What is a Distribution Agreement?
The purpose of this agreement is to bind a supplier of goods and a distributor of goods in a legal business relationship. It ensures that both parties are required to fulfill their obligations to one another as written in the document. Also, this type of agreement can either be exclusive or non-exclusive. Both parties may enter an exclusive relationship wherein the distributor will be the only business that can sell your products in a given territory for a period.
How to Write a Distribution Agreement?
1. Identify the Parties Involved
The first paragraph of the agreement should consist of information on both the supplier and the distributor. What you will need to do here is to point out the exact names of the businesses that will be entering the relationship and their roles. Do not forget to include their addresses and the date in which the business agreement is being executed.
2. State the Effective Date of Agreement
You should always consider how long you want this type of sample agreement to last. How long do you want to work with the other party? Do you think that working for a long period will benefit both of you? Although there are some instances wherein some businesses are comfortable in locking in a distributor for an extended duration, you may only want it to last a year or even less. Make sure to point out the exact date and year in which the distribution agreement will both start and end.
3. Provide the Terms Regarding Distribution
Start by appointing the distributor with products that will be supplied. Provide specific descriptions for each product that must be distributed by the other party. You can also provide a statement in the alliance agreement that tells the distributor to use whatever legal means to promote and sell the products. Then you will have to define the distributor's territory. How you want to limit the areas in which the distributor is allowed to market and sell your products is all up to you, be specific when doing so.
4. Include a Clause
It is entirely possible that you want to include more products to distribute and that you want to expand the distributor's territory. That is why you should include a clause wherein you state that you retain the right to change the terms within the basic agreement.
5. Define Prices and Payment
Start by pointing out how exactly the distributor will be ordering products from you and the amount in which each one should be sold. Consider the prices carefully before setting them and provide a statement that you retain the right to change them at any given point in time. The next is to provide payment details. State the modes of payment, the amount, and when it should be made. Include a statement regarding the fees and penalties for any late payments.
6. Protect Yourself
What this means is that you are going to have to provide warranties in your cooperation agreement regarding the products that will be provided. This means you have to point out whether you are responsible for manufacturing them or if it's another business entirely that made them. Include a clause concerning the limitation on liability. This prevents the distributor from any consequential or indirect damages. You will also want to include an indemnification agreement that gets the distributor to agree to reimburse you for any loss.
7. Explain Matters Concerning Termination
Make sure the agreement contains a clause on how either party may terminate the business relationship. You will have to explain the process of termination thoroughly and you must also point out what actions can break the agreement between both parties.
8. Include a Signature Block
Lastly, you will want to place lines where both the supplier and the distributor can place their signatures into the document. Be sure that you also have a line wherein you can place the date in which the contract agreement was signed by both parties.