A: A