Typical Distributor Agreement

Relationships between manufacturers and distributors are organic. They were born. They`re growing. They`re growing up. They`re maturing. They`re disintegrating. They ended up perishing. External factors regularly put the distributor and manufacturer under pressure. These pressures sometimes change the distribution agreement. If the agreement allows for changes later this year, there are few problems. However, if the agreement allows for changes only once a year, one or both partners must face undue pressure until the agreement can take such an annual change into account. The best distribution agreements allow for changes during the year.

Suppliers who use channel partners as part of their distribution network can use a one- or two-step distribution channel. In a one-step distribution system, the provider develops relationships with channel companies such as VARs, System Integrators (SIs) and Managed Service Providers (MSPs) — which sell to end customers. In a two-tier system, the supplier sells products to an independent distributor who in turn supplies products to channel partners who then package solutions for end customers. The two-step model requires dealer agreements to facilitate relationships between distributors and channel partners. Traders sometimes think that they would have a competitive advantage if their producers were limited to adjusting prices only once a year. This may serve the distributor well, but to the detriment of the supplier. An arbitrary advantage of one party over the other party does not bode well for the partnership. Third, if you are trying to sign a distribution agreement in a foreign country, use the foreign network. The U.S. Chambers of Commerce are located in most countries of the world (American Chamber of Commerce in Hong Kong, American Chamber of Commerce in the Netherlands, American Chamber of Commerce in Egypt, etc.).

If your foreign branch is not yet connected to the local Chamber of Commerce, launch it immediately. The cost of joining these organizations is low and the benefits go far beyond learning how to negotiate a balanced allocation agreement. Among other things, some of the key clauses you will usually find in an international distribution contract include products and territory, the obligations of the parties, exclusivity clauses, prorogation/rescission and dispute resolution. It is important that the distribution agreement defines the products to be obtained. If you are the distributor, it is not a good idea to base the product description on a brand. What happens if the manufacturer changes its brand? Below are a few questions that need to be taken into account when developing the provisions of the product agreement. Recent court proceedings have ruled that a manufacturer can impose a compromise clause in a distribution contract, even though the distributor`s basic right includes federal cartel laws. To some extent, this is a departure from previous legislation, which stipulated that requests for federal agreements were not deviating. In the past, it was thought that because antitrust laws are part of our public policy, the distributor must have the right to have such an application challenged in a federal court and that the courts must enforce those laws, regardless of the existence of an arbitration agreement. The law seems to be that as long as the merchant`s claim to cartels and abuse of dominance (usually based on a theory of resale price maintenance) does not permeate the whole dispute or thus overshadow all the controversy that it is unreasonable, the compromise clause can be applied in the contract.

In other words, the manufacturer may insist that the distributor settle disputes between them. In general, the compromise clause will favor the manufacturer, because it will remove the largest club from the distributor, it is the cartel request in which the distributor, if it succeeds, can recover damages and legal fees.