Typical Distribution Agreement

Parties inexperienced by distribution agreements sometimes try to minimize the possibility of termination. The requirement for annual notice and a semi-automatic extension is a routine procedure for experienced players. In such cases, the agreement shall provide for the termination of the agreement at the end of the first full calendar year following the entry into force of the agreement and each subsequent year. The terms and conditions allow each party to submit a notice of intent to non-renewal 30 days before the end of the calendar year. Fourth, ask the reseller or supplier with whom you are negotiating an agreement for a blind copy of two or three agreements currently in force. You do not need to know the names of the parties in the agreement; They just want to create an idea of what is considered normal. The best time to consider what happens upon termination is if you design the agreement. So keep in mind that many of the proposals that should or should not be included in a distribution agreement are based on two factors. One factor is obvious: “Let`s peel it so everyone knows what to do.” The other is not so obvious: “Let`s recognize that manufacturers and distributors disagree on their respective rights and obligations regarding dismissal and try to put us in the best negotiating position if such differences arise.” 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. An oral agreement would indicate that if a supplier`s objectives were achieved, no additional distributors would be admitted to the non-exclusive territory. . . .