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Rule #1:  Gather your professionals, including legal counsel and tax and/or international tax professionals..

Rule # 2:  "Get it in Writing" Disputes can be very costly and and can damage business relationships. The key to dispute-avoidance is implementing a clear and well-drafted Distributor Agreement. The Distributor Agreement should clearly set forth the duties, responsibilities and expectations of each of the parties. The Distributor Agreement should also set forth provisions related to limitations and protections that each party can understand.

Consider addressing the following 21 Important Issues for Distributor Agreements:

• Gather your professionals to make sure your own business has a solid foundation and structure and protect your personal assets from the distributor business with corporations, LLC's, trademark registration, etc.  Contact this office for your free Business Checklist . 
• Legal Identity of the Parties of Distributor Agreement (it is important that the identity reflect the legal names of the entity(ies) and/or individual(s) and the State or Country where the entity is registered, as well, as the full address).
• Appointment of Distributor for Distributor Agreement (or Seller, Reseller or broker) a. Specify whether Distributor Agreement is an exclusive or non-exclusive distributor agreement; b. Set forth territory; c. Specify if there is a right to bind supplier; and d. Permit or prohibit assignments of the contract and/or appointment of sub-distributors.
• Term and Termination of the Distributor Agreement.
• Define Products or Services and reservation of rights, right of first refusal, etc.
• Clearly set forth Pricing terms (e.g. initial, notice for changes, etc.) for the Distributor Agreement.
• Terms of Payment (Currency, Letter of Credit, etc.)for the Distributor Agreement.
• Performance requirements (sales targets, remedial measures, etc.) for the Distributor Agreement.
• Procedures related to Ordering and Shipping (risk allocation, etc.) for the Distributor Agreement.
• Supplier's Responsibilities (min. & max. order, tech. support, marketing, etc.) for the Distributor Agreement.
• Distributor's Responsibilities (inventory, reporting, training, etc.)for the Distributor Agreement.
• Government filings or approval (allocation of responsibility,etc.) in relation to the Distributor Agreement.
• Warranty (minimum warranty required by law, defective product procedure, etc.) applicable to products sold under the Distributor Agreement.
• Intellectual Property rights (parties rights, granted and reserved, etc.) granted via the Distributor Agreement.
• Termination (auto renew, special circumstances, etc.) provisions of the Distributor Agreement.
• Non-Circumvention & Confidentiality terms for Distributor Agreement.
• Whether Assignment of Distributor Agreement is allowed and under what circumstances.
• Post-Termination Rights, remedies, etc. to be included in Distributor Agreement.
• Dispute Resolution process for disputes arising under Distributor Agreement.
• Non-compete provisions required by either party to the Distributor Agreement.
• Finders Fee arrangement; Get paid for leads; Limit scope of payment to others for leads.

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Distribution Agreement

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A Distribution Agreement, also sometimes called a Distributor Agreement, is a document between two parties, a Supplier and a Distributor. The Supplier can be an individual or business and is the party that "supplies," or sells, the goods to the Distributor. The Distributor can also be an individual or a business and is the party that "distributes," or re-sells (through retail or through other distributors) the goods that the Supplier provides.

Within these agreements, the Supplier and the Distributor outline their expectations for the sale and distribution of the goods, as well as the general behavior and bounds of the relationship between them.

In a Distribution Agreement, the most important details of the parties' relationship will be entered: things such as a description of the goods being sold , how and when the Distributor is expected to pay, whether the contract is exclusive or not, and what penalties for early termination are. A good Distribution Agreement will also have both parties covered in case anything goes wrong: things such as dispute resolution and governing law should be included.

How to use this document

This document can be used when a Supplier and Distributor are getting ready to enter into a new contract for the distribution of goods.

In this document, the form filler will be able to enter pertinent identifying details , such as whether the parties are individuals or businesses, and their respective addresses and contact information. The form filler will also input the most important characteristics of the agreement between the parties, like duration for the contract, dispute resolution and governing law, and of course, any pertinent details about the actual distribution relationship.

When this agreement is filled out, it should be printed, signed by both parties, and a copy should be kept with each .

Applicable law

Distribution Agreements in the United States are subject to both Federal laws and specific state laws, which cover general contract principles like formation and mutual understanding. Federal laws may restrict what items may be underlying the contract (for example, no one may not contract to sell anything illegal), but individual state laws may govern the interpretation of the contract in case of a dispute.

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Distribution Agreement: Definition, Key Terms, How It Works

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ContractsCounsel has assisted 73 clients with distribution agreements and maintains a network of 86 business lawyers available daily. These lawyers collectively have 13 reviews to help you choose the best lawyer for your needs. Customers rate lawyers for distribution agreement matters 5.0.

What is a Distribution Agreement?

Distribution agreements are contracts between a distributor and manufacturer. They are also sometimes called wholesale distribution agreements, though not all distribution agreements are wholesale in nature. They often allow the distributor to sell, market, and profit from the sales of a manufacturer’s or wholesaler’s product in bulk. However, it is not a requirement for all distribution agreements. Distribution agreements can also cover distribution of products in smaller quantities or through different channels. A distribution agreement typically uses the terms and conditions that address territories, exclusivity rights, reporting requirements, and more.

If you need a distribution agreement, you should consider the essential parts, how they work, types of distribution agreements, when to use one, and how to get help drafting one.

Parts of a Distribution Agreement

Parts of a distribution agreement vary according to the transaction type. Both parties must determine if they want to enter into an exclusive or non-exclusive deal first. You should also consider the type of distribution strategy including selective and intensive strategies.

Below is a basic distribution agreement checklist to help you get started:

• Names and addresses of both parties
• Sale terms and conditions
• Contract effective dates
• Marketing and intellectual property rights
• Defects and returns provisions
• Severance terms
• Returned goods credits and costs
• Exclusivity from competing products
• Ownership of product provisions

There may be other parts of a distribution agreement to include in your contract that isn’t listed here. Business lawyers are able to understand your objectives and translate them into a legally binding and enforceable distribution agreement.

See Distribution Agreement Pricing by State

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• District of Columbia
• Massachusetts
• Mississippi
• New Hampshire
• North Carolina
• North Dakota
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• Rhode Island
• South Carolina
• South Dakota
• West Virginia

How Distribution Agreements Work

The distributor directly sells products to retailers and consumers on behalf of the manufacturer. Instead of the manufacturer paying for the cost of sales, this responsibility falls on the shoulders of a distributor. Profitability from already recognizable and developed products and services is what the distributor is after from the transaction.

The following steps outline how finding and negotiating a distribution agreement works:

• Step 1. Set an appointment with the manufacturer
• Step 2. Negotiate the distribution terms
• Step 3. Review specifics, such as promotional literature
• Step 3. Hire a business lawyer to help you draft the terms
• Step 4. Sign or renegotiate the contract
• Step 5. Begin executing the agreement as contained within provisions

You should also decide which type of distribution agreement you want your company to use. The decision you make will affect critical marketing and legal aspects, which means the decision should be made carefully. Business attorneys are licensed to offer legal advice at every crucial point in the negotiation and contract drafting process. While it is advisable to seek legal advice when drafting a distribution agreement, it is not the only option available. You can also utilize templates or online resources to create a distribution agreement.

Here is another article about how distribution agreements work.

Types of Distribution Agreements

The type of distribution agreement to select depends upon the type of transaction in which you are engaging. It’s vital to choose the proper agreement so that it can perform its contractual purpose of protecting both party’s rights.

There are four distribution agreement types including:

• Type 1. Exclusive distribution agreements: An exclusive distribution agreement is a contract between a manufacturer/supplier and a distributor, in which the distributor is granted the exclusive right to distribute the products within a specific geographic area or market segment. During the term of the agreement, the manufacturer agrees not to appoint any other distributor or sell the products directly in that designated area or to that segment.
• Type 2. Wholesale distribution agreements: A wholesale distribution agreement is a contract between a manufacturer/supplier and a distributor, where the distributor is authorized to purchase products at wholesale prices to resell to retailers or end consumers. This agreement typically covers terms like product pricing, order quantities, delivery, payment terms, etc.
• Type 3. Distribution agreements for commissions: A distribution agreement for commissions refers to a contract between a supplier/ manufacturer and a distributor, where the distributor is compensated based on commissions from sales. Rather than purchasing the products at a wholesale price and then reselling them, the distributor acts more like an agent, earning a commission for each sale made or achieving certain sales metrics.
• Type 4. Developer distribution agreements: A developer distribution agreement refers to a contract between a software developer and a platform provider or distributor. The agreement governs the distribution of the developer's software or application on that platform. Examples of this are app stores like Google's Play Store, Apple's App Store, and others.

Let’s look closer at each type of distribution agreement below:

Exclusive Distribution Agreement

Exclusive distribution agreements are distribution rights granted between a distributor and supplier company. Both parties agree that the distributor will give exclusivity rights to the supplier to sell certain products or services instead of non-exclusive rights. This strategy creates competitive barriers to participation.

Provisions to consider when drafting distribution agreements include:

• Provision 1. Minimum purchase requirements
• Provision 2. Purchase order cancellations
• Provision 3. Defined geographic locations
• Provision 4. Handling purchase orders and deliveries
• Provision 5. Representations of warranties and guarantees
• Provision 6. Dispute resolution requirements
• Provision 7. Force majeure clauses

Wholesale Distribution Agreement

Wholesale distribution agreements are between a distributor and manufacturer. They define the terms and conditions surrounding distribution within a specific territory. The distributor must sell goods and services as outlined within the wholesale distribution agreement.

Provisions to include in a wholesale distribution agreement include:

• Provision 1. Applicable geographic territory
• Provision 2. Information about the products to be sold
• Provision 3. Prices at which the distributor must sell the products
• Provision 4. Minimum number of sales and purchases
• Provision 5. Non-competition agreements
• Provision 6. Payable royalties and commissions
• Provision 7. How to terminate the agreement
• Provision 8. Responsibilities of handling specific costs and fees

Distribution Agreement for Commissions

Distribution agreements for commissions define a distributor’s compensation from meeting or exceeding manufacturer sales goals. Commissions will vary according to the particulars and value of products sold. These types of agreements provide an excellent way to encourage growth and sales while rewarding channel partners commensurately for their efforts.

Provisions contained with commission distribution agreements include:

• Provision 1. Sales goals that trigger commissions
• Provision 2. Details on commission tiers
• Provision 3. How to facilitate payouts
• Provision 4. Percentage of commissions
• Provision 5. Agreement termination requirements
• Provision 6. Handling disputes and disagreements
• Provision 7. Guarantees and warranties

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Developer Distribution Agreement

Developer distribution agreements let distributors know how software and application developers want them to distribute the product. They also define the overall relationship between the distributor and developer. It’s essential to draft the formal agreement the first time around to avoid the chance of facing a future dispute.

