Overview of Distribution Agreements
What is this document?
A Distribution Agreement is an agreement between a supplier of goods and distributor of goods where the distributor sells the supplier’s product.
When would I use this document?
This document can be used when a supplier wishes to use a distributor to distribute product throughout a defined territory. Distribution Agreements can be exclusive or nonexclusive, depending on whether the distributor will be given the exclusive right to distribute the product(s) in the territory. This document includes the obligations of the supplier and distributor, as well as a compensation scheme and who bears liability for shipping insuring and delivering the product. The agreement can also deal with marketing of the product.
Who signs this document?
Distribution Agreements are signed by the supplier (usually an Officer or Director of the corporation) and the distributor (usually an Officer or Director of the corporation).
More details about this document
Distribution Agreements can range in length depending on the complexity of the relationship and the services that are being provided. Some Distribution Agreements last for a short period of time and cover a small territory, others can last for years and cover distribution to a wide territory that can include multiple regions or countries. Distributors will try to negotiate to be exclusive distributors so other distributors do not compete to sell the supplier’s product in their territory..
Distributor Agreements may contain minimum quotas that have to be achieved by the distributor in order to keep the contract in effect. Distribution Agreements may also contain detailed compensation schemes that can include royalty payments to the distributor or additional compensation for selling a specified quantity of the product.
What are the core elements of this document?
The core elements include: parties, territory, reporting obligations (who the distributor reports to and how often), exclusive/non exclusive distributor, compensation, reimbursements, work hours/schedule, warranties, termination clause, relationship and intellectual property and confidentiality clauses.
Some examples of additional clauses include non-solicitation, non-competition, sub-contracting, limitation of liability, audits, marketing materials, and indemnification.
Nondisclosure/Confidentiality Agreement – an agreement that protects confidential information
Contractor/Consulting/Services Agreement – this type of agreement can have various names, and is used when a person is paid to provide services but is not hired as an employee. Payment can be flexible eg. money, shares or some other form of compensation.
Intellectual Property Transfer, Assignment and Release – an agreement that transfers the intellectual property from one person to another eg. from a consultant/contractor or employee to the person who ‘hired’ the consultant/contractor or employee
Commission Agreement – an agreement setting out the terms of a sales relationship with a payment structure based on commissions
– – –
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.