Distribution Agreement
1. Definitions
1.1 In the Agreement, the following words shall have the following meanings when written with a first capital letter:
“Agreement” means this Distribution Agreement, including Appendix A, as may be amended from time to time in accordance with Article 14.1.
“Confidential Information” means information that a Party provides to the other Party under the Agreement and that concerns the providing Party’s business, including, without limitation, information on finances, development, production, marketing, sale, products, services, customers, suppliers, knowhow, trades secrets and the terms of the Agreement.
“Products” means the Supplier’s products set out in Appendix A from time to time.
“Spare Parts” means the spare parts for the Products offered by the Supplier from time to time.
2. Distribution right
2.1 The Supplier hereby grants to the Distributor the right to distribute the Products on the terms set out in the Agreement.
2.2 The Distributor shall be entitled to designate himself as an authorized distributor of the Products, but shall not be entitled to enter into agreements on behalf of or to otherwise bind the Supplier.
2.3 The Supplier shall be entitled to add Products to or delete Products from Appendix A upon [number] day’s written notice to the Distributor.
3. Distributor’s obligations
3.1 The Distributor shall endeavour to sell as many units of the Products as possible.
3.2 The Distributor shall market the Products in a professional manner and shall follow any reasonable instructions of the Supplier in so doing. The Distributor shall use the Supplier’s marketing materials or its own marketing materials approved by the Supplier.
3.3 The Distributor shall employ personnel and maintain a pre-sales and after-sales service for the Products to serve customers in a professional manner with respect to offers, purchase order confirmations, repairs, service and other matters.
3.4 The Distributor shall be free to set its own sales prices of the Products and Spare Parts, but shall keep the Supplier informed of its sales prices.
4. Supplier’s obligations
4.1 The Supplier shall deliver the Products and Spare Parts ordered by the Distributor. The Supplier shall be able to deliver Spare Parts for a Product for a period of [number] years after delivery of the Product to the Distributor.
4.2 The Supplier shall provide marketing materials for the Products in [language] to the Distributor. Translation of materials into other languages shall be arranged by and paid for by the Distributor. The Supplier shall be free to determine the extent and type of marketing materials.
4.3 The Supplier shall provide support for the Products by telephone and e-mail during the Supplier’s normal opening hours.
4.4 The Supplier shall ensure that the Products and Spare Parts comply with all applicable laws in [country] and shall obtain all statutory approvals of the Products and Spare Parts necessary to sell them in [country].
5. Purchase orders and purchase order confirmations
5.1 The purchase of a Product or Spare Part is accomplished by the Distributor sending a written purchase order to the Supplier. A purchase order shall not be binding on the Supplier until the Supplier has sent a written purchase order confirmation to the Distributor. The Supplier shall confirm or reject a purchase order within [number] days of receipt, failing which the purchase order shall be deemed confirmed.
6. Delivery
6.1 The terms of delivery for Products and Spare Parts purchased and sold under the Agreement shall be [delivery term] in accordance with Incoterms as in force from time to time.
6.2 If delivery of a Product or Spare Part is delayed by [number] days or more, the Distributor may set a time of not less than [number] days within which the Supplier shall deliver the Product or Spare Part. If the Supplier fails to deliver the Product or Spare Part within the time set by the Distributor, the Distributor shall be entitled to terminate the purchase of the Product or Spare Part.
6.3 The remedies set out in Article 6.2 shall be the exclusive remedies available to the Distributor for late delivery of Products or Spare Parts.
7. Price and terms of payment
7.1 The prices of the Products and Spare Parts shall follow the Supplier’s price list as in force from time to time, unless the Parties otherwise agree in writing. The Supplier shall be entitled to change prices at any time upon [number] days’ written notice to the Distributor.
7.2 The terms of payment of Products and Spare Parts purchased and sold under the Agreement shall be [terms of payment]. If the Distributor fails to pay a correctly rendered invoice by the due date of payment, the Supplier shall be entitled to claim interest at the rate of [number] % p.a. from the due date of payment and until the invoice is paid.
8. Warranty
8.1 The Supplier warrants that Products and Spare Parts will be free from material defects in design, materials and workmanship for a period of [number] months after delivery to the Distributor.
8.2 The Supplier shall, at its election and expense, remedy defective Products or Spare Parts by repairing or replacing them within a reasonable time, provided that the Distributor notifies the Distributor of the warranty claim without undue delay after having discovered it and within the warranty period.
8.3 All repairs and replacements carried out under warranty shall be free from material defects in design, materials and workmanship for a period of [number] months after completion thereof or, if longer, the remaining time of the original warranty of the relevant Products or Spare Parts.
8.4 The warranty under Article 8 does not cover defects resulting from: (i) normal tear and wear, (ii) accident or other external cause, (iii) incorrect storage, installation, service, maintenance or use, or (iv) repairs or alteration not approved by the Supplier.
