Distributor Agreement Checklist; 19 Issues for Distributor Agreement
Rule #1: "Get it in Writing"
Disputes can be very costly and and can damage business relationships. The key to dispute-avoidance is implementing a clear and well-drafted Distributor Agreement. The Distributor Agreement should clearly set forth the duties, responsibilities and expectations of each of the parties. The Distributor Agreement should also set forth provisions related to limitations and protections that each party can understand.
Consider addressing the following 19 Important Issues for Distributor Agreements:
- 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).
- 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.
- Term and Termination of the Distributor Agreement.
- Define Products or Services and reservation of rights, right of first refusal, etc.
- Clearly set forth Pricing terms (e.g. initial, notice for changes, etc.) for the Distributor Agreement.
- Terms of Payment (Currency, Letter of Credit, etc.)for the Distributor Agreement.
- Performance requirements (sales targets, remedial measures, etc.) for the Distributor Agreement.
- Procedures related to Ordering and Shipping (risk allocation, etc.) for the Distributor Agreement.
- Supplier's Responsibilities (min. & max. order, tech. support, marketing, etc.) for the Distributor Agreement.
- Distributor's Responsibilities (inventory, reporting, training, etc.)for the Distributor Agreement.
- Government filings or approval (allocation of responsibility,etc.) in relation to the Distributor Agreement.
- Warranty (minimum warranty required by law, defective product procedure, etc.) applicable to products sold under the Distributor Agreement.
- Intellectual Property rights (parties rights, granted and reserved, etc.) granted via the Distributor Agreement.
- Termination (auto renew, special circumstances, etc.) provisions of the Distributor Agreement.
- Non-Circumvention & Confidentiality terms for Distributor Agreement.
- Whether Assignment of Distributor Agreement is allowed and under what circumstances.
- Post-Termination Rights, remedies, etc. to be included in Distributor Agreement.
- Dispute Resolution process for disputes arising under Distributor Agreement.
- Non-compete provisions required by either party to the Distributor Agreement.