Distribution agreements

Distribution agreement solicitors

A business may wish to enter into a distribution agreement within a market where they may have limited or no presence. A business may wish to enter into a distribution agreement with a distributor who has a strong presence or market share within a certain market with the result being increased sales and profile. A distribution agreement is a popular alternative to an agency agreement as it allows a business to exploit local knowledge and market share without being subject to the Commercial Agents (Council Directive) Regulations 1993. The prime description between agency and distribution agreements is that with an agency arrangement the goods do not pass to the agent and the contract remains with the business. The agent merely acts on behalf of the business and usually takes a commission. With a distribution agreement the ownership of the goods passes to the distributor who then sells them directly to the customer.

Why do you need a distribution agreement?

Distribution agreements are essential for several reasons. They provide a structured and clear framework for the distribution of products, reducing the risk of misunderstandings and disputes. By clearly defining the terms of the relationship, these agreements help protect the interests of both the supplier and the distributor.

Moreover, distribution agreements help ensure compliance with relevant laws and regulations, which is particularly important in industries with strict regulatory requirements. They also provide legal protection by outlining the terms of the relationship, including conditions for termination, which can help prevent disputes and provide a basis for resolving any issues that may arise.

Additionally, having a formal distribution agreement can enhance trust and credibility in the business relationship. It shows a commitment to professionalism and good governance, which can be a significant factor for both suppliers and distributors considering entering into a partnership.

Types of distribution agreements

There are various types of distribution agreements, each tailored to different business needs and contexts. Some common types include:

Exclusive distribution agreement

This type of agreement grants the distributor exclusive rights to sell and distribute the supplier's products within a specified territory or market. The supplier agrees not to appoint other distributors or engage in direct sales within that area during the term of the agreement.

Non-exclusive distribution agreement

Under this arrangement, the supplier can appoint multiple distributors and also engage in direct sales. This type of agreement offers greater flexibility but may lead to competition among distributors.

Selective distribution agreement

This agreement allows the supplier to select specific distributors who meet certain criteria or standards. It is often used for high-end or luxury products where the supplier wants to maintain control over the brand's image and customer experience.

Franchise distribution agreement

In this type of agreement, the distributor operates under the supplier’s brand and follows a specific business model provided by the supplier. The distributor pays a fee or royalty for the right to use the brand and business model.

Key components of a distribution agreement

A well-drafted distribution agreement should include several essential components to ensure clarity and enforceability. These components include:

• Identification of parties: clearly state the names and contact details of the supplier and the distributor.
• Scope of distribution: define the products to be distributed and the territory or market where the distributor is authorised to sell the products.
• Duration: specify the term of the agreement, including the start and end dates, and any conditions for renewal or termination.
• Pricing and payment terms: outline the pricing structure, payment terms, and any discounts or incentives offered to the distributor.
• Marketing and sales responsibilities: detail the marketing and sales responsibilities of both parties, including any support or resources provided by the supplier.
• Performance targets: include performance targets or sales quotas that the distributor is expected to meet, and the consequences of failing to meet these targets.
• Confidentiality and intellectual property: Include provisions to protect sensitive information and intellectual property, ensuring that the distributor respects the supplier's proprietary rights.
• Termination conditions: define the circumstances under which the agreement can be terminated, including any notice requirements and procedures for handling post-termination obligations.
• Governing law and jurisdiction: specify the legal framework and jurisdiction that will govern the agreement and any disputes that may arise.

What is the difference between an agency and a distribution agreement?

An agency agreement involves an agent acting on behalf of a principal to negotiate and facilitate sales, while a distribution agreement grants a distributor the right to buy and resell products within a specified territory, assuming ownership and risk of the goods.

How we can help

At Stephensons, we offer expert legal services to help you draft, review, and enforce distribution agreements tailored to your specific business needs, our commercial litigation solicitors can also assist if you are in a related dispute. Our experienced team of solicitors works closely with you to understand your objectives and ensure that the agreement comprehensively addresses all relevant aspects. We provide guidance on the appropriate type of agreement, help negotiate terms, and ensure compliance with applicable laws and regulations.

Whether you are establishing a new distribution relationship or reviewing existing agreements, we provide ongoing legal support to ensure that your interests are protected. Our goal is to help you build strong, effective, and legally sound partnerships that contribute to your business success.

Why choose Stephensons?

Choosing Stephensons means partnering with a law firm that prioritises your business’s needs and success. Our team of experienced commercial solicitors brings extensive knowledge in commercial law and a commitment to providing high-quality legal services. We understand the complexities of distribution relationships and offer tailored solutions that align with your specific requirements.

We are dedicated to excellence, providing clear, practical advice and robust legal support. Our approach is client-focused, ensuring that we build long-term relationships based on trust, professionalism, and a deep understanding of your business goals.

Contact us

If you need assistance with distribution agreements or any other commercial legal matters, contact us at Stephensons. Our team is ready to provide the expertise and support you need to navigate the complexities of business contracts. Reach out to us today to schedule a consultation and learn more about how we can help protect and grow your business.