Distribution Agreements

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Expand into new markets or territories

A distribution agreement is a contract between a supplier and a distributor, whereby the distributor agrees to sell the supplier’s products in a particular territory. The supplier typically provides the distributor with the products at a wholesale price, and the distributor then sells them to retailers or end users at a retail price.

Distribution agreements are a common way for businesses to expand into new markets or territories without having to invest in their own sales and distribution infrastructure. They can also be a way for businesses to reduce their costs and focus on their core competencies.

Different types of distribution agreements

There are different types of distribution agreements, each with its own advantages and disadvantages. The most common types are:

  • Exclusive distribution: This is where the supplier agrees to sell its products only to the distributor in a particular territory. This gives the distributor the exclusive right to sell the products in that territory and can be a valuable way for the distributor to build up its market share. However, it also means that the distributor is taking on a lot of risk, as it is the only one selling the products in the territory.
  • Sole distribution: This is where the supplier appoints the distributor as its only or sole distributor in a particular territory, but the supplier reserves the right to sell the products directly to end users. This gives the distributor a degree of exclusivity, but it also means that the supplier can compete with the distributor.
  • Non-exclusive distribution: This is where the supplier is free to appoint other distributors in the territory. This gives the distributor less security, but it also means that the supplier is more likely to promote the products to a wider range of customers.

Selective distribution: This is where the supplier only appoints a limited number of distributors in the territory. This can be a way for the supplier to maintain control over the quality of the products and the level of service that is offered to customers.

Terms of a distribution agreement

The terms of a distribution agreement will vary depending on the specific circumstances of the parties involved. However, there are some key terms that are typically included in all distribution agreements, such as:

  • The products that are being distributed: The agreement should clearly specify the products that are being distributed. This will help to avoid any disputes about what products are covered by the agreement.
  • The territory: The agreement should specify the territory in which the distributor is authorized to sell the products. This will help to prevent the distributor from competing with the supplier in other territories.
  • The price and payment terms: The agreement should specify the price at which the distributor will buy the products from the supplier, and the terms of payment.
  • The marketing and promotion of the products: The agreement should specify how the distributor will market and promote the products. This will help to ensure that the products are properly promoted to potential customers.
  • The term of the agreement: The agreement should specify the term of the agreement, i.e. the length of time that it will be in effect.
  • Termination provisions: The agreement should specify the circumstances under which either party can terminate the agreement.
  • Dispute resolution: The agreement should specify how any disputes between the parties will be resolved.

How Richardson Lissack can help

It is important to have a well-drafted distribution agreement in place to protect the interests of both the supplier and the distributor. A lawyer can help you to negotiate and draft a distribution agreement that meets your specific needs.

In addition to the key terms mentioned above, there are a few other things to keep in mind when drafting a distribution agreement in the UK. First, the agreement must comply with the Competition Act 1998. This Act prohibits certain types of agreements that may restrict competition, such as exclusive distribution agreements. Second, the agreement must be in writing and signed by both parties. Finally, the agreement should be registered with the Competition and Markets Authority (CMA) if it meets certain criteria.

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