Examples of developer distributors include:

• Example 1. Google Play Store
• Example 2. Apple Store
• Example 3. Microsoft Store
• Example 4. Oculus Store
• Example 5. Channel Partners

Ensure that you consider the terms and considerations of a developer distribution agreement carefully since they can affect your company’s performance and future. Here’s a page containing an example of a distribution agreement.

Who Needs a Distribution Agreement?

Anyone engaging in the distribution of another company’s product or services usually needs a distribution agreement. While it is generally recommended to have a distribution agreement in place, it is not always a legal requirement. The need for a distribution agreement depends on various factors, including the nature of the products or services, the relationship between the parties, and applicable laws and regulations. Businesses must use distribution agreements to facilitate clear guidelines among the parties while providing a legal record of the formalized agreement.

The following business types may need distribution agreements:

• Type 1. Wholesalers
• Type 2. Manufacturers
• Type 3. Retailers
• Type 4. Software companies
• Type 5. Beauty products
• Type 6. Clothing and accessories
• Type 7. Electronics
• Type 8. Brands

Ultimately, you can determine if you need a distribution agreement by speaking with lawyers directly. They can also help you establish whether you should have other contracts in place.

Here’s the website for the National Association of Wholesale Distributors for more information.

Drafting or Reviewing Distribution Agreements

Drafting or reviewing distribution agreements is another aspect of the contract writing process. From some parties, it is challenging to determine if the proposed contract is fair, whether you are the author or signer. The most practical way to overcome any doubt is by hiring contract lawyers to help you through the process.

Contract lawyers can help with the following:

• Negotiation of the terms and conditions
• Providing legal advice and professional insight
• Sending emails and letters to both parties
• Acting as a communication hub for all parties
• Explaining the legal terms of the contract
• Drafting and revising the agreement
• Settling disputes between you and your channel partners
• Adding amendments and restatements to your contract
• Representing your contract agreement in arbitration or court if a dispute arises

A distribution agreement is only as good as the language contained within it. If your agreement is unenforceable or illegal in some capacity, these legal mistakes can result in unintended consequences. Instead of leaving your business deal to chance, hire contract lawyers to ensure that your and your company’s rights are protected throughout the process.

ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.

Need help with a Distribution Agreement?

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Rhea de Aenlle is a business-savvy attorney with extensive experience in Privacy & Data Security (CIPP/US, CIPP/E), GDPR, CCPA, HIPAA, FERPA, Intellectual Property, and Commercial Contracts. She has over 25 years of legal experience as an in-house counsel, AM Law 100 firm associate, and a solo practice attorney. Rhea works with start-up and midsize technology companies.

I am a solo-practitioner with a practice mostly consisting of serving as a fractional general counsel to growth stage companies. With a practical business background, I aim to bring real-world, economically driven solutions to my client's legal problems and pride myself on efficient yet effective work.

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Licensed in MI since 2010. Practiced SSDI appeals and auto negligence for over a decade until 12/2022 when I left largest personal injury firm In MI to open my own estate planning firm. Looking for part-time contract/remote work to supplement income as I build my own practice.

Seasoned corporate, business and real estate attorney with 30 years experience managing private practice groups and in-house legal functions for publicly traded, privately held, and family companies.

I am an experienced family law attorney licensed in California and Florida with over 13 years of experience.

I have worked for over 20 years in the areas of family law, business formation, contracts and real estate law. In the area of family law, I represent clients in all areas of family law including child custody, child support, spousal support and marital property division as well as preparing prenuptial and separation agreements. I am experienced in real estate law, including commercial and residential leases, preparing various types of real estate related contracts. I am also experienced in business formation among other business law matters. I currently work in the area of grant management with the Small Business Administration.

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Distribution Agreement

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Distribution Agreement: Key Terms To Include And Considerations

In the world of business, expanding your product reach efficiently is key to sustained growth. A distribution agreement is a powerful tool that defines the rules of engagement between suppliers and distributors. These agreements can not only streamline your distribution process but also shield your business from potential pitfalls.

On this page, we’ll delve into exactly what distribution agreements are, discuss their key terms and uncover some of our tips to take on board when you’re determining whether distribution agreements are right for you or not.

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What is a distribution agreement?

A distribution agreement serves as a crucial document outlining the terms between a product manufacturer, wholesaler, or supplier, referred to as the supplier, and a local reseller or distributor. This agreement is designed to facilitate a smooth relationship between the parties involved in bringing products to market.

Businesses often engage distributors to leverage their local connections and customer networks, aiming to expand their sales reach. For others, choosing a distributor is simply the most efficient way to deliver products to customers.

Drafting a legally sound distribution agreement is essential to avoid costly disputes and misunderstandings between suppliers and distributors. Since each business operates in unique markets with different products and requirements, relying solely on template documents rarely offers sufficient legal protection.

What are the key terms in a distribution agreement?

The key terms in a distribution agreement govern the relationship between the supplier and distributor. Here’s an overview of the key terms in a distribution agreement:

Territorial Scope and Exclusivity

One critical aspect to consider in every Distribution Agreement is the territorial scope assigned to the distributor and whether exclusivity applies.

The agreement typically addresses whether the distributor holds exclusive rights within a specific country, state, or region. When granted exclusive distribution rights in a designated territory, the distributor gains a unique advantage. This exclusivity allows them to focus on understanding the market, efficiently manage orders, and operate without competition from other distributors in that region.

The appeal of exclusivity lies in the distributor’s ability to fully exploit the market, secure in the knowledge that no other entity can conduct similar activities in the specified area. This arrangement serves as a powerful incentive for the distributor to maximize their efforts and establish a strong presence in the market.

On the other hand, a non-exclusive arrangement permits multiple distributors to operate within the same area concurrently. While this fosters cooperation among distributors, it introduces the potential for competition within the shared territory.

Balancing the advantages and disadvantages of exclusive and non-exclusive arrangements is crucial, as it directly influences the dynamics of sales and market penetration.

Duration and Termination

It’s essential to clearly define the timeframe for which a distribution agreement is intended to be effective.

The agreement should explicitly state the initial period during which the distributor will be engaged. In some cases, a supplier might opt for an initial trial period, during which the distributor’s performance is evaluated against predefined sales targets or Key Performance Indicators (KPIs). If these criteria are met, both parties may mutually agree to extend the duration of the agreement.

Alternatively, the agreement may establish an ongoing arrangement from the outset. In such cases, there should be clarity regarding the conditions under which the agreement can be terminated by either party. Common termination grounds include situations where a party becomes insolvent or bankrupt or if there is a persistent breach of the agreement by one of the parties.

Having these terms in writing not only provides a clear roadmap for the duration of the partnership but also ensures that both the supplier and the distributor have a solid understanding of the circumstances under which the agreement can be terminated. This clarity helps to mitigate potential disputes and fosters a more transparent and stable business relationship.

Delegation of Roles and Responsibilities

In a distribution agreement, both the Supplier and Distributor bear specific duties.

The supplier typically commits to:

• Ensuring timely product delivery to the distributor
• Providing necessary training and ongoing support
• Safeguarding intellectual property and addressing infringements
• Establishing procedures and solutions for handling defective products

Conversely, the Distributor’s responsibilities include:

• Cultivating positive customer relationships, serving as the primary contact for complaints
• Managing product storage and delivery to customers
• Adhering to the supplier’s packaging requirements
• Promptly reporting recall notices to the supplier

Marketing and promotional activities may be a shared responsibility, and the agreement should explicitly outline the intended approach. This includes clarifying the extent of control the supplier wishes to maintain over the brand and determining the party best suited to engage with customers.

A comprehensive distribution agreement ensures a clear understanding of each party’s role, fostering a collaborative and effective business relationship.

Performance Targets or KPI’s

Clearly defined key performance indicators (KPIs) or targets are crucial for a transparent and successful distributor relationship.

These targets may involve:

• Establishing a minimum monthly product purchase from the supplier
• Defining a minimum annual revenue generation goal for the distributor
• Setting a minimum number of units the distributor should sell annually
• Incorporating any other feasible target that incentivises the distributor to maintain a baseline standard of performance

It is imperative that these targets are both motivating and attainable. If the distributor falls short of the agreed-upon targets, avenues for resolution may include a performance review, reconsideration of the targets, or, in more severe cases, the possibility of terminating the contract or revoking exclusivity granted to the distributor.

Clearly outlining and mutually understanding these performance expectations from the outset ensures a fair and productive collaboration between both parties.

Orders and Payment

Often the  supplier  will specify how they want orders to be made,  what the payment terms will be  and whether there will be a minimum order amount.  

Usually the  ordering  procedure will require the   distributor to submit a purchase order. The supplier  will need to decide if it will accept order cancellations and  the procedures in this event.  

The parties will  also  need to determine who will pay the costs associated with the delivery of the products and the insurance  over the products.  

If the distributor fails to pay the supplier for whatever reason, the supplier should also  ensure the Agreement provides it with options and remedies to recover outstanding payments.  

For both parties, delivery is a risk because it relies on the provision of services by a third party. Therefore, the parties need to decide who will be responsible for booking the delivery, who will pay the costs of delivery (including any taxes ,  freight handling charges  and insurance ) ,  and  whether any specific procedures will apply to the delivery process.  

Passing of title and risk

The parties should consider  when title to the goods will pass and who will be liable for the risk to the goods. For instance, who will be liable of the product is damaged during delivery? Who will be liable if the product causes injury to a customer?   

Usually title will pass to the distributor once payment for the goods has been made and risk will pass on delivery.  

Intellectual Property

The  goods which are being distributed will bear the intellectual property of the  developer of the product.  So , i t’s  usually the  supplier’s   responsibility to ensure  it enforces its  rights  to the copyright, patents, trade marks, designs and any other intellectual property which it owns  over the products.  

The Agreement should also stipulate  who will own any  new  IP developed by the distributor.  

To learn more about protecting your Intellectual Property, click  here .

Liability & Indemnities

The Agreement should clearly set out  who is liable  in what circumstance .   

For  example ,  if the distributor is negligent or  commits an act which results in a claim being brought against the  supplier , it ’ s likely the  supplier  would attempt to pass this liability on to the  distributor.  

Similarly, the  supplier  of the products should limit their liability  to the extent permissible by  L aw in the event  the  distributor  suffers  any  loss, damage, injury,  delay o r  inconvenience  from matters such as  non-delivery of the products.  

