In the commercial world there may be instances when one party, a Distributor, seeks to purchase goods from another party, the Supplier, in order to sell those goods on to Customers of the Distributor.

The relationship that exists between Distributor and Supplier needs to be governed by a Distribution Agreement, which is essentially a contract that specifies the terms of their business relationship.

Different types of Distribution Agreement exist, and the appropriate type of Agreement for the circumstances is dependent on the scale of distribution and the nature of the goods being sold.

Broadly, the main types of Distribution Agreement comprise:

• Exclusive Distribution Agreement

This type of agreement exists where a Distributor is only allowed to sell the goods in a certain geographical area. The exclusivity element can also apply to a particular product or sales channel.

• Sole Distribution Agreement

This can tie in with an Exclusive Distribution Agreement, in that a Supplier will only authorise one Distributor of its goods in a specific geographical area.

• Selective Distribution Agreement

This type of agreement allows the Supplier to control the sales which the Distributor makes. Care should be taken when drafting this sort of agreement in particular to ensure that it does not infringe Competition Law.

• What is in a Distribution Agreement?

The Distribution Agreement should contain all the terms and conditions relating to the supply of the goods.

When drafting a Distribution Agreement, consideration should be given to:

• Exclusivity;
• Terms and conditions of sale / supply (i.e. price, delivery, product identification);
• Key performance indicators to manage the Distributor’s performance;
• Marketing;
• Proprietory Rights;
• Duration of Agreement;
• Restrictions;
• Notices / Termination.

As with other types of commercial relationship, reliance should not be placed on oral understandings. Business relationships can and do deteriorate and therefore a carefully drafted Distribution Agreement will protect the parties and provide a framework for resolving disputes when they occur.

The Corporate & Commercial Team at QualitySolicitors Oliver & Co. has extensive experience in advising businesses across the full spectrum of industry sectors in relation to Distribution networks around the world.

One of the Team's specialist lawyers can assist your business by:

• Applying our knowledge and expertise in drafting an appropriate Distribution Agreement for use by your business;
• Ensuring that we understand your commercial requirements and then taking a practical approach which ensures that the needs of the parties are met and any risks of a dispute later are minimised;
• Providing you, whenever possible, with an up-front fixed cost quote for the drafting of or advice on any Distribution Agreement;
• Making sure that your commercial contracts are compliant with all relevant legislation, subject to English law and enforceable through the English courts rather than overseas.

Whether you require a review of your existing standard Distribution Agreement, advice on contracts and contractual terms which another party is seeking to impose on you, or a bespoke Agreement tailored to the needs of your business, we can help.

For further advice and information please use the contact form or call 01244 354697 and ask for Tim Polding.