Distribution agreements + benefits and risks
A distribution agreement is a legally binding contract and regulates the commercial terms between a supplier of goods and a distributor of goods. The supplier of the goods supplies the goods to the distributor for resale in specified territory The supplier may be a manufacturer, or may itself be a distributor reselling another's goods.
A distribution agreement is a prevalent alternative to an agency agreement as it permits a business to utilize local knowledge and market share with out being subject to the Commercial Agents (Council Directive) Regulations 1993. The line of demarcation between agency and distribution agreements is that with an agency arrangement the goods do not pass to the agent and the contract remains with the business. The agent merely acts on behalf of the business and usually takes a commission. With a distribution agreement the ownership of the goods passes to the distributor who then sells them directly to the customer.
Distribution agreement may be exclusive or non exclusive. Distribution agreement is a chief tool which creates a relationship between a distributor and a supplier and sets forth that how the parties will work together. The manufacturer will grant to the distributor exclusivity over a specified territory and/or product line and/or sales channel via exclusive distribution agreement.
Distribution agreements are based on the commercial laws of England and Wales your business is subject to.
Your distribution agreement should cover the following clauses:
details of the parties
details of the goods
rights and responsibilities of Supplier
rights and responsibilities of Distributor
Contract period
title and risk
restrictions on Distributor
marketing rights
supply of goods and/or services
payment terms
technical support
Trade mark licensing
Confidential information
Circumstances in which agreement may be terminated
Consequences of termination
Distribution agreements generally incorporate terms and conditions of supply, sometimes in the body of the agreement and sometimes as a schedule or annex to the agreement. These should cover all the basic essential pertaining to supplies, including the delivery of goods, the transfer of risk in and title to the goods, inspection requirements and returns. Fair distribution agreement will provide opportunities to make money for both the manufacturer and supplier.
Unless agreed by the both parties, changes into the distribution agreement can not be made and will require a new agreement to be signed.
When you are choosing a distributor it is essential that you choose someone who will maximize the sales of your product. If you are going to be selling your product into a new market it is also important to find someone with in-depth knowledge of that market. Businesses selling complementary products can make good distribution partners.
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