Thursday, February 28, 2013

Guest Blog: The Distributor Agreement

Below are answers to some frequently asked questions related to Distributor Agreements.

Q: How can I protect my interests as a Distributor?
A: Rule No. 1: "GET IT IN WRITING!" Make sure you have included the important terms in a well drafted  Distributor Agreement, and that it is signed by each of the parties.  

Q: How do I know who is responsible for the shipment and when risk transfers to me or another party?
A: Make sure the risk transfer terms are clearly set forth in a comprehensive Distributor Agreement.

Q: Who will pay for tariffs, taxes, customs duties, etc.?
A: Make sure the allocation of responsibility of tariffs, taxes and customs duties is clearly set forth in a well-drafted Distributor Agreement.

Q: How can I reduce the risk of my Buyer circumventing me and dealing with the Supplier directly?
A: Make sure non-circumvention terms are clearly set forth in a well-drafted comprehensive Distributor Agreement.

Below is a Distributor Agreement Checklist.*

1. Legal Identity of the Parties of Distributor Agreement (it is important that the identity reflect the legal names of the entity(ies) and/or individual(s) and the State or Country where the entity is registered, as well, as the full address).
2. Appointment of Distributor for Distributor Agreement (or Seller, Reseller or broker).
a. Specify whether Distributor Agreement is an exclusive or non-exclusive distributor agreement;
b. Set forth territory;
c. Specify if there is a right to bind supplier; and
d. Permit or prohibit assignments of the contract and/or appointment of sub-distributors.

3. Term and Termination of the Distributor Agreement.

4. Define Products or Services and reservation of rights, right of first refusal, etc.

5. Clearly set forth Pricing terms (e.g. initial, notice for changes, etc.) for the Distributor Agreement.

6. Terms of Payment (Currency, Letter of Credit, etc.) for the Distributor Agreement.

7. Performance requirements (sales targets, remedial measures, etc.) for the Distributor Agreement.

8. Procedures related to Ordering and Shipping (risk allocation, etc.) for the Distributor Agreement.

9. Supplier's Responsibilities (min. & max. order, tech. support, marketing, etc.) for the Distributor Agreement.

10. Distributor's Responsibilities (inventory, reporting, training, etc.) for the Distributor Agreement.

11. Government filings or approval (allocation of responsibility, etc.) in relation to the Distributor Agreement.

12. Warranty (minimum warranty required by law, defective product procedure, etc.) applicable to products sold under the Distributor Agreement.

13. Intellectual Property rights (parties rights, granted and reserved, etc.) including but not limited to, use of Trademarks for marketing purposes, granted via the Distributor Agreement.

14. Termination (auto renew, special circumstances, etc.) provisions of the Distributor Agreement.

15. Non-Circumvention & Confidentiality terms for Distributor Agreement.

16. Whether Assignment of Distributor Agreement is allowed and under what circumstances.

17. Post-Termination Rights, remedies, etc. to be included in Distributor Agreement.

18. Dispute Resolution process for disputes arising under Distributor Agreement.

19. Non-compete provisions required by either party to the Distributor Agreement.

* This checklist is published with authorization from Grenier Law Offices, PC.  To view the entire article, go to   This article is provided for information purposes only and is not legal advice.  Also, it does not contain an exclusive list of issues. Do not rely solely on this checklist. Consult a qualified attorney with regard to the specifics of your situation.

Michelle L. Grenier, Esq. is a business lawyer and founder of Grenier Law Offices, PC, a Better Business Bureau Accredited Business since 2002.

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