What is a Distribution Agreement?

A distribution contract is a legal document between a distributor and a supplier that grants rights to the distributor to market their products. In other words, it’s a legally binding distribution deal where we, as a company, allow a distributor to sell our products to other customers or companies. 

So, what’s in a distribution agreement? It’s a document that spells out the rules of the game. It covers things like how long the agreement will last, where the distributor will sell our products, how much the customers will pay for them, and the whole process of getting your products from them to the customer. 

In a distribution deal, once we, as suppliers, have given away our rights to the distributor to market the products, the distributors are entirely responsible for selling them. For this reason, the distributors will handle inventory, marketing operations, selling, transportation, and other business processes.  At the same time, they will also be responsible for any potential risks, including loss, damage, cancellation, and other issues. 

• Exclusive Distribution: When it comes to an exclusive distribution agreement, the signed distributor will be the only one with the right to sell a particular product within a location. 
• Selective Distribution: In a selective distribution agreement or a nonexclusive agreement, the supplier might be able to sell their products to other distributors within the exact location and even the same market. 

So, what should you include in a distribution agreement? 

1. Complete Information: Names, addresses, phone numbers, and other essential details of both suppliers and distributors.
2. Scope of the Contract: We must state the scope of the sale, what products will be sold, the territories and markets where the product will be sold, and other necessary details about the distribution deal. 
3. Payment Details: Include the price at which the products will be sold, the distributor’s commissions, and the payment methods. You can also include the maximum selling price if you want. 
4. Terms and Conditions of Sales: The quantity and quality of the products sold to the distributor and the warranties the supplier provides. It may be necessary to include complete product quality control, testing, and inspection information. 
5. Marketing Activities and Rights: Since the distributor is responsible for selling and marketing the products, it outlines the distributor’s rights and limitations when implementing marketing strategies. For example, a distributor may not have a billboard with your product without prior approval. 
6. Contract Duration: This section states the duration for which the distribution deal is in effect and other conditions about renewing or terminating the partnership.