The Distribution Agreement Explained

A Guide To Creating a Professional Distribution Agreement 

The success of a company often depends on how well it can distribute its products. That’s why creating a bullet-proof distribution agreement is of utmost importance

Drafting legal documents is not easy, but you shouldn’t be discouraged. DoNotPay is here to explain what constitutes a valid distribution agreement and teach you how to create one easily!

A Distributor Agreement in a Nutshell

A distributor agreement is a contract between a company that supplies a particular product (a supplier) and a company that markets and sells it (a distributor). 

 A distribution agreement should define a relationship between a supplier and distributor in a way that benefits both parties. A distributor receives a fee or commission for marketing and selling the supplier’s product. The supplier makes a profit without worrying about logistics and marketing. 

There are three basic types of distributor agreements, as presented in the table below:

Type of Distribution AgreementDescription
Exclusive distribution agreementThe supplier agrees not to appoint other distributors or sell the products to other clients within a specific geographical area. This type of distribution agreement is more favorable for the distributor. An exclusive distribution agreement is typically used for selling expensive products or the ones requiring specific knowledge of both the product and the market. 

Before using an exclusive distribution agreement, make sure to check with a lawyer if you are not violating any antitrust laws regulating free competition

Sole distribution agreementThe distributor has exclusive marketing rights in the specific area, but the supplier keeps the right to sell their product directly to end-users
Non-exclusive distribution agreementThe seller reserves the right to sell their product to end-users and appoint other distributors on a particular territory. This arrangement favors the supplier

Crucial Elements of a Valid Distribution Agreement 

A basic distribution agreement should contain specific elements to be legally binding. You need to pay close attention when creating it to avoid any disagreements or legal disputes. Here is a quick guide to creating an enforceable distribution agreement:

  1. Identify the involved parties and indicate that the agreement regulates reselling of the supplier’s product
  2. Outline the territory where the distributor can operate
  3. Indicate whether the agreement is exclusive, sole, or non-exclusive
  4. Define causes for the agreement
  5. Specify the product and the delivery date
  6. Determine whether the agreement is commission-based or there is another type of fee arrangement
  7. Describe the relationship between the involved parties, such as the distributor being an independent contractor
  8. Define the terms of selling the product, including allowed advertisement strategies, branding guidelines, and distributor’s responsibilities for product resale
  9. Clarify whether product-rebranding is permitted
  10. Include a statement that the supplier has to accept the distributor’s orders at an appropriate time
  11. Explain what happens when a distributor can’t sell the goods and if there is a quota 
  12. Outline payment terms
  13. State that the agreement is binding and enforceable by the particular state law. You can also determine whether the arbitration will precede a potential lawsuit
  14. Specify the date the agreement takes effect and how long it will last

Should I Use Distribution Agreement Samples?

If you don’t believe that writing contracts is right up your alley, you can try using a contract template. The potential problem with templates is that they contain general terms and are not applicable in specific situations. 

Once you create your distribution agreement, make sure you have it checked by a lawyer. It's the only way to avoid business-impacting mistakes.

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While some agreements can be written by a layman with proper guidance, others require a bit more finesse. DoNoPay, the revolutionary robot lawyer, can generate personalized legal documents for you! and pick a document from the table below:

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  1. in a web browser
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