and signed by a party or its authorized representative.
19. ASSIGNMENT AND DELEGATION.
20. COUNTERPARTS; ELECTRONIC SIGNATURES.
21. SEVERABILITY.
If any one or more of the provisions contained in this agreement is, for any reason, held to be invalid, illegal, or unenforceable in any respect, that invalidity, illegality, or unenforceability will not affect any other provisions of this agreement, but this agreement will be construed as if those invalid, illegal, or unenforceable provisions had never been contained in it, unless the deletion of those provisions would result in such a material change so as to cause completion of the transactions contemplated by this agreement to be unreasonable.
22. NOTICES.
23. WAIVER.
No waiver of a breach, failure of any condition, or any right or remedy contained in or granted by the provisions of this agreement will be effective unless it is in writing and signed by the party waiving the breach, failure, right, or remedy. No waiver of any breach, failure, right, or remedy will be deemed a waiver of any other breach, failure, right, or remedy, whether or not similar, and no waiver will constitute a continuing waiver, unless the writing so specifies.
24. ENTIRE AGREEMENT.
This agreement constitutes the final agreement of the parties. It is the complete and exclusive expression of the parties' agreement about the subject matter of this agreement. All prior and contemporaneous communications, negotiations, and agreements between the parties relating to the subject matter of this agreement are expressly merged into and superseded by this agreement. The provisions of this agreement may not be explained, supplemented, or qualified by evidence of trade usage or a prior course of dealings. Neither party was induced to enter this agreement by, and neither party is relying on, any statement, representation, warranty, or agreement of the other party except those set forth expressly in this agreement. Except as set forth expressly in this agreement, there are no conditions precedent to this agreement's effectiveness.
25. HEADINGS.
The descriptive headings of the sections and subsections of this agreement are for convenience only, and do not affect this agreement's construction or interpretation.
26. EFFECTIVENESS.
This agreement will become effective when all parties have signed it. The date this agreement is signed by the last party to sign it (as indicated by the date associated with that party's signature) will be deemed the date of this agreement.
27. NECESSARY ACTS; FURTHER ASSURANCES.
Each party shall use all reasonable efforts to take, or cause to be taken, all actions necessary or desirable to consummate and make effective the transactions this agreement contemplates or to evidence or carry out the intent and purposes of this agreement.
[SIGNATURE PAGE FOLLOWS]
Each party is signing this agreement on the date stated opposite that party's signature.
Date: _________________ |
By:__________________________________________ |
Name: |
|
Date: _________________ |
By:__________________________________________ |
Name: |
[PAGE BREAK HERE]
EXHIBIT A
PRODUCTS
The following products are the subject of this distribution agreement. Any products not specifically listed are excluded from this agreement:
add border | ||
---|---|---|
PRODUCT NAME | INITIAL PRICE | MINIMUM QUANTITIES/TIME PERIOD |
1. |
$ |
|
[PAGE BREAK HERE]
EXHIBIT B
EXISTING CUSTOMERS
1. |
[PAGE BREAK HERE]
|
How-to guides, articles, and any other content appearing on this page are for informational purposes only, do not constitute legal advice, and are no substitute for the advice of an attorney.
No matter what business you’re in, the key to your business success is getting your products to the right markets at the right time. A distributor will let you get your products on the market quickly, avoiding the costly and time-consuming investment of promoting and delivering the products yourself.
Here’s how it works: the distributor places purchase orders, and the payments will be made to you directly. Once you have received these payments, you ship your products to the distributor to be sent to the customers. The distributor receives a percentage of the sales made.
You can choose to make your distribution agreement exclusive or non-exclusive. If your agreement is an exclusive distribution agreement, the company is not entitled to hire additional distributors to offer the same products in the same area.
If you want to make sure that the company can have more than one distributor for its products, you should ensure that your document is a non-exclusive distribution agreement.
It is important to include a clear description of which products will be distributed under your agreement.
Imagine a distributor thinks they can sell all of a company's products, but the company says only certain products are allowed to be sold. To avoid confusion, it's a good idea to list the products in your agreement. If products have serial numbers, including these in your agreement may be a good idea to limit confusion.
In more established businesses, the distributor will purchase products from the company outright and then resell them in the territory to which the distributor is assigned.
Exclusive rights tend to be used to distribute higher-end merchandise (like cars or luxury brands). Both parties mutually benefit from this arrangement. The seller is freed from competitive marketplace pressures, and the manufacturer has the seller’s commitment to sell items they have the sole authority over. In addition, both parties benefit from the perception that because the product is not available to the mass market, it is more desirable and exclusive.