Key considerations when deciding to use a distribution agreement

When drafting a distribution agreements for your business, it’s crucial to ensure that you’re not inadvertently exposing yourself to legal liabilities under other frameworks. Here are essential tips to help you navigate potential pitfalls:

Franchise Evaluation

• Ensure your business model isn’t inadvertently functioning as a franchise.
• Without the necessary documents and legal compliance systems, you may face fines from the ACCC and potential court proceedings.
• Verify if your model involves granting business rights, adherence to a marketing plan, material association with the trade mark, and payments by the franchisee.

In Workplace Safety Australia v Simple OHS Solutions Pty Ltd [2015] NSWCA 84 , these criteria were pivotal in legal proceedings.

Avoiding Agency Models

• Ensure your business model doesn’t inadvertently operate as an agency.
• In an agency model, the seller may be held liable for the actions and negligence of its agents.
• In an agency model, the agent is typically paid a commission for finding buyers and making sales.

By considering these aspects, you can safeguard your business from potential legal complications, ensuring that your distribution agreement aligns with your actual business structure. Regular evaluations and legal awareness play a key role in preventing unintended legal consequences.

Key Takeaways

As businesses continue their journey in the Australian marketplace, a nuanced understanding of distribution agreements is not just advisable but paramount. At Progressive Legal, we offer expert guidance tailored to the intricacies of Australian business law.

For businesses looking to fortify their market presence, Progressive Legal is your partner in unlocking success through comprehensive distribution agreements drafted with expertise by our commercial lawyers . Our distribution agreement packages start from $1,400 + GST. Get in touch with us today via phone on 1800 820 083 or request our expert advice below.

Contact us by giving us a call on 1800 820 083 or request our advice today.  

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Free Distribution Agreement Template

A distribution agreement outlines the terms under which a manufacturer grants a distributor the right to distribute, resell, and promote their products in a defined territory. This guide outlines best practices in creating a distribution agreement, and provides a template to kickstart your efforts.

What is a Distribution Agreement?

A distribution agreement is a legally binding contract between a manufacturer or supplier (the licensor) and a distributor (the licensee) that authorizes the distributor to purchase, stock, advertise, and resell the manufacturer’s products in a specific geographical region or territory. 

The agreement grants the distributor access to the supplier’s products at wholesale prices for resale purposes but does not transfer ownership of the products to the distributor.

The key parties in a distribution agreement are the licensor/supplier who manufactures or supplies the products and the licensee/distributor who purchases, stores, markets, and resells the products to customers at a markup. The agreement outlines the product details, pricing, minimum order quantities, sales territory, marketing responsibilities, quality controls, inventory levels, payment methods, confidentiality, and other terms that govern the business relationship.

Distribution agreements provide mutual benefits to both parties. The manufacturer gains new sales channels and expanded market reach without significant overhead costs. The distributor obtains products to sell for a profit margin within an assigned territory.

When to Use a Distribution Agreement Template

A distribution agreement template is useful when a manufacturer wants to authorize a third party to market, sell, and distribute their products in a defined region without taking on the operational costs and responsibilities of managing sales channels themselves.

It’s an efficient way to expand into new territories and tap into an established distributor’s customer base without additional overhead. The formal agreement outlines all expectations upfront regarding product prices, order processes, promotional activities, territory boundaries, sales metrics reporting, and other logistics.

Having a template in place makes it simple to onboard new distributors as you grow and want to enter additional markets. It also ensures consistency across all partnerships regarding terms, rights, quality controls, etc. See the complete distribution agreement template below.

What is the Difference Between a Distribution Agreement and a Purchase Agreement?

The critical difference between a distribution agreement and a purchase agreement is that a distribution agreement authorizes a distributor to market and resell a supplier’s products, while a purchase agreement is for the one-time purchase of products or goods.

Under a distribution agreement, the distributor purchases inventory from the supplier at wholesale prices for resale purposes, but the supplier retains ownership of the products. The distributor acts as a channel partner to sell and promote the supplier’s offerings in an assigned territory.

Conversely, a purchase agreement is for the outright purchase of goods to become the buyer’s property. It transfers product ownership and is typically a one-off transaction, not an ongoing business relationship.

Understanding these differences is critical when establishing reseller partnerships to correctly structure expectations, rights, inventory, and compensation. Mistaking one type of agreement for the other can cause significant legal and financial issues down the road.

What to Include in a Distribution Agreement

A comprehensive distribution agreement clearly defines all critical elements of the business relationship so both parties understand their rights and obligations. Key components to include are:

Party Details

Identify the official legal names and addresses of the supplier/licensor and distributor/licensee. Define if either party has affiliates or parent companies bound by the agreement terms. Outlining detailed contact information ensures proper legal notices are delivered efficiently. Specify signatory titles like owners, presidents, etc.

Product Description

Provide specifics on the supplier’s products, product lines, brands, models, etc., that the distributor can purchase and resell. Detailed descriptions eliminate confusion over which offerings the agreement covers now and in the future as new products are added. Include technical specs, features, sizes, capacities, etc. Images or attachments help.

Supply Terms

Outline where, how, and when the distributor will provide inventory, such as direct shipping, 3PL delivery, will-call order pickup, just-in-time inventory, etc. Also, thoughtfully define clear rules regarding stocking adequate products to meet demand without excessive warehousing of goods, managing seasonal volume spikes or inventory shortages potentially causing backorder dilemmas, and contractually addressing supply chain disruptions regarding logistical or raw material issues. Articulating fulfillment processes upfront is essential for coordination.

Thoroughly define the geographical areas or market segments where the distributor maintains exclusive or non-exclusive promotional and sales distribution rights regarding the supplier’s covered products under this agreement. Carefully detailing this territorial scope ensures no conflicts occur with other authorized reseller partners already operating in the assigned region unless intentionally overlapping as indicated by explicitly defined terms. 

Additionally, outline if broader ecommerce or internet sales also get permitted under this contract along with applicable usage policies around advertising channels, customer geo-mappings, web restrictions preventing cannibalizing physical resellers, etc.

Orders & Terms of Sale

Specify how the distributor will officially place routine product orders with the supplier, such as through an online B2B customer portal if available, emailed POs containing necessary data for fulfillment teams, etc. Explicitly detail expected timeframes regarding order acceptance, requested revisions if data is unclear, manufacturing/processing lead times if customization is involved, standard lead times for inventory items in stock, approved freight methods, and programs based on geographic cutoffs. 

It’s also important to outline agreed-upon shipping terms if using Incoterms, including noting which party bears responsibility for insurance and formal transfer of ownership/title triggers, allowing customer acceptance while in transit.

Pricing & Payment Terms

Carefully provide the negotiated formula, bulk discount schedules, or framework for determining the exact wholesale pricing the distribution partner will prepay when positioning orders for the supplier’s covered product inventory being purchased for resale under this agreement. Pricing guides may involve formal price lists in exhibits that outline standard baseline retail costs to which preset trade discounts are applied at tiered graduated levels based on total order value thresholds achieved cumulatively over specified rolling periods. 

Also, clearly outline formally approved payment methods and strict timing of when advance payments must be fully render from the distributor to the vendor to officially lock in supplied goods for fulfillment along with standard payment terms if credit gets extended, such as net 30 days after invoices get generated upon outgoing shipments.

Quality Control & Compliance

Address mandatory product quality control standards the distribution partner must uphold and maintain regarding climate-controlled storage conditions while warehousing inventory, handling procedures used when processing orders for maximizing preservation, inspection processes before final outbound transportation, ongoing monitoring criteria regarding aged packaged stock to ensure first-expiring first-out practices, etc. 

Accordingly, include periodic random inspection rights the supplier reserves along with requirements around satisfactorily addressing any inventory found damaged or rendered defective for properly upholding brand standards customers anticipate associating with the manufacturer.

Party Rights & Responsibilities

Thoroughly characterize any permitted and prohibited operational activities, either contractually imposed or legally regulated, on both parties. Address aspects such as approved advertising procedures reviewed to safeguard branding guidelines compliance and guard against deceptive market practices. Outline protocols around authorized trade promotions – whether targeting end consumers to avoid channel conflicts or addressing reseller partnerships in assigned territories. 

Detail usage terms and oversight governing the exploitation of trademarks, patents, and other protected intellectual property. List requirements to host educational training sessions and expectations around trade show participation. Explain proper sales reporting procedures needed for accurately tracking performance goals across regions.

Confidentiality

Include non-disclosure provisions regarding sensitive information like pricing, customer data, intellectual property, and other trade secrets. Such provision ensures critical supplier and distributor information remains protected. Outline what confidential data can be collected, stored, accessed, processed, and shared. Define security protocols required.

Define the distribution agreement terms, such as one year, three years, etc. Outline conditions for renewal, including new negotiations. This ensures expectations are reset periodically as business needs evolve. Include timing guidelines for essential written notice like non-renewal intent, breach of contract, etc.

Address liability caps for damages, uninsured losses, intellectual property infringement, injuries, etc., caused by either party. Including reasonable limitations prevents excessive unforeseen risks. Define what constitutes a default and material breach of the agreement. Outline dispute resolution approaches like arbitration clauses (that can be aided by the American Arbitration Association).

Modification & Termination

Outline how each party can request changes to the agreement terms and approvals required with prior written consent. Allow reasonable flexibility to modify non-essential clauses over time while protecting core components. Outline specific conditions that enable early termination with sufficient notice periods. To transition smoothly, define termination implications like inventory buybacks, financial obligations, customer communication, etc..

General Agreement Terms

Include standard legal clauses like entire agreement, severability, waiver, force majeure, assignability, third-party rights, notices, and governing law stipulations. This is also the section in which you define if the other party will be the exclusive distributor. These protect both parties while allowing flexibility to address unforeseen situations fairly. Define rules of interpretation and hierarchy related to conflicting agreement terms.

Once final negotiations are complete, the distribution agreement template must contain signature fields for authorized representatives from the supplier and distributor. Using e-signatures through a solution like Signaturely to sign and manage agreements digitally makes the process fast, efficient, and legally binding. Signaturely also enables sending automated reminders when it’s time to renew existing contracts.

Adding signatures finalizes the formal distribution partnership, allowing the exciting work of bringing products to market under the outlined cooperative terms to begin! With a comprehensive contract, both parties can focus on collaborating to drive brand growth rather than haggling over legal uncertainty.

Download our free example Distribution Agreement Template

We’ve got your back here at Signaturely, and we’re ready to help make stress-free contracts a reality. Forget the confusing paperwork and overwhelming legal jargon – get easy, breezy contract  templates  in minutes with our free template.

How to Create and Manage Distribution Agreement Templates With Signaturely

Signaturely provides the ideal solution for digitally creating, signing, and managing distribution agreements to establish and maintain reseller partnerships.

With Signaturely, suppliers can set up branded templates tailored to your business needs that outline all necessary legal terms, conditions, and details for your distribution contracts. Create templates for territories, products, or agreement types that can be reused and customized.

