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Essential items for secure distributor agreements

A distribution agreement is a legally binding document between parties that outlines the right to sell merchandise in return for fair compensation. A distribution arrangement is essential for product circulation and a strong distribution agreement is a must for establishing vendor relationships. Using a distributor is an effective way to place products in new or expanding markets.

Building blocks of an agreement

A distribution agreement is the framework for the working partnership between all parties. When crafting the document there are key elements that should not be left out.

  • Parties and products: The agreement should address who will be involved and what will be sold. It should also have instructions for handling competitor products if the distributor currently or previously sold products made by a competitor.
  • Territory range: The geographic distribution areas should be specified and contain penalty information for outside territory sales.
  • Duration and termination: The length of the agreement as well as any minimum periods and renewal clauses should be specified. It should also outline how either party can end the agreement and specify how contractual obligations need to be fulfilled upon termination.
  • Contractual obligations: The supplier must supply the products and product information and the distributor needs to purchase, promote and sell the products. The agreement should outline any minimum purchase quantities and required recordkeeping policies for sales.
  • Terms and pricing: Prices for sales from the supplier to distributor and then to the consumer should be spelled out along with how and when prices can be changed. Payment terms also need to be addressed.
  • Trademarks and intellectual property: The agreement should stipulate how and when the distributor is allowed to use the supplier's trademarks and other intellectual property to increase sales while protecting the supplier's rights.
  • Returns, warranties and defective products: If the product is covered by a warranty the agreement should outline who is responsible for providing replacement parts or products. Additionally, the agreement should outline how returned or defective products received by other the supplier or distributor will be handled.
  • Jurisdiction: In the event of a dispute, the agreement should address which country or state's law will prevail.

While negotiating and drafting an agreement, it should include provisions to protect both parties in order to strengthen the partnership. When navigating the complexities of business expansion, a strong legal advocate can protect your venture from unexpected pitfalls.

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