Distribution Agreement

What is a distribution agreement?

A distribution agreement is a legally binding contract that defines the terms under which one party gives permission to another party to market, sell, or distribute agreed products within a defined territory. This document helps to define clarity about both parties’ rights and obligations, payment terms, territory limitations, termination rules, etc.

The present distribution agreement template serves a dual purpose. First, it acts as a legal framework for the business cooperation between both parties. Second, the document helps to prevent disputes along the road.

The parties involved in distribution agreements are suppliers and distributors. A supplier is a person that manufactures and/or sells goods, while a distributor is a person that wants to purchase, distribute, and further promote them within a specified territory and market. Both parties could be independent contractors, businesses, or startups.

Who needs this distribution contract?

This distribution contract sample is ideal for:

• goods and product manufacturers who seek third parties to promote goods;
• importer and exporter businesses that are involved in cross-border transactions;
• various types of businesses, including startups, that want to build a solid distribution chain across the country;
• wholesalers and suppliers that need a solid distribution agreement sample to grow their businesses.

This template could be customized for both international and regional distribution. Apart from that, you can also use this document as a non-exclusive or exclusive distribution contract, depending on the arrangement with your business partner.

What to include in the distribution agreement template?

A well-drafted distribution agreement template should clearly outline the most important elements listed below.

Identification of Parties

Every distribution contract sample shall reflect full identification details of the parties involved—a supplier and a distributor. Those details include full name, registered business or mail address, and contact details (e.g., phone number, email).

The parties whose names are listed in the contract’s preamble must sign and date the contract. Without their signatures a distribution agreement cannot become legally valid.

Description of Products

All distribution agreements shall provide a brief description of products purchased for the distribution. The text of a description could simply mention their type, main characteristics, and measurements. There is no need to include the number or quantity of products, as it will be all reflected in invoices sent by the supplier.

Conditions of Distribution

Another essential section for every property distribution agreement sample is the inclusion of detailed terms and conditions of the distribution. They shall include:

• Territory. A well-drafted sample distribution agreement must define the exact territory (e.g., city, town, county, state, country) where the distribution takes place.
• Type. Parties shall choose if the business arrangement shall form a non-exclusive or exclusive distribution agreement. In the case of a non-exclusive arrangement, a supplier has a right to engage other distributors to sell and promote products in the same territory as a distributor. This, however, cannot be possible in the case of an exclusive distribution arrangement. A distributor shall not sell or promote products outside the agreed territory.
• Compliance. A distributor undertakes to promote, sell, and distribute products under this agreement in full compliance with applicable federal, state, local, or foreign laws (in the case of an international distribution).

Confidentiality Obligation

In the course of the execution of a distribution agreement, parties are exposed to confidential information of each other. Such confidential information usually includes trade secrets, sensitive accounting, financial, or other information. In this regard, parties have to protect that information from its further disclosure to unauthorized third parties.

Inclusion of a non-disclosure clause into a business distribution agreement includes each party’s obligation to refrain from disclosure for a specified period of time. That period of time usually varies between 6 months and 3 years. The parties can also enter a separate confidentiality agreement to add an extra layer of protection to their sensitive information.

Duration and Termination

Every distribution contract sample shall define the period of time within which the contract remains effective. You can fix the contract’s duration by establishing:

• a specific date in the future on which the contract must end;
• a certain period of time within which the contract shall remain effective (e.g., 1 year, 20 months); or
• a list of certain events upon occurrence of which the contract must end (e.g., failing to make a payment for one or more days).

It is also common for distribution agreements to have an automatic prolongation clause. It means that on the last date of a contract’s original term, it could be automatically prolonged for the same period of time again. Either party can stop such an automatic prolongation if a prior written termination notice is being sent in advance (i.e., before the last day of the current term).

Governing Law and Dispute Resolution

For business distribution agreements, it is vital to have a solid dispute resolution clause. It allows parties to act efficiently and discuss a problem in a civilized and compliant way. The parties in a distribution agreement sample can choose one or several dispute resolution mechanisms to implement:

• mediation (i.e., when parties appoint a professional mediator to resolve a dispute without filing a lawsuit);
• arbitration (i.e., when parties designate a professional arbiter to perform arbitration without litigation);
• litigation; or
• both.

The governing law is a law of a state that shall apply to the interpretation, execution, and termination of the agreement. Parties to a sample distribution agreement can select any state they want.

How to customize a distribution agreement at FasterDraft?

To get a fully customized legal document template, follow the instructions given below:

1. Click the “Create Document” button.
2. Answer simple questions in the form.
3. Select a template’s format—distribution agreement template PDF or Word.
4. Make a payment.
5. Download, print, and sign the document.