Once final negotiations are complete, Signaturely enables both parties to e-sign the agreements instantly online from anywhere, on any device—no more printing, scanning, faxing, mailing, or overnighting signature pages. The fully executed contract is automatically stored in secure Signaturely cloud storage for easy access with built-in permissions controls for sharing.

When the existing entire agreement is set to expire, Signaturely sends automatic reminders to prompt renewals or terminations. It also allows you to create schedules for any required business or compliance reviews, and maintain complete visibility into what agreements are active, expired, or coming due for each partner.

With streamlined workflows, standards, and automation, Signaturely reduces the friction, risks, and overhead costs of distribution partnerships. Intuitive features like search, tagging, activity audit trails, and reporting provide operational efficiency and insights.

Say goodbye to distribution agreement headaches! Adopt Signaturely for a complete system to establish and scale channel relationships smoothly as your business grows.

FAQs About Distribution Agreements

Distribution agreements are complex legal contracts that establish formal business partnerships. Here are answers to common questions:

How do you set up a distribution agreement?

First, identify a reputable distributor that is well-matched to sell your products. Outline mutual goals, capabilities, and benefits during initial discussions before drafting the agreement terms. Get the necessary approvals internally and externally before executing the final contract.

What are the essentials of a distribution agreement?

At a minimum, include authorized territory, product details, order/delivery procedures, inventory requirements, payment terms, sales/marketing obligations, confidentiality, liability caps, agreement duration, and signatures. Customize to your specific situation.

How do you structure a distribution deal?

In return, offer compelling sales incentives like discounts, marketing assets, or exclusivity, asking for sales minimums, customer service standards, and consistent brand representation. Build periodic reviews to reset expectations.

How do you negotiate a distribution agreement?

Compromise on territories, pricing thresholds, quotas, or support responsibilities to find an arrangement that provides value for both parties based on core capabilities. Ask “what-if” to explore contingencies.

What is another name for a distribution agreement?

Reseller agreement, channel partner agreement, or authorized distributor agreement. The legal name depends on the specific business relationship structure.

What You Need to Remember About Distribution Agreement Templates

Defining the partnership terms, rights, and responsibilities upfront is essential to avoid misunderstandings that undermine success. Take time to negotiate patiently, consult lawyers with questions, and finalize professional contracts. Using Signaturely’s robust distribution agreement template helps you get through to the finish line in your legal process, while capturing the nuances that go into complex distribution operations.

Distributor Agreement

Distributor contractual agreement.

• This Distributor Agreement (hereinafter referred to as the “Agreement”) is entered into on ________________ (the “Effective Date”), by and between ________________________, having an address of ________________ (hereinafter referred to as the “Distributor”), and ________________ with an address of ________________ (hereinafter referred to as the “Supplier”) (collectively referred to as the “Parties”).
• The Supplier hereby appoints the Distributor as its exclusive/non-exclusive distributor for the distribution of the following products/services: [describe the specific products/services in detail]. The Distributor shall have the exclusive/non-exclusive right to distribute the specified products/services within the territory of [insert geographical limitations, if any]. The Parties agree that any modifications or expansions to the scope of distribution must be mutually agreed upon in writing.

EXCLUSIVITY

• The Parties agree that [Distributor’s Name] shall have [exclusive/non-exclusive] rights to distribute the Supplier’s products/services within the designated territory of [insert territory] for the duration of this Agreement. [Exclusive/Non-exclusive] rights mean that the Supplier shall not engage in the distribution of the specified products/services directly or through any other distributor within the designated territory. The Parties acknowledge that any breach of this exclusivity clause shall constitute a material breach of the Agreement, subject to termination as outlined in the termination clause.

TERM AND TERMINATION

• This Agreement shall commence on the Effective Date and shall remain in effect for an initial term of [insert duration], unless terminated earlier as provided herein. Upon expiration of the initial term, this Agreement may be renewed for successive [insert duration] terms upon mutual written agreement of the Parties. Either Party may terminate this Agreement by providing [insert notice period] prior written notice to the other Party in the event of a material breach of any provision of this Agreement, subject to a cure period of [insert cure period]. Additionally, either Party may terminate this Agreement immediately in the event of insolvency, bankruptcy, or dissolution of the other Party. Upon termination of this Agreement, the Distributor shall cease all distribution activities and promptly return any remaining inventory to the Supplier. Any outstanding payments or obligations shall survive the termination of this Agreement.

PRICING AND PAYMENT

• Payment for the products/services shall be made by the Distributor to the Supplier within 30 days of the date of invoice, in the currency and via the method specified by the Supplier. The Supplier shall provide the Distributor with a price list for the products/services, subject to change with mutual agreement. Any discounts or commissions payable to the Distributor shall be outlined separately. The Distributor is responsible for any applicable taxes, duties, or charges. The Supplier reserves the right to audit the Distributor’s financial records to ensure compliance with payment terms.

INTELLECTUAL PROPERTY

• All intellectual property rights, including but not limited to patents, trademarks, copyrights, trade secrets, and any other proprietary information related to the products/services, shall remain the exclusive property of the Supplier. The Distributor acknowledges that it has no rights or claims to the Supplier’s intellectual property except as expressly granted in this Agreement. The Distributor agrees to use the Supplier’s intellectual property solely for the purpose of promoting and distributing the products/services in accordance with this Agreement and shall not reproduce, modify, or distribute the Supplier’s intellectual property without prior written consent. Any use of the Supplier’s intellectual property must be in compliance with applicable laws and regulations. Upon termination of this Agreement, the Distributor shall cease all use of the Supplier’s intellectual property and return any materials containing such intellectual property to the Supplier.

MARKETING AND PROMOTION

• The Distributor agrees to actively promote and market the Supplier’s products/services within the designated territory, using reasonable efforts to maximize sales and brand awareness. The Distributor shall develop and implement marketing strategies, campaigns, and promotional activities in accordance with the Supplier’s branding guidelines and standards. The Parties may collaborate on joint marketing initiatives and promotional events as mutually agreed upon. The Distributor shall bear the costs associated with its marketing and promotional activities unless otherwise agreed upon in writing by the Parties. Both Parties shall maintain open communication and provide mutual support to ensure the success of marketing and promotional efforts.

PRODUCT RETURNS AND WARRANTY CLAUSE:

• The Supplier agrees to accept returns of defective or non-conforming products in accordance with its standard return policy, which shall be provided to the Distributor upon request. The Distributor shall promptly notify the Supplier of any product defects or non-conformities and provide reasonable evidence to support the return request. Upon approval by the Supplier, the Distributor shall return the defective or non-conforming products to the Supplier at the Distributor’s expense. The Supplier shall, at its discretion, either replace the defective products or issue a credit to the Distributor for the returned products. The Supplier warrants that all products provided to the Distributor shall conform to the specifications and quality standards agreed upon by the Parties. This warranty shall remain in effect for a period of [insert warranty period] from the date of delivery. The Distributor shall pass on the Supplier’s warranty to its customers and shall not make any additional warranties or representations on behalf of the Supplier without prior written authorization.

CONFIDENTIALITY AND NON-DISCLOSURE

• During the term of this Agreement and thereafter, both Parties agree to maintain the confidentiality of all proprietary information disclosed by one Party to the other (“Confidential Information”). Confidential Information includes, but is not limited to, trade secrets, business plans, customer lists, financial information, pricing structures, and any other information marked as confidential or which should reasonably be understood to be confidential. Both Parties agree not to disclose, reproduce, or use Confidential Information for any purpose other than the performance of their obligations under this Agreement without the prior written consent of the disclosing Party. This obligation of confidentiality shall not apply to information that (a) is or becomes publicly available through no fault of the receiving Party, (b) is independently developed by the receiving Party without reference to the disclosing Party’s Confidential Information, or (c) is rightfully obtained by the receiving Party from a third party without breach of any confidentiality obligation. Upon termination of this Agreement, both Parties shall promptly return or destroy all Confidential Information received from the other Party, including any copies thereof, and provide written certification of such action upon request. This confidentiality obligation shall survive the termination of this Agreement.

FORCE MAJEURE

• Party shall be liable for any failure or delay in performing their obligations under this Agreement due to circumstances beyond their reasonable control, including but not limited to acts of God, war, terrorism, government actions, natural disasters, or epidemics. If a Force Majeure Event occurs, the affected Party shall promptly notify the other Party and make reasonable efforts to mitigate the impact. The affected Party’s obligations shall be suspended during the Force Majeure Event, and the time for performance shall be extended accordingly. If the Force Majeure Event continues for [insert duration], either Party may terminate this Agreement upon written notice to the other Party.

RENEWAL OF AGREEMENT

• The Parties agree that this Agreement, prior to its termination, is subject to renewal provided that both parties submit a signed addendum agreeing to the renewal.
• The Parties agree that any amendments made to this Agreement must be in writing where they must be signed by both Parties to this Agreement.
• As such, any amendments made by the Parties will be applied to this Agreement.

SEVERABILITY

• In an event where any provision of this Agreement is found to be void and unenforceable by a court of competent jurisdiction, then the remaining provisions will remain to be enforced in accordance with the Parties’ intention.

DISPUTE RESOLUTION

• Any dispute or difference whatsoever arising out of or in connection with this Agreement shall be submitted to [insert means] (Arbitration/mediation/negotiation) in accordance with, and subject to the laws of [insert applicable law].

GOVERNING LAW

• This Agreement shall be governed by and construed in accordance with the laws of [insert applicable law].

SIGNATURE AND DATE

• The Parties hereby agree to the terms and conditions set forth in this Agreement and such is demonstrated throughout their signatures below:

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Don’t waste any more time trying to craft the perfect distributor agreement. Our distributor agreement template is ready and ready to download in one quick, convenient click—no more complicated documents for you or your clients to fill out.

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Distribution Agreement Template

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Use this free Distribution Agreement Template to govern the marketing and distribution of a product or service.

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Prepared for:  ​ [Client.FirstName] [Client.LastName] ​ ​ [Client.Company]

Created by:  ​ [Sender.FirstName] [Sender.LastName] [Sender.Company] ​

This Distribution Agreement (this “Agreement” or this “Distribution Agreement”) is made and entered into as of [Date] (the “Effective Date”) between [Distributor.Name] (“DISTRIBUTOR”) and [Vendor.Name] (“VENDOR”).WHEREAS, VENDOR has created and licenses the software program known generally as [Program.Name] (together with the Documentation referred to below, the “Software”) and, subject to the terms and conditions of this Agreement, has agreed to authorize DISTRIBUTOR to be an authorized DISTRIBUTOR of the Software.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1. Certain Defined Terms

As used herein, the following terms shall have the following meanings: “Documentation” means those printed or online instructions, manuals, screens and diagrams distributed or otherwise provided by VENDOR that pertain to the Software; “End User” means any licensee or potential licensee of the Software; “End User Agreement” means the standard agreement(s) pursuant to which VENDOR grants to End Users the right and license to use the Software; “Term” has the meaning set forth in Section 3 below.

