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Distribution Agreement Considerations

The following are the key topics to look at before shaking hands with an agency or distribution contract. Whether the law requires your reseller to be local or not, there may be different rules when it comes to key concepts such as termination and exclusivity. You shouldn`t expect your standard distribution agreement to work the same way in every region. If you think about it long and thoroughly, without rose-colored glasses, you will be assured at the beginning of the agreement that if the execution is not up to the tobacco to be sned, you can continue quickly and with the least possible negative impact on your business. For example, European competition law prevents you from entering into a distribution agreement that imposes minimum prices for resale, limits cross-deliveries or limits internet sales. Any provision which affects trade between Member States and restricts or distorts competition shall be prohibited. There are exceptions, for example. B if your distribution agreement is considered a “small” agreement and, in some cases, exclusive agreements may also be excluded. EU competition law is strictly enforced and you should seek legal advice on competition law issues. The first question that a manufacturer and distributor must answer when entering into a distribution agreement is whether a written distribution agreement should be concluded. From the manufacturer`s point of view, it would be almost reckless not to have such an agreement.

However, on the side of the distributor of the table, the problems are much less obvious. If you do not sign a written agreement, your contract is based on the insurance and behavior of each party. If there are no explanations or oral behaviors and a dispute arises, the courts will simply apply the implied theory of the contract. This essentially means that the courts will enter into their own contract. Often, this approach is more favorable to the distributor than to the manufacturer. It may also be more advantageous for the distributor than an agreement, in particular an agreement designed by the manufacturer, in which the distributor had little or no say in its content. In the modern business world, more and more companies are participating in distribution agreements that cross international borders. According to the World Bank, international trade accounted for nearly one-third of U.S. gross domestic product (GPD) in 2017. Distribution franchises may be either exclusive if there are no other distributors crossing into the area; or not exclusively, if the new distributor could be one of the distributors among others that are franchised in the region. Distributors sometimes call for an exclusive zone, arguing that the distributor has no incentive to provide adequate resources to develop the manufacturer`s turnover without an exclusive zone. As soon as a supplier accepts an exclusive zone, it loses the possibility of franchising an additional reseller for a certain period of time.

The appointment of an exclusive distributor in an area is an unnecessary guarantee of trust on the part of the supplier. An alternative to the allocation of an exclusive territory is to arrange the distribution agreement in such a way that the distributor is not exclusive, but only franchises a distributor as a franchisee. . . .