8.5 The remedies set out in Article 8 shall be the exclusive remedies available to the Distributor for defects in Products or Spare Parts.
9. Product liability
9.1 The Supplier shall be liable for death, personal injury or damage to property caused by defects in Products or Spare Parts in accordance with applicable law.
9.2 The Parties shall each maintain a product liability insurance policy with a sum insured of not less than [amount and currency] per occurrence and [amount and currency] per insurance year for the duration of the Agreement and for [number] years after termination of the Agreement.
10. Intellectual property rights
10.1 The full ownership in all intellectual property rights in the Products and Spare Parts, including, without limitation, patents, designs, trademarks and copyrights, shall vest in the Supplier.
10.2 If Products or Spare Parts delivered under the Agreement infringe third party intellectual property rights, the Supplier shall, at its expense: (i) procure for the Distributor and its customers the right to continue to use the infringing Products or Spare Parts, (ii) modify the infringing Products or Spare Parts to make them non-infringing, or (iii) replace the infringing Products or Spare Parts with non-infringing items.
10.3 The remedies set out in Article 10.2 shall be the exclusive remedies available to the Distributor for infringement of third party intellectual property rights.
11. Confidentiality
11.1 A Party shall keep all Confidential Information obtained from the other Party under the Agreement strictly confidential and shall not disclose it to any third party or use it for any purpose other than the performance of the Agreement without the other Party’s prior written consent.
11.2 The duties set out in Article 11.1 shall not apply to Confidential Information of the other Party that: (i) is publicly available, (ii) is obtained from a third party in good faith, (iii) is independently developed without use of the other Party’s Confidential Information, or (iv) is disclosed to comply with applicable law.
12. Limitation of liability
12.1 A Party shall not be liable to the other Party for a failure to fulfil its obligations under the Agreement to the extent caused by circumstances beyond its reasonable control (force majeure). If such circumstance lasts for [number] days or more, the Party not affected hereby shall be entitled to terminate the Agreement upon written notice, and without liability, to the Party affected hereby.
12.2 Notwithstanding anything to the contrary in the Agreement, the Supplier’s total liability to the Distributor under the Agreement shall not exceed [amount and currency] per year and the Supplier shall not be liable for indirect loss, including, without limitation, loss of profit, loss of turnover, loss of business, loss of goodwill, loss of anticipated savings or costs of procuring replacement products or services.
13. Duration
13.1 The Agreement shall enter into force when signed by both Parties and shall continue until terminated under Article 13.2 or 13.3.
13.2 The Agreement may not be terminated for the first [number] months after entering into force. Thereafter, the Agreement may be terminated by either Party for any reason upon [number] months’ written notice to the other Party.
13.3 Either Party may terminate the Agreement forthwith by written notice to the other Party, if the other Party fails to remedy a material breach of the Agreement within [number] days after having received written notice requiring remedy of the breach. Material breach of the Agreement includes, without limitation: (i) a failure to meet any term of the Agreement, and (ii) a Party’s reorganization, bankruptcy, liquidation, composition or similar proceeding.
13.4 On termination of the Agreement for any reason other than the Supplier’s material breach of the Agreement the Distributor shall not be entitled to compensation for loss of sale, investment or goodwill. The Distributor disclaims any right it might have to such compensation.
13.5 The Distributor shall be entitled to sell its stock of marketable Products and Spare Parts for a period of [number] months after termination of the Agreement, provided that the Distributor complies with the terms of the Agreement for such period of time.
14. Other terms
14.1 The Agreement constitutes the entire agreement between the Parties with respect to the Distributor’s right to distribute the Products. Terms set out in the Distributor’s purchase orders or other documents or in the Supplier’s purchase order confirmations or other documents shall not apply. The Agreement may be amended only by a written agreement signed by both Parties.
14.2 Any disputes between the Parties arising out of or in connection with the Agreement, which cannot be settled amicably, shall be settled by a competent court in accordance with the laws of [country] to the exclusion of its conflict of law rules.
14.3 The terms of Article 4.1, 2nd sentence, 6.3, 8.1, 8.2, 8.3, 8.4, 8.5, 9.1, 9.2, 10.2, 10.3, 11.1, 11.2, 12.2, 13.4, 13.5, 14.2 og 14.3 shall survive termination of the Agreement for any reason.
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What is a distribution agreement?
Not to be confused with an equity distribution agreement, a distribution agreement is a contract that outlines the relationship between a supplier or manufacturer of products and another party who agrees to sell those products.
That party is the distributor, often purchasing the products from the supplier and selling them under their own trading name. If the seller is the only distributor for a supplier, it is referred to as an exclusive distribution agreement.