2. Non-Exclusive Right to Provide and Market Software to End Users

Subject to the terms and conditions of this Agreement, VENDOR grants to the DISTRIBUTOR a non-exclusive right and license during the Term to: (a) market the Software to End Users; (b) purchase Software licenses for distribution to End Users; and (c) distribute Software and licenses thereto to End Users. DISTRIBUTOR may use the names, trademarks, service marks, trade names, product names and logos of VENDOR related to the Software (“VENDOR Trademarks”) for advertising, distribution and promotion of the Software to End Users. The DISTRIBUTOR agrees that it will not modify, alter, conceal, remove or make any other modification to any VENDOR Trademark without VENDOR’s prior approval. VENDOR shall be responsible for causing each End User that becomes authorized to use the Software to enter into an End User Agreement. The DISTRIBUTOR agrees that it will not modify or alter any End User Agreement.

3. Term and Termination

This Agreement shall commence as of the Effective Date and, unless earlier terminated as provided herein, shall continue until the first (1st) anniversary of the Effective Date (the “Initial Term”). This Agreement shall automatically renew for successive one (1) year renewal terms (each, a “Renewal Term”) at the end of the Initial Term or any succeeding Renewal Term, unless (a) either party provides the other with written notice at least sixty (60) days prior to the beginning of any such Renewal Period electing to not renew this Agreement for such Renewal Period or (b) this Agreement is otherwise terminated as provided herein.  The Initial Term and all Renewal Terms are, collectively, the “Term.”

Notwithstanding the foregoing provisions of this Section 3, (a) either party may terminate this Agreement, at any time and for any reason, upon sixty (60) days prior written notice to the other party and (b) if either party (the “breaching party”) breaches this Agreement, the other party may provide written notice thereof to the breaching party and if such breach is not cured within fifteen (15) days after the breaching party’s receipt of such notice, the other party may terminate this Agreement upon written notice to the breaching party.​

Effect of Termination; Remedies Cumulative; Survival.  Upon the effective date of expiration or termination of this Agreement, for any reason, DISTRIBUTOR’s rights pursuant to Section 2 shall terminate. Each right or remedy of a party in this Agreement shall be cumulative and in addition to, and not in lieu of, each other right and remedy of such party hereunder or pursuant to applicable law.  The following provisions of this Agreement shall survive any expiration or termination hereof: Sections 4 and 8 through 15. In addition, any accrued rights to payment and remedies for breach of this Agreement shall survive any expiration or termination hereof and, if so directed by DISTRIBUTOR, VENDOR shall fulfill any Software orders placed hereunder prior to any expiration or termination of this Agreement, even if such fulfillment occurs after such expiration or termination.

4. Prices and Payment

The fees charged by VENDOR to DISTRIBUTOR for the Software’s End User licenses that DISTRIBUTOR may order hereunder are set forth on Exhibit A hereto. The fees identified in this Agreement do not include any sales or use taxes resulting from the ordering of Software by DISTRIBUTOR hereunder. Unless a tax exemption is applicable, VENDOR may invoice DISTRIBUTOR for sales and use taxes arising as a result of DISTRIBUTOR’s ordering of Software hereunder. For all fees and other charges hereunder, VENDOR shall promptly invoice DISTRIBUTOR and invoices are due within Number days after DISTRIBUTOR’s receipt thereof.

5. Ordering and Provision

• The DISTRIBUTOR may order End User Software licenses hereunder by submitting a purchase order to VENDOR. Each purchase order submission shall identify: the number of Software end user licenses to be purchased; the name of the End User for each license; the version of the Software for each license; and the Fulfillment Email Address (as defined below). “Fulfillment Email Address” means, for any order, the email address specified in such order as the place where the Fulfillment Materials are to be sent to DISTRIBUTOR. If no such email address is specified in such order, the Fulfillment Email Address for such order shall be the email address of DISTRIBUTOR from which such order was originated.
• Within two (2) business days of its receipt of such an order, the VENDOR shall fulfill such order by sending the following materials (the “Fulfillment Materials”) to the Fulfillment Email Address for each End User license included in such order: a license key; a serial number; and an Internet web link that enables such End User to access and download the licensed Software and agree to the End User Agreement. VENDOR shall forward an End User’s Fulfillment Materials to such End User.

6. Title; Limitations on Use

The DISTRIBUTOR agrees that, as between the VENDOR and the DISTRIBUTOR, VENDOR shall have sole and exclusive ownership of and all right, title and interest in and to the Software. This Agreement does not provide the DISTRIBUTOR with title or ownership of the Software, but only the right to market and provide the Software as set forth herein. DISTRIBUTOR will not modify or prepare derivative works of the Software.  The DISTRIBUTOR may not reverse assemble or reverse compile the Software or use other means to identify the Software’s source code.

7. Infringement Indemnity

VENDOR shall indemnify, defend and hold DISTRIBUTOR harmless from and against any and all damages, costs, penalties, claims, demands, causes of action and expenses (including, without limitation, the fees and expenses of counsel) arising out of or resulting from the infringement of any patent, copyright, trademark, service mark, trade secret or other intellectual property right of a third party by the Software. DISTRIBUTOR agrees to promptly notify the VENDOR after DISTRIBUTOR becomes aware of any claim giving rise to an indemnification obligation pursuant to this Section; provided that a failure to provide such notice shall not affect DISTRIBUTOR’ right to indemnification pursuant to this Section, except to the extent that the VENDOR is actually prejudiced thereby.

8. Warranties; Limitation of Liability

VENDOR represents and warrants that (i) it has all power and authority, corporate and otherwise, to enter into this Agreement and perform its obligations hereunder, (ii) it has duly authorized, executed and delivered this Agreement and (iii) this Agreement is an enforceable agreement of VENDOR, enforceable against VENDOR in accordance with its terms. VENDOR DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. NEITHER PARTY HERETO SHALL BE LIABLE TO THE OTHER PARTY OR ANY OTHER PERSON OR ENTITY FOR ANY SPECIAL, EXEMPLARY, PUNITIVE, CONSEQUENTIAL OR INCIDENTAL DAMAGES (INCLUDING, WITHOUT LIMITATION, LOST PROFITS), WHETHER CAUSED BY NEGLIGENCE OR OTHERWISE, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

9. Assignment

Either party may assign its rights and obligations hereunder (in whole and not in part) to any person or entity, provided that (a) the assignee agrees to be bound, in writing, by this Agreement, (b) such an assignment shall not relieve the assignor of its obligations hereunder and (c) the assignor provides written notice of the assignment to the other party. This Agreement shall be binding upon the parties hereto and their respective successors and assigns.

10. Confidential Information

“VENDOR Confidential Information” means the Software, “DISTRIBUTOR Confidential Information” means the identity of, and other information regarding, End Users and information about DISTRIBUTOR’S plans, strategies, products and services, “Confidential Information” means the VENDOR Confidential Information and the Distributor Confidential Information, “disclosing party” means a party hereto disclosing its Confidential Information hereunder and “receiving party” means a party hereto which receives Confidential Information of the disclosing party hereunder. Confidential Information may be oral, visual, in writing or electronic. “Confidential Information” of the disclosing party shall not include information which: (i) is or becomes generally available to the public, other than as a result of a disclosure by the receiving party or any of its Representatives (as defined below); (ii) was available to receiving party on a non-confidential basis prior to its disclosure to the receiving party by the disclosing party, provided that the source of such information was not bound by a confidentiality agreement with, or other contractual, legal or fiduciary obligation of confidentiality to, the disclosing party; (iii) is or becomes available to the receiving party on a non-confidential basis from a source other than the disclosing party, provided that such source was not bound by a confidentiality agreement with, or other contractual, legal or fiduciary obligation of confidentiality to, the disclosing party or any of its affiliates; or (iv) is or was independently developed or discovered by the receiving party without use of or reference to the Confidential Information of the disclosing party. The Confidential Information will not be used by the receiving party or any of the receiving party’s employees, officers, directors or contractors (“Representatives”) for any purpose other than the receiving party’s performance of its obligations or exercise of its rights pursuant to this Agreement. The Confidential Information of the disclosing party will not be disclosed or divulged by the receiving party to anyone except: with the disclosing party’s prior written permission; as may be required by law, rule or regulation or by the order or demand of a court or government agency or authority; or as may be permitted pursuant to this Agreement.  Notwithstanding the foregoing, the receiving party may disclose the disclosing party’s Confidential Information to those of the receiving party’s Representatives who need to review such Confidential Information for the purpose of the receiving party’s performance of its obligations or exercise of its rights pursuant to this Agreement, but only after the receiving party has informed them of the confidential nature of such Confidential Information and they have agreed, in writing, to treat such Confidential Information confidentially on terms substantially similar to those of this Agreement. If the receiving party or any of its Representatives shall be requested or required by governmental order, judicial process or similar means to disclose any Confidential Information of the disclosing party, the receiving party agrees to provide prompt written notice to the disclosing party of such request and to cooperate with the disclosing party in seeking to limit such disclosure and in seeking an appropriate protective order and confidential treatment. The receiving party acknowledges that the disclosing party will suffer irreparable injury as a result of the use or disclosure of the disclosing party’s Confidential Information in violation of this Section, for which money damages will be inadequate. Accordingly, in addition to any other remedy available to the disclosing party pursuant to this Agreement or applicable law, the disclosing party shall be entitled to obtain preliminary and permanent injunctive relief with respect to any breach or threatened breach of this Section, without the necessity of proving actual damages. Upon expiration or termination of this Agreement for any reason, the receiving party will return to the disclosing party or destroy all Confidential Information of the disclosing party and all copies thereof (except that DISTRIBUTOR may retain any Confidential Information needed to fulfill orders then pending as contemplated by this Agreement until such orders are fulfilled and any other Confidential Information that DISTRIBUTOR has a right to retain independent of this Agreement) and, upon the written request of the disclosing party, an authorized officer of the receiving party will certify in writing to the disclosing party that the receiving party has complied with this Section. In such event, the receiving party will continue to be bound by this Section.

11. Independent Contractor

The relationship between the parties is that of independent contractors and nothing herein shall be construed to create a partnership, joint venture, or agency relationship between the parties hereto.

