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What is a distribution agreement?

Posted on Thursday, 6th June 2013 by

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A distribution agreement is a contract that governs the marketing of a particular customer group, that states the responsibilities of both parties. It is usually between a manufacturer and a distributor, but in some cases may involve two distributors. Agreements can range from a very short letter agreement to a complex international arrangement.

A distribution agreement usually includes the time period of the contract, terms and conditions of supply and exclusivity – only stipulated distributors have the rights to sell product within a geographic area,  or non – exclusivity. For example, a shop that sells a certain brand may have exclusivity over that in their area, so other shops around them cannot sell the same.

Marketing rights, trade mark licensing, non –competition, performance, reporting and termination circumstances are often also included within this agreement. Why do we have these agreements? Informal arrangements often lead to misunderstandings and disagreements. The agreements create a negotiated contract to ensure both parties agree upon the terms, and to create a basis ready for backup, incase something does happen to go wrong.

Distribution agreements that are intended to last over a long period of time also need to consider that products and management change, along with trademarks and markets to just name a few. The writing in the agreements should be flexible enough to meet the needs of changing environment without having to amend the agreement time and time again.

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