It's like perfect teamwork between the supplier and the distributor — the distributor handles all the marketing hustle for the products, and in return, they get a fee or commission. No worries for the supplier about how to get their products out there — it's a win-win! You may have heard it called product distribution agreements or distribution rights agreements.
Types of distribution agreements
In distribution agreements, commissions are crucial. Distributors get paid for selling the product and enjoy a commission based on the sales volume. This is called a distribution agreement for commissions. It’s a win-win, motivating distributors to push the supplier's products generating more revenue for both parties.
Exclusive distribution agreements add another layer of exclusivity to the mix. In some cases, a distributor becomes the sole player within a specific geographic area, while in others, they gain exclusive rights to sell to specific customers. These agreements are often employed for unique or technical products, ensuring the distributor's specialized knowledge brings success. Access our free template to create exclusive distribution agreements here.
Then, there's the wholesale distribution agreement, where products are provided in bulk at a lower cost. This arrangement involves a distributor partnering with a wholesale company, whether selling to retail stores or directly to consumers. Sometimes, the distributor buys the product, becomes the owner, and sells it to the next entity for a profit.
In the tech realm, the developer distribution agreement takes the spotlight. Typically centered around software, this contract allows developers to license their creations to end-users through a distributing company. From tech giants to individual app creators, these agreements keep the digital world running smoothly.
What should you include in a distribution agreement?
Any enforceable and reliable distribution agreement (like ours above) should include the following elements as standard:
- Distribution right - Outlining that the supplier is giving the right to distribute to the distributor
- Distributor’s obligations - What is required of the distributor?
- Supplier’s obligations - What is required of the supplier?
- Purchase orders and purchase order confirmations - How the distributor orders goods from the supplier and handles those orders.
- Delivery - When goods are required to be delivered.
- Price and terms of payment - Who sets the prices of the products to be sold, and what happens in the case of a price change?
- Warranty - The state of the goods to be sold. The process of determining if goods are defective upon delivery to the distributor.
- Product liability - The supplier is liable should the products cause any problems. Both parties need to hold product liability insurance to a defined amount.
- Intellectual property rights - The supplier owns any intellectual property and how any infringement of intellectual property rights is approached.
- Confidentiality - All information regarding the agreement shall remain confidential.
- Limitation of liability - When a party shall not be held liable due to a force majeure, and how such instances should be dealt with.
- Duration - How long will the agreement last, and how long can a distributor sell products once the contract has been terminated?
- Any other terms
When should I use a distribution agreement?
Use a distribution agreement before entering into a professional relationship with another party to sell their products or for them to sell your products.
Without a distribution agreement, you're playing a risky game where verbal agreements can crumble under the weight of financial uncertainties. Imagine your products being sold at a fraction of the agreed price, undermining the efforts of your other distributors. Or think you've secured an exclusive deal only to find out the other party is double-dealing with someone else.
Don't leave yourself vulnerable to these financial risks — opt for a solid distribution agreement and safeguard your business interests.
Why use a distribution agreement template?
A distribution agreement helps ensure that the resulting relationship is based upon a reliable and accurate legal document that can be used in the future — either as a form of legal protection or to help enhance the professional relationship between a supplier and a distributor.
Distribution agreements help your company to:
- Monitor distributor compliance with agreement terms.
- Keep track of upcoming distribution agreement expirations.
- Proactively manage renewal or re-tendering processes.
- Maintain a comprehensive repository of all distribution agreements.
- Assess key distributors' sales performance and contributions over time.
- Evaluate the efficiency of distribution channels.
- Provide investors with insights into established distribution channels and accounts.
- Facilitate an efficient review process for distributors.
Where and how to use a distribution agreement template?
Use a distribution agreement template whenever you need to create a distribution agreement quickly, yet do so in a way that makes a reliable and enforceable contract.
These templates offer the flexibility to modify details while ensuring the essential clauses remain reliable and enforceable. Say goodbye to the hassle of starting from scratch every time. Contractbook templates streamline the process and can be populated with information extracted from various documents using our dynamic data format.
The result? A document that takes less time to create but is also more likely to be accurate. Our platform extends its benefits beyond templates — securely storing final documents for easy access and fostering seamless collaboration for potent and expedited negotiations. Utilize our software to finalize contracts efficiently and lay the foundation for a relationship built on trust and respect.
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This agreement grants the Distributor the right to distribute the Supplier's products in a specified territory. It outlines the obligations of both parties, such as the Distributor's duty to market and sell the products professionally, and the Supplier's duty to provide marketing materials, product support, and ensure legal compliance. The agreement covers purchase orders, delivery terms, pricing, payment, warranties, liability, intellectual property rights, confidentiality, limitations of liability, duration, and termination. It appears to be a fairly standard distribution agreement.
Manually processing standardized legal contracts is tedious, error-prone, and (let’s be honest) boring. Let our scanner do the hard work for you.
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