12. Entire Agreement; Amendment; Waiver; Severable Provisions; Headings

This Agreement is the entire agreement between the DISTRIBUTOR and VENDOR with respect to its subject matter and supersedes all prior and contemporaneous agreements, negotiations, representations and proposals, written or oral, related to such subject matter. This Agreement may not be amended or otherwise modified except by a writing signed by authorized representatives of all parties that specifically refers hereto. A waiver by any party of its right hereunder shall not be binding unless contained in a writing signed by an authorized representative of the party waiving its rights. The non-enforcement or waiver of any provision on any occasion shall not constitute a waiver of such provision on any other occasions unless expressly so agreed in writing. It is agreed that no usage of trade or other regular practice or method of dealing between or among the parties hereto shall be used to modify, interpret, supplement, or alter in any manner the terms of this Agreement. In the event that any provision of this Agreement is held invalid, illegal, or unenforceable, the remaining provisions shall be enforced to the maximum extent permitted by applicable law. Headings herein are for reference only, and shall not be construed as substantive parts of this Agreement.

13. Governing Law

This Agreement shall be governed by, and construed in accordance with, the laws of the State of Maryland. This Agreement shall be governed by and construed in accordance with the laws of the State of Maryland, without giving effect to its principles or rules of conflicts of laws. The parties hereby agree to opt-out of the Maryland Uniform Computer Information Transactions Act (UCITA).

14. Notices

All notices and other communications required or permitted to be given under this Agreement will be in writing and will be considered effective when deposited in the U.S. mail as registered or certified mail, return receipt requested, postage prepaid, or deposited with a nationally recognized overnight courier service for next day delivery, and in each case addressed to the party at the address of such party on the signature page hereof, unless by such notice a different address will have been designated in writing.

IN WITNESS WHEREOF, the parties have caused the Agreement to be duly executed by their authorized representatives as set forth below.

[Sender.Company]

[Sender.FirstName] [Sender.LastName]

[Client.Company]

[Client.FirstName] [Client.LastName]

Prices and Discount Volume Prices

Subject to Company’s right to increase the price only once per year per the terms and restrictions contained in the Agreement, and Company’s right to decrease the price at any time upon notice, the Products shall be sold by Company to Distributor at the following Prices and Volume Discount Prices. Prices are in  [Currency] .

Distributor will be appropriately credited should Distributor make payment related to an order and later determine that it had achieved a greater discount per the above.

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This assignment and assumption of agreement is between , an individual a(n) (the " Assignor ") and , an individual a(n) (the " Assignee ").

The Assignor and , an individual a(n) (the " Other Party "), entered an agreement dated (the " Agreement "), a copy of which is attached as Exhibit A .

Under section of the Agreement relating to assignments, the Assignor may assign the Agreement to the Assignee and the Other Party wants to permit this assignment.

The parties therefore agree as follows:

1. ASSIGNMENT.

The Assignor assigns to the Assignee of all its rights in, and delegates to the Assignee all of its obligations under, the Agreement. This transfer will become effective on (the " Effective Date "), and will continue until the current term of the Agreement ends.

2. ASSUMPTION OF RIGHTS AND   DUTIES.  

After the Effective Date, the Assignee shall assume all rights and duties under the Agreement. The Assignor will have no further obligations under the Agreement The Assignor will remain bound to the Other Party under the Agreement for the following purposes: . However, the Assignor remains responsible for obligations accruing before the Effective Date.

3. INCONSISTENCY.

If there is a conflict between this assignment and the Agreement, the terms of this assignment will govern.

4. AGREEMENT CONTINUANCE.

Except as expressly modified and supplemented by this assignment, all other terms in the Agreement remain in full effect and continue to bind the parties, including the prohibition against further assignments without the Other Party's express written consent.

5. ASSIGNOR'S REPRESENTATIONS .

The Assignor represents that:

• (a)  it is the lawful and sole owner of the interests assigned under this assignment;
• (b)  it has not previously assigned its rights under the Agreement;
• (c) the interests assigned under this assignment are free from all encumbrances; and
• (d)  it has performed all obligations under the Agreement.

6. INDEMNIFICATION.

• (a) Of Other Party by Assignee. The Assignee shall indemnify the Other Party against all claims, actions, judgments, liabilities, proceedings, and costs, including reasonable attorney's fees and other costs of defense, resulting from the Assignee's performance under the Agreement after the Effective Date.
• (b) Of Other Party by Assignor. The Assignor shall indemnify the Other Party against all claims, actions, judgments, liabilities, proceedings, and costs, including reasonable attorneys' fees and other costs of defense, resulting from the Assignor's performance under the Agreement before the Effective Date. With respect to claims, actions, judgments, liabilities, proceedings, and costs resulting from the Assignee's performance under the Agreement after the Effective Date, the Other Party shall look first to the Assignee to satisfy those claims, actions, judgments, liabilities, proceedings and costs, including reasonable attorneys' fees and other costs of defense.
• (c) Of Assignee by Assignor. The Assignor shall indemnify the Assignee against all claims, actions, judgments, liabilities, proceedings, and costs, including reasonable attorneys' fees and other costs of defense, that may after the Effective Date be suffered by or asserted against the Assignee because of the Assignor's failure to have performed, before the Effective Date, all of the Assignor's obligations under the Agreement or because of any other claims accruing before the Effective Date that may be asserted with respect to the Agreement.
• (d) Of Assignor by Assignee. The Assignee shall indemnify the Assignor against all claims, actions, judgments, liabilities, proceedings, and costs, including reasonable attorneys' fees and other costs of defense, that may after the Effective Date be suffered by or asserted against the Assignor because of the Assignee's failure to have performed, after the Effective Date, all of the Assignor's obligations under the Agreement or because of any other claims accruing after the Effective Date that may be asserted with respect to the Agreement.

7. COUNTERPARTS; ELECTRONIC SIGNATURES.

• (a) Counterparts. The parties may execute this assignment in any number of counterparts, each of which is an original but all of which constitute one and the same instrument.
• (b) Electronic Signatures. This assignment, agreements ancillary to this assignment, and related documents entered into in connection with this assignment are signed when a party's signature is delivered by facsimile, email, or other electronic medium. These signatures must be treated in all respects as having the same force and effect as original signatures.

8. SEVERABILITY.

If any provision contained in this assignment 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 assignment, but this assignment will be construed as if the 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 assignment to be unreasonable.

No waiver of a breach, failure of any condition, or any right or remedy contained in or granted by the provisions of this assignment 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.

10. ENTIRE AGREEMENT.

This assignment, together with the Agreement, constitutes the final agreement of the parties. It is the complete and exclusive expression of the parties' agreement with respect to its subject matter. All prior and contemporaneous communications, negotiations, and agreements between the parties relating to the subject matter of this assignment are expressly merged into and superseded by this assignment. The provisions of this assignment may not be explained, supplemented, or qualified by evidence of trade usage or a prior course of dealings. No party was induced to enter this assignment by, and no party is relying on, any statement, representation, warranty, or agreement of any other party except those set forth expressly in this assignment. Except as set forth expressly in this assignment, there are no conditions precedent to this assignment's effectiveness.

11. HEADINGS.

The descriptive headings of the sections and subsections of this assignment are for convenience only, and do not affect this assignment's construction or interpretation.

12. EFFECTIVENESS.

This assignment will become effective when all parties have signed it. The date this assignment 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 assignment.

13. 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 assignment contemplates or to evidence or carry out the intent and purposes of this assignment.

[SIGNATURE PAGE FOLLOWS]

Each party is signing this assignment on the date stated opposite that party's signature.

The Other Party hereby acknowledges and consents to the above assignment and assumption, and as of its effective date, releases the Assignor from all future obligation and liability under the Agreement. In executing its consent to this assignment, the Other Party does not release the Assignor from any claims or remedies it may have against the Assignor under the Agreement.

In executing its consent to this assignment, the Other Party does not release the Assignor from any claims or remedies it may have against the Assignor under the Agreement.

[PAGE BREAK HERE]

EXHIBIT A Attach copy of original agreement

Free Assignment of Agreement Template

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.

Assignment of agreement: How-to guide

Assignment agreements are foundational documents in legal transactions that enable the transfer of contractual rights and responsibilities from one party to another. Understanding the complexities of assignment agreements is critical for individuals and corporations alike. In this detailed article, we will look at the specifics of assignment agreements, from their concept to practical uses.

What is an assignment of agreement?

An assignment agreement is a legal procedure that transfers contractual rights and duties from the original party (the assignor) to a third party (the assignee). This transfer includes substituting one party for another, with the assignee taking over the rights and contractual obligations indicated in the original contract. Assignment agreements are critical in many legal transactions, facilitating the smooth transfer of interests while maintaining the integrity of contractual relationships.

When do you need an assignment agreement?

You may need an assignment agreement in various scenarios where the transfer of contractual rights and obligations is required. Some common situations include:

• Business acquisitions : When acquiring a business, you may need to assign existing contracts to ensure the smooth transition of rights and responsibilities to the new owner.
• Real estate transactions : Assignment agreements are often used in real estate deals to transfer leases, mortgages, or other property interests from one party to another.
• Intellectual property transfers : Assignments play a crucial role in transferring intellectual property rights, such as patents ( patent assignment ), trademarks ( trademark assignment ), and copyrights ( copyright assignment ), from one entity to another.
• Employment arrangements : Assignment agreements may be necessary to transfer employment contracts from one employer to another in mergers, acquisitions, or corporate restructuring.
• Contractual agreements : Any situation where one party wishes to delegate its rights or obligations under a contract to another party may necessitate an assignment agreement.

By utilizing assignment agreements in these scenarios, parties can ensure the seamless transfer of rights and obligations, protect their interests, and mitigate potential disputes.

What are the elements of an assignment agreement?

The primary element in an assignment agreement is the transfer of rights and contractual obligations from the assignor to the assignee. This transfer ensures that the assignee assumes the same rights and obligations originally outlined in the contract.

Assumption of rights and duties

Upon accepting the assignment, the assignee takes over all the rights and duties specified in the original contract. This includes responsibilities, privileges, and obligations previously held by the assignor.

Inconsistencies

To address any discrepancies between the terms of the assignment and the existing contract, it's essential to include provisions outlining how to resolve such differences or disputes. Clarity in addressing inconsistencies helps ensure the enforceability of the agreement.

Agreement continuance

Despite changes in the parties involved, the terms and conditions of the existing contract typically continue to govern the relationship between the parties. This continuity ensures that the contractual obligations remain in effect following the assignment.

Assignor's representations

The assignor asserts the legality of the assignment and the rights being transferred. These representations assure the assignee of the transaction's legitimacy and legality.

Indemnification

Indemnity provisions must be added to protect the assignee from any liabilities that result from the assignment. These provisions safeguard the assignee from losses, damages, or obligations arising from the assignor's actions or omissions.

Proper execution of the assignment agreement requires the signatures of all parties concerned. Obtaining signatures assures formal recognition and approval of the conditions of the agreement.