Exclusive distribution agreements may face legal scrutiny if they limit brand competition or create a monopoly in the market. However, it must be proved (among other things) that the supplier’s products have the ability to restrain trade in the market. This tends to be true only if the company has significant power and the products in question are rare or very unusual.
Review your state’s laws governing independent contractors. In recent years, many states have made it difficult for individuals to qualify, imposing absolute requirements about the freedom an independent contractor must have from company control.
The company and the distributor should review the agreement carefully before signing. This helps to stop claims arising in the future regarding misinterpreting the agreed-upon terms and conditions.
The involved parties need to sign two copies of the agreement. One copy is kept by the company, while the other is retained by the distributor.
Keep your copy of the signed agreement for your records. At the end of its term, you and the other party can revisit its provisions and consider whether to renew.
If your agreement is complicated, contact an attorney to help you draft a document that will meet your specific needs.
The following instructions will help you understand the terms of your distribution agreement.
It starts with identifying the document as an exclusive distributor agreement. In agreement, the hiring party is called the “company,” and the distributor of the product is called the “distributor.” Along with providing the names of the involved parties, you need to mention what type of organization(s) they are. Write the date on which the agreement will become effective.
The “whereas” clauses, referred to as recitals, define the world of the agreement and offer key background information about the parties. In this agreement, the recitals include a simple statement of your intent to enter into an exclusive distribution arrangement.
This section appoints the distributor as a distributor for the company and emphasizes that this is an “exclusive” appointment (i.e., no other distributors can be used). This section also limits the distributor’s duties to certain territories and products.
In a distribution agreement, “products” can mean either products or services. If your distributor is selling services, then you can use the term services instead of products. Here, you have to include a detailed list of all of the products or services that the distributor will be selling for the company.
If there are any limitations on what the distributor will be doing or other requirements that you want to add, feel free to do so.
It also gives the company the right to sell its own products or services (i.e., the distributor’s exclusivity doesn’t extend to the company itself).
Here you have to list each party’s responsibilities under the agreement. For example, if the distributor doesn’t need to provide financial reports to the company, clarify that in this section. Another example could be each party has an obligation to comply with the other’s privacy policies.
This clause lets you limit the geographical area in which the distributor’s efforts should be focused. If it’s an exclusive distribution agreement, the appointed distributor will have an exclusive sales region.
In the case of a non-exclusive distribution agreement, the distributor does not have exclusivity since there will be multiple distributors assigned to the same area.
There can be cases where the distributor is the company’s exclusive distributor in multiple geographical areas or in all areas. You need to mention clearly which geographical areas the distributor shall be supplying your products or services.
If it’s a new distribution relationship, make sure the territory is relatively small to begin with. Expand the territory gradually if the results in the initial area are promising.
Here, describe the type of customer that the distributor should be seeking. This can be a select group of individuals or a class of businesses. Provide a list of the company’s existing customers along with the distribution agreement.
This section provides the pricing details and payment terms of the distribution agreement.
(a) It states that the company is responsible for setting the price and the terms of any product sale by the distributor. You also need to provide the list of initial prices and give the notice period the company must give if there is a change to the listed prices.
(b) Include the “Free on board” (FOB) pricing terms in this section. FOB term refers to who pays the cost of shipping.
Under the terms of this section, the distributor is required to obtain (and sell) a certain amount of products from the company. You and the other party can agree on these minimums and set them out clearly.
If the distributor can’t keep up with its obligations under this section, it must provide notice to the company at least thirty days before the time period ends. The parties can then discuss whether the requirements are too difficult and should be changed or whether the distributor needs to change its own procedures to try to keep up.
In this part, the only promise that the company is making about the products is that they are contained in the official warranty. This is usually limited to a promise that the items are not defective in how they were made. If someone claims the products are defective, the distributor promises to notify the company before taking further action.
Sometimes, products don’t work correctly, and it’s up to the manufacturer to fix those problems and prevent damage or injury. If the company decides that the products must be recalled (i.e., taken off the market and/or returned by customers), the distributor promises to help ensure this happens.
To make sure this process is as easy as possible if it happens, both parties agree to keep track of where the products are at all times (both at their own facilities and at those of the customers to whom the products were sold).
