Terminating A Distribution Agreement

A distribution agreement allows a distributor to transport or resell products purchased by a manufacturer. The manufacturer supplies the products and the distributor acts as a seller, either as a wholesaler or as a distributor. The distribution agreement may be exclusive, with a single distributor using a manufacturer for a particular product or region. The agreement may also allow several distributors to collaborate with several manufacturers. The manufacturer generally states the terms of the agreement, including all marketing tactics or product licensing procedures, and the distributor agrees to comply with these conditions. A common area of concern during termination is the status of the extended customer base or client lists and how this information is handled if there is no specific clause to address the issue. It is clear that both parties have a stake in maintaining control or financial relations with the companies in the end-to-end distribution chain. The supplier wants to preserve the expanded market obtained by the distribution contract and distributors often want to restrict the use of customer information by suppliers. It is important to report on what each party learns through its relationship with the other. In the event of termination or expiry of the distribution contract, the provisions established at the time of the constitution are at the heart of the concerns. Is the termination procedure clear, does it avoid any legal implications in cartel and abuse of dominance disputes? These issues can be dealt with in advance, provided, of course, that they are discussed at the beginning of the business relationship.

When a supplier or distributor seeks legal advice when entering into a new distribution contract, the first thoughts focus on customer-specific issues. Is a general boilerplate contract sufficient or does the customer want or need a contract specifically tailored to their sector or business relationship? When reviewing a distribution agreement, the parties must have done their homework. Is this a situation in which the other side has shown that he is capable of playing well with others? Has a lawyer asked to intervene to design the contract? Do you know if either party has a well-established history/reputation compared to its former distributors or old distribution contracts? You may have the best product in the world, but if the supplier`s history is a scorched earth dispute when each sales contract is concluded, you can pass on the distribution. If the supplier is willing to share some "control" with the dealer or it will be "their way or the highway". Specific issues to be included in the contract include the duration of the agreement, the required service, exclusivity or non-exclusivity, the definition of territorial boundaries, the definition of the transfer of material and the specific definition of terms of sale. In addition, these contracts should include specific conditions for authorized or necessary marketing and advertising, the need to account for activities and sales, consideration of what is considered competitive, regardless of exclusivity decisions, concerns about trademarks and ip concerns, and the classic choice of legislation, both for interpretation and enforcement of the contract.

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