Including clear and detailed headings in the assignment agreement will help organize the document and guide the parties through its content. These titles improve reading and understanding, decreasing uncertainty and ambiguity while interpreting the agreement.

Effectiveness

Add the clauses addressing the effectiveness of the assignment agreement. Establish the date or conditions under which the assignment takes effect, providing clarity and certainty to the parties concerned.

Necessary acts

To enable a smooth and efficient transfer of interests, include provisions requiring the parties to perform specified activities or meet specific responsibilities to complete the assignment, such as obtaining third-party approval or signing supplementary agreements.

Severability

Severability clauses are added to guarantee that the assignment agreement remains enforceable even if a court declares specific terms or sections unlawful or unenforceable. By incorporating severability clauses, parties ensure the agreement's overall enforceability, as the other sections will stay in effect.

Waiver provisions allow any party to voluntarily surrender rights or duties in an assignment agreement. These provisions allow parties to waive particular rights or responsibilities mentioned in the agreement, allowing flexibility and mutual consent to change certain aspects as needed.

Entire agreement

This phrase indicates that the assignment agreement is the complete understanding of the parties concerned. By incorporating an entire agreement language, the parties certify that the terms and conditions of the assignment agreement override any earlier agreements, conversations, or understandings, whether oral or written. This provision helps avoid conflicts arising from misunderstandings or competing provisions outside of the written agreement.

Together, these components create the structure of an assignment agreement, assuring clarity, enforceability, and legal compliance.

What are the governing laws guiding assignment agreements?

In the United States, the assignment of agreements is controlled by both federal government and state legislation, as well as common law principles. Federal laws, such as the  Uniform Commercial Code  (UCC), may apply to some components of assignment agreements, particularly those involving the transfer of goods and commercial transactions.

Contract law legislation and regulations differ by state, and each state may have its procedures for enforcing and interpreting assignment agreements. In addition, courts may use  common law concepts  and precedents established via  case law  to address problems involving assignment agreements.

Ensure that the assignment complies with the terms of the original contract, get any necessary consents from relevant parties, and adhere to any statutory or contractual limits on assignment. A violation of public policy or legislative prohibitions could make an assignment unlawful or unenforceable.

What are the best practices for drafting assignment agreements?

Assignment agreements must be drafted with great attention to detail and by best practices to guarantee clarity, enforceability, and protection of the parties' interests. Here are some significant points to keep in mind.

Writing simple and comprehensible language

Avoid using vague or ambiguous language that could lead to misunderstandings or disputes. Instead, use clear and precise language to outline the rights, duties, and obligations of each party. Define terms explicitly to avoid interpretation issues.

Including “consideration”

Include consideration, such as monetary compensation or services rendered, to validate the agreement. Failing to do so can invalidate the agreement, so ensure that valuable consideration is exchanged between the parties.

Obtaining consent

Before assigning rights, obtain written consent from all relevant parties involved. Assigning rights without necessary consent may render the assignment unenforceable, so verify consent requirements and obtain written consent to ensure validity and enforceability.

Including indemnification clause

Include indemnification clauses to protect parties from liabilities arising from the assignment. Specify the scope and limitations of indemnification to avoid disputes and safeguard against losses, damages, or liabilities resulting from actions or omissions.

Identifying applicable laws and regulations

Conduct thorough research to identify federal, state, and local laws governing assignment agreements. Compliance with applicable laws and regulations is essential to avoid non-compliance and legal challenges.

Adding severability clause

Include severability clauses to guarantee that the entire agreement is enforceable. If any term is invalid, severability clauses require that the remaining sections stay in effect, ensuring the agreement's overall enforceability.

Specifying the governing law

Designate the governing law of the assignment agreement to avoid uncertainty in case of disputes. Specify the jurisdiction whose laws will govern the interpretation and enforcement of the agreement.

Seeking legal counsel

Engage qualified legal counsel experienced in contract law to assist in drafting, reviewing, and negotiating assignment agreements. Legal professionals can provide invaluable expertise and ensure compliance with legal requirements.

For individuals and businesses seeking a convenient and reliable resource to draft assignment agreements, LegalZoom offers a free assignment agreement template. This template provides a structured framework for creating comprehensive assignment agreements, incorporating key provisions to protect the interests of all parties involved.

In conclusion, assignment agreements are critical tools in legal transactions because they allow for the clear and precise transfer of contractual rights and duties. Understanding the aspects of assignment agreements, recognizing their practical uses, and adhering to legal concerns allows parties to confidently traverse complicated contractual relationships and preserve the integrity of their transactions.

Frequently asked questions

What does an assignment of agreement mean.

An assignment agreement allows a party to transfer their contract's obligations and rights to another party, provided it's permitted under the original agreement. This can be beneficial for various reasons, such as changes in business circumstances, local laws, or market conditions. Here's what you'll need to complete your assignment agreement:

• Assignor information : Gather the name and contact details of the party transferring their rights and duties
• Assignee information : Obtain the information of the party who will assume the responsibilities under the agreement
• Other party information : Know the details of the other party involved in the original agreement

What is the purpose of the assignment agreement?

The purpose of the assignment contract is to allow a party to transfer their contractual rights and obligations to another party, with consent, under the terms of the original agreement.

How do you assign an agreement?

To assign an agreement, you typically need to obtain consent from all relevant parties involved in the original contract and then draft an assignment agreement outlining the transfer of rights and obligations to the new party.

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• Distribution Agreements

49 Best FREE Distribution Agreement Templates

Distribution, though unsung, is the lifeline of many companies and enterprises. It’s one of the reasons we can buy iPhones from anywhere in the United States even though they are made in China, and the main reason your favourite brand of chips is always fully stocked even in your county’s smallest supermarket, regardless of season and distance. Distribution is only the way manufacturers can get their goods across to sellers and ground level consumers, which means that it’s quite important. Such importance can easily be manipulated, which is how distribution agreements (more on these later) come into play.

Table of Contents

• 1 Distribution Agreement Samples
• 2 How does distribution work?
• 3 Exclusive Distribution Agreements
• 4 Distributors Vs Sales agents
• 5 What is a distribution agreement?
• 6 Distribution Agreement Templates
• 7 The Key Terms Covered in a Distribution Contract
• 8 Free Distribution Agreements
• 9 Drafting a distribution contract: Terms That Must Be Considered
• 10 Is a distributor agreement the same as a dealer agreement?
• 11 Distribution Contracts
• 12 The Benefits of having a distributor agreement
• 13 Avoiding mistakes

Distribution Agreement Samples

How does distribution work?

To put it simply, distribution works in channels. In an ideal world, it all starts with the manufacturer, who makes the goods to be distributed. The manufacturer then employs the services of a distributor to get the finished product delivered to different retailer across a specific region, with set expectations and guidelines on how to achieve them. Distribution can also be undertaken by established dealers that purchase items directly from manufacturers and resell them to fellow dealers down the line. Even in this case, a distribution agreement is put to work early on.

Exclusive Distribution Agreements

Distributors Vs Sales agents

Distributors and sales agents are nearly one and the same, except that they are different in each’s own way. Bigger companies with cash to burn sometimes prefer to directly use sales agents to get their products in front of people and see a difference in sales. Such agents are stationed in prime locations across a region, sometimes in hundreds if it’s a large region, and their stores are stocked by the company or manufacturer itself.

Smaller companies that cannot afford this arrangement tend to use distributors more to cut costs, get more done (distributors can also offer after-sale services, especially with technological products) and still get their products noticed by customers. And when distributors are hired, a distribution contract is drafted and put to use.

What is a distribution agreement?

A distribution agreement, or distribution contract as it’s more commonly known, is essentially a document that outlines the guidelines and boundaries of a distribution partnership between two or more parties, following their expression of willingness and ability to fully participate in it. A distribution contract or agreement is legally recognized and can be used in the courts of law.

In the everyday sense, distribution contracts are regularly employed by manufacturers and distributors to rule out any uncertainty while doing business and to guarantee that supply is achieved as and when needed. As a legal contract between two or more parties, distribution agreements act as a form of protection for the future, in that one party can sue the other should the latter fail to meet the guidelines and results agreed upon in the earlier-signed distribution contract.

Distribution Agreement Templates

The Key Terms Covered in a Distribution Contract

Every distribution agreement has a series of clauses built in, but a few are more important than others. Some of them include.

• Terms and conditions regarding supply Between the two or more parties signatory to the agreement, there must be an understanding over what must be supplied and in what amounts. The manufacturer or initial distributors use distribution contracts to clarify their supply requirements and expectations beforehand.
• Terms and conditions regarding territories covered by distributor Distributor agreements are always clear on territorial assignment, especially since one company can employ different distributors for different regions of an area. The distribution agreement clearly outlines the region each distributor is expected to cover, and the supply guidelines that comes with it.
• Duration of contract One other guideline every distribution contract clarifies is how long the distribution contract is going to take. It can be as long as a week, months or even years, depending on the nature of the business, the distributor in question and expected returns. This duration can still be cut short though, if it doesn’t go according to plan. The terms of that also have to be listed in the agreement.
• Exclusivity Exclusivity, or the lack thereof, is very important in distribution, which is why it makes a major appearance in all distribution contracts. An exclusive distribution agreement is that involving a party that has been awarded full, unshared distribution control over a particular product or area. A simple example of this would be Company X being hired to distribute a new soap brand on the East Coast alone. An agreement is also considered exclusive if only one distributor is being employed to distribute all of a company’s products. A simple example of this would be Company Y working with only Distributor X when distributing its products across the United States. Under this situation, the company agrees from the very beginning not to use any other distributor apart from its exclusive distributor within the assigned territory. Naturally, exclusive distribution agreements come with higher performance requirements for the distributors awarded and are more common within high-tech and luxury product markets. A non-exclusive distribution agreement on the other hand, is more inclusive, allowing more than one distributor to supply products across a region. As one would expect, non-exclusive distribution arrangements are less popular with distributors.

Free Distribution Agreements

Drafting a distribution contract: Terms That Must Be Considered

In addition to the sections above, there are a few major points that must be featured in a distribution contract. They are important in a way that they make a distribution agreement what it really is. If you’re going to use an already existing distribution agreement sample, you will easily notice them in the text. We highlight a few of them below.

• Trade mark licenses and licensing, i.e. how the manufacturer’s logos and other trademarks are to be used during distribution.
• Marketing rights, i.e. the guidelines to follow so as to keep in line (legally) when marketing the products being supplied.
• Territory covered by the agreement, especially the geographical scope of the area in question with a focus on boundaries.
• Exclusivity or non-exclusivity for the distributor in question, followed by the performance requirements expected of a distributor as a result.
• Minimum performance requirements required by the manufacturer or initial distributor. The minimum is the level below which the performance would be deemed poor and unsatisfactory.
• Obligations on competition, i.e. guidelines on how to stay within the jurisdiction of the competition law of the United States while distributing the product.
• Obligations on reporting, i.e. guidelines and requirements on what must be reported in financial accounts books and more.
• Termination causes and circumstances, i.e. the actions, reactions, circumstances and affiliations that would result in annulment of the agreement should either party be found guilty of them.
• Termination consequences, i.e. what happens after the distribution agreement has been cancelled, such as whether or not the two parties can continue working together or not.

