|Distribution agreements are vital contracts for the widespread marketing of goods and services. In such agreements a supplier appoints a third party, the distributor, to market and perhaps also support the supplier's goods or services, sometimes in a specific area, the territory, in which the distributor has already established itself and has an existing customer base.
Whilst it is essential for the supplier in the agreement drafted for the supplier's benefit to retain control over the appointed distributor, it is equally important for a distributor, in an agreement drafted for that party's benefit to avoid overbearing controls and unnecessary interference from the supplier yet ensuring that there is sufficient back-up from the supplier when required. It is the role of the drafter to find the workable balance. Some essential considerations in any distribution agreement drafted for the benefit of the distributor include:
Finally, whether or not the distributor would want the right to support the product would depend on the distributor's technical resource and support staff . If the distributor does have such resources then it is preferable for the distributor to support the product in order to keep the continuity of customer contact.
- Should the appointment be exclusive or non exclusive?
- Should the appointment have territorial restrictions?
- Should the appointment include a right to support the product?
- If the supplier of the product is also supplying software, will the distributor be granted the right to license, sub license or merely to act as an "agent" on the supplier's behalf?
- Should the supplier grant the distributor the right to appoint dealers or sub distributors?
All these points are considered and answered in the Explanatory Note to this Contract.