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Exorbitant Fees Leads to Demise of Distributor

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This article is about a lawsuit alleging fraud by the supplier, who controlled the distributor, in the form of exorbitant distribution fees. “The effect of Weinstein’s (the supplier) scheme was to utilize the Distribution Agreement to transfer to Weinstein, as a result of Weinstein’s ownership of the Debtor, the Debtor’s cash by charging the Debtor above-market rates in the Distribution Agreement instead of the net revenues that could be obtained if the Distribution Agreement reflected market terms and industry norms.”

Agreements which are overly-biased in favour of one of the parties are more likely to be terminated early, or result in financial difficulties for the ‘junior’ party.

Read the article here.

Take away:

  • One sided distribution agreements are less likely to succeed.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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Termination Clauses in Distribution Agreements

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When drafting a distribution agreement, the parties should ensure that each party has the right to terminate the agreement under certain circumstances. These may be broad and general in nature such as termination upon the material breach of the agreement or upon default of the parties. The provisions may also be specific to the agreement and the parties to it.

The article describes a supplier that was given the right to terminate the distribution agreement if the distributor’s current chairman of the board died, suffered from a permanent incapacity, or ceased to be involved in the business of the distributor. This type of clause is inserted for the benefit of the supplier so that if the distributor incurs a change of control which the supplier does not endorse, the supplier is not required to continue the agreement with such new change of control. Although it may be important to incorporate some language specific to the parties’ needs, generally, broad termination provisions should also be included.

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Take away:

  • Parties should include termination provisions which are tailored to their needs.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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Distribution Agreements and App Stores

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Distributing an app in the Google or Apple app stores? It would be wise to carefully review the distribution agreements that come along with these two stores. Google and Apple both include their default end user licensing agreement (“EULA”) into the application before sending it out to the market. This includes a limitation of liability provision which protects the developer, but it does not appear to include an indemnity provision that operates in favour of the supplier. However, it states that if you have your own EULA, you can replace their default one. Often, after signing their distribution agreements, you have granted the app store a perpetual, royalty-free licence to use your application… so be careful to read the agreement before you sign away your hard work!

Read the article here.

Take away:

  • If you are planning to market an app through Apple or Google, read the licensing agreement to understand your options.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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Common Mistakes in Drafting a Distribution Agreement

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This article discusses ten common mistakes in the drafting of a distribution agreement. One of these is having an inflexible agreement that is difficult to amend, specifically in the areas of pricing and freedom to make changes to the product in response to changing market and economic parameters.

Parties to a distribution agreement may want to consider making the agreement flexible in regards to pricing and product changes, among other things. Business relationships and the market can change drastically and the ability to amend your distribution agreement to meet those changes is very valuable.

Read the article here.

Take away:

  • Building in flexibility to deal with changing market conditions while maintaining the distribution relationship is very important.

 

–  –  –

This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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Protecting Intellectual Property can be Essential in a Distribution Agreement

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This article points out that when parties enter a distribution agreement, it is prudent to take extra precautions to protect intellectual property. It is vital to understand that while a distribution agreement may be explicit about the retention or ownership of intellectual property embedded in the distributed product, it should also specify the length of any licenses to exploit intellectual property granted under the distribution agreement. Furthermore, when granting distribution rights, owners of intellectual property should consider requiring distributor’s end users to sign an end user’s terms of service agreement to protect against any claims the end user may assert against any associated intellectual property.

Read the article here.

Take away:

  • Protect the supplier’s IP from distributor’s end users and customers as well as from the distributor.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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