Is a distributor agreement the same as a dealer agreement?

No it is not. The two documents are similar in nature but due to the differing nature of the business operations of either party, the contents of their agreements end up differing. A distribution agreement covers a distributor and his/her relationship with the manufacturer or initial supplier.

The terms listed in that agreement cater only to their relationship in its uniqueness. Dealers get a unique document of their own, the dealer agreement, which fits better with their line of work, which includes buying products directly from distributors and selling them off at retailer level or as value-added resellers.

The two agreements still share some complex clauses, such as territorial rights and circumstances that cause contract termination . But unlike the distribution agreement, the dealer agreement may delve further into details such as means of payment, dealer responsibilities, delivery dates and more.

Distribution Contracts

The Benefits of having a distributor agreement

• It rules out the uncertainty associated with informal agreements Informal distribution may be easy to create and follow, especially for smaller businesses, but by virtue of their nature and their lack of attached surety, they are easily dismissible in case of trouble or untrustworthy partners. Distribution agreements present a better, more formal take on the issue, and they guarantee certainty because of their nature.
• It can be used as a legal cover when the deal goes sour Distribution contracts are formal and legal, so when necessary, such as when one of the parties to the agreements bails on their end on of the bargain, they can always be used as evidence before the courts of law.
• It forms a guideline for achieving goals for both parties From the clauses outlined in a distribution agreement, all parties to it are expected to know what to do in order to make the expected final product. That includes guidelines on specifics such as delivery times, sales performance requirements , deadlines, profit sharing and more.

Avoiding mistakes

A distribution agreement is a legal document, which means that it must be handled with extra care. It’s important that you have a lawyer around as you sign it or as it’s being drafted so that you avoid making any mistakes.

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Table of Contents

What is a distribution agreement.

A  Distribution Agreement  is a legally binding agreement between two parties; one is responsible for supplying the products to sell and another party markets and sells the products under predefined terms.

The distribution agreement sets out the obligations and responsibilities of both entities to sell products/provide services to clients within certain geographical areas. It gives a distributor the right and duty to sell and market the supplier’s products for a fee or a commission. It defines and governs the relationship of both parties involved.

Who is a distributor?

A person or company who purchases some goods from a manufacturer or supplier and proceeds to sell it to direct customers is called a distributor. Distributors have a set profit margin on the goods they deal with and they sell the products to the customers at a higher price with their share of profits included.

What should be included in a Distribution Agreement?

A Distribution Agreement can be used to set out the terms and conditions of a distribution arrangement. Whether you are the part, manufacturing, supplying, or distributing the goods or products, it is important that you specify the terms of your cooperation from the start so you can avoid misunderstandings during the course of your relationship. These are the important things to include in a Distribution Agreement:

• Defining the territory: The geographic limitations of the distribution of products or services must be set out in order to avoid conflicts between several distributors. Also, note that the agreement should comply with regional competition laws.
• Product line: The supplier should specify the products or services that the appointed distributor can sell or market. This can be done by stating the details such as the description of the product, its identification or trademark number, etc. The distributor can also be barred from distributing other similar products, and if there are any products or services that the distributor is not allowed to market or sell should be clearly mentioned in the distribution agreement. The details of the product should also mention the number of products to be dealt with or provided and the timing or schedule for the same. Additionally, the manufacturers would want to be able to make changes to the product at times and the distributor’s rights should be ensured in such cases as well. Protecting these changes and rights might require an Assignment of Intellectual Property Rights agreement to ensure clear ownership and usage rights.
• Acceptance of orders and shipment: This section sets out if the distributor’s conduct regarding orders and shipment, where it specifies which orders should be accepted, the methods that should be followed in shipping these orders, and the conditions and terms of refunding and compensating clients or customers.
• Appointment of the distributor: The appointment of a distributor may be exclusive or non-exclusive depending on the intent of the supplier. So, it should be clearly mentioned whether the distributor is only one in the region or there are multiple distributors.
• Termination: There are several obligations that may remain effective after the termination, which can be a non-competition clause, or returning or repurchasing products that are in the distributor’s possession. In such cases, a Mutual Termination of Contract Letter can clearly document the agreement of both parties to end the contract and outline any final terms or obligations.
• Payment terms: The currency of the payment should be, how it will be paid as well as when it will be paid should be revealed well. It should be clearly written on the agreement whether the payment is commission-based or there is another form of payment terms, the deadline for paying the amount, etc. The manufacturers or suppliers might also require security from the distributor such as a letter of credit. For future cases, when the supplier might want to increase prices for various reasons, a minimum notice period for the distributor must be given. To be in line with the market competition, suppliers can put forward a price restriction term, where the maximum resell, price is stated.
• Marketing rights: Both distributors, as well as suppliers, could be in charge of their own marketing. However, suppliers could control the rules for marketing specific products or be solely responsible for providing resources to use for the marketing of a product. A Trademark Licence Agreement could be necessary to allow distributors to use the supplier’s trademarks in their marketing efforts.
• Term of the agreement: This section deals with the length of time for the appointment of the distributor. There could be a probation period, or it could be signed for successive fixed periods. This needs to be clearly laid out beforehand. It should also include any terms related to the renewal of the appointment.
• Intellectual Property: Depending upon the product, you might need an Assignment of Intellectual Property Rights (IP Rights) in your distribution agreements. Details of the trademarks, copyrights and others as such are an extremely important topic that needs to be included in these agreements and could require an additional contract addressing just these.

Other provisions and clauses:

A distributor agreement covers quite a vast number of obligations and the clauses in it should cover just that. Some other provisions that it can include are:

• Obligations for marketing and advertising : The specifics of how the products should be marketed, and who is responsible for marketing efforts, can be detailed. For instance, specifications on advertising materials and the approval process for such materials may require collaboration outlined in a Supply of Services Agreement if external vendors are involved in marketing efforts.
• Training provisions : At times distributors have to be provided with certain training and assistance before they can begin. The type of assistance that will be provided by the supplier has to clarify here. For example, customer assistance training regarding certain tech devices has to be given to suppliers. To facilitate this, a Supply of Services Agreement might be used to outline the services, training, or support the supplier will provide to the distributor.
• Insurance : Details on the insurance requirements for the distributor, including the types of insurance and coverage amounts necessary, should be stipulated. This ensures that both parties are protected against potential liabilities.
• Confidentiality : To protect sensitive information shared during the distribution partnership, a confidentiality clause or a separate Non-Disclosure Agreement may be necessary. This ensures that proprietary information, pricing details, and strategic plans are not disclosed improperly.
• Non-assignment : This clause prevents the distributor from assigning their rights or obligations under the agreement to another party without the supplier’s consent. This ensures the supplier maintains control over who is distributing their products.

What is the purpose of a Distribution Agreement?

A distribution Agreement also referred to as a distributor contract, is a legally binding contract between a supplier of products or services, and any entity that sells or provides services to the clients, referred to as a distributor.

The distribution agreement gives a distributor the right and duty to sell and market the supplier’s products for a fee or a commission, the distributor markets the product so the supplier doesn’t have to worry about how to get its products into the right hands. These agreements are also known as product distribution agreements and distribution rights agreements.

Having a formal distribution agreement reduces the risk of misunderstanding and misinterpretation of informal agreements by having the term and conditions expressed in a straightforward manner.

The most important purpose of a distribution agreement has to be the legal protection that it provides. If there is ever a violation of any of the terms or conditions by either of the party, they can pursue legal channels or stand their ground based on the agreement.

When should a distribution agreement be used?

This agreement should be used to hire or appoint distributors who can purchase and resell the product in specific geographical areas.  It can also be used to push the product to new territories and expand the market. It should particularly be used to ensure that there is a smooth flow of distribution throughout the network.

4 types of a distribution agreement

The type of distribution agreement drafted defines the type of relationship the supplier and the distributor will have. Each type will have its own specific limitation and grant certain negotiation points:

Exclusive Distribution Agreement

When the distributor and supplier sign an agreement that grants exclusive distribution rights to the supplier to deal with a specific item it is called an Exclusive Distribution Agreement. Oftentimes this exclusive power is limited to certain territories. This gives the supplier a competitive market edge. 

Non-exclusive Distribution Agreement

These agreements, do not give any specific rights to the supplier. With these, multiple distributors within the same territory can distribute the same product.

Sole Distribution Agreement

This agreement allows the distributor to sell in a particularly limited territory but here the supplier can also themselves sell the products to the customers.

Selective Distribution Agreement

When distributors are selected based on specific criteria that need to be pre-fulfilled, a selective distribution agreement is usually signed. This is done to ensure that the distributors have the capacity to handle the technicality associated with the product, as well as to make sure that they have the ability to carry the brand’s name forward. The terms will depend on what the parties have agreed to and often depends on the risks and obligations that each party is ready to bear.

Can you terminate a Distribution Agreement?

Yes, all parties are allowed to terminate a distribution agreement. They can determine when, how and under what conditions it ends. It is important to note that these agreements have a fixed term and are automatically renewed if they are not terminated. So, they have to be manually terminated and it needs to be done in writing. However, the conditions and causes for termination can vary.  There can be an early termination which is before the term ends; or there can be urgent and immediate ones, for instance, if either of the party does bankrupt. Termination can also occur if there is a breach of contract. 

Legal help while drafting or reviewing Distribution Agreements

The process of drafting a distribution agreement consists of numerous negotiations between the parties to discuss the terms and conditions. Although not a requirement, you might want to consider getting legal help with the following during this process.

• To get professional legal advice if something seems unclear, unfair, or fishy.
• To act as a communicator or buffer between the two parties.
• To clarify the legal terms and obligations mentioned in the contract.
• To revise or amend a distribution agreement.
• To settle disputes if any arise.

Create a Distribution Agreement with a Zegal template

A distributor is a company that plans to market and sell the products, whether to the public or to the companies. Businesses use this Distribution Agreement to increase sales and market their products by segregating the duties and responsibilities of the distributor. This agreement should allow for continual and ever changing growth.

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About Author

Daniel Walker

Daniel Walker is the Founder and Chief Executive Officer of Zegal, the trusted legaltech firm. Prior to founding Zegal, Daniel practised at DLA Piper, Stephenson Harwood and Clyde & Co, in Hong Kong, Singapore, and the UK.

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