In this part, the distributor promises that it is not currently representing any other company or product that competes with the company. Under this section, the distributor must also provide a list of its current products/clients and agree to amend that list as it changes.
Note that this doesn’t prevent the distributor from working on behalf of other companies. However, if they are new companies and there is a question of whether or not a product competes with the product in the territory, the parties should discuss the matter further.
It explains that the distributor is not an employee, partner, or agent of the company and vice versa. This is an important distinction for many reasons, including those relating to insurance coverage, legal liability, and taxes.
To ensure there are no misunderstandings, this section lists each party’s “representations” about their company’s current state of affairs. In other words, each party makes promises to the other, and each party agrees to enter the arrangement based on the other’s promises.
More specifically, each party swears that:
This section indicates how long the initial agreement will last. It’s a good idea to make this about one year, with continuing one-year renewals. This provides enough time to test the relationship without locking yourself in a long-term deal.
This clause explains that certain actions or events, including written notice or material breach, will cause the distribution agreement to end out of time (i.e., before the services are completed or the end of the term, if any). Write in the notice period a party must give of its intent to terminate or to notify the other party of a breach.
This is an extremely important provision, which states that property should be returned after the end of the agreement. Enter the time period within which the distributor must return the property after the agreement is terminated.
This provision allocates responsibilities between the parties if problems arise in the future and protects each party from the financial consequences of the other’s illegal or harmful conduct.
In this section, the company allows the distributor to use their trademarks and intellectual property in order to distribute the products. However, the company doesn’t transfer ownership rights of the trademark to the distributor. The distributor can use the company’s trademarks only till the agreement lasts.
The distributor also agrees not to misuse the company’s trademarks and intellectual property.
This clause defines confidential information for purposes of the agreement and explains how the distributor will treat that information.
You need to note two important details:
You can create an optional provision as a subsection that allows you to set an expiration date for the distributor’s obligation. In other words, after a certain period of time, the distributor will no longer have a duty to keep the information confidential.
There is some debate about whether a time limit on non-disclosure is required; after all, confidential information received during the relationship doesn’t always become less confidential over time. You should review the laws in your area, and consider the specific context, to determine whether or not you will need to set an absolute deadline.
Explains that a party can’t transfer its obligations and interests under the agreement without the other party’s prior written consent.
This section makes clear that if another company or person takes the place of a party under the agreement (e.g., because a company took over a party, because an individual who was a party died, etc.), that company or person will have the same rights and obligations as the party they took the place of.
This explains that if either party allows the other to ignore or break an obligation under the agreement, it does not mean that the party waives any future rights and obligations.
For example, say the agreement requires the distributor to distribute 100 units a month, but the company only requires the distributor to distribute 50 units monthly. Later, the company could tell the distributor to distribute 100 units monthly, as the agreement requires. If the distributor claims that this right was “waived” because the company didn’t enforce it before, the company can point to this section: its failure to enforce the provision at one point doesn’t mean it can’t enforce it later.
Lists the addresses to which all official or legal correspondence should be delivered. Write a mailing address for both the company and the distributor.
The distributor may work in one state and the company in another. This provision allows the parties to choose the state laws that will be used to interpret the document.
This section says that even if the parties sign the agreement in different locations, or use electronic devices to transmit signatures (e.g., fax machines or computers), all of the separate pieces will be considered part of the same agreement.
Protects the terms of the agreement as a whole, even if one part is later invalidated. For example, if a state law prohibiting assignment clauses is passed, it will not undo the entire document. Instead, only the section dealing with assignment would be invalidated, leaving the remainder of the agreement enforceable.
The parties’ agreement that the document they’re signing is “the agreement” about the issues involved.
It states that the headings at the beginning of each section are meant to organize the document. Any interpretation of the clauses should not be based on the headings.
A good distribution agreement outlines the rights and responsibilities of the company and the individuals and organizations that will sell its products. Vague verbal agreements can lead to disputes and ill will. Hence, using a distribution agreement template to kick-start your document creation is a good practice. It ensures that you add all the important terms and conditions precisely. It helps to create multiple distribution agreements faster and easier.
Use LegalZoom’s simple and easily understandable distribution agreement template to create your distribution contract quickly. Provide answers to the guided questionnaire, and download the document created from the template for free.
Your products are ready. It’s time to get help moving them to the right markets at the right time. With a distribution agreement, distributors can promote, deliver, and sell your products throughout a specific area, sometimes with exclusive regional rights.
Here's the information you'll need to have handy to complete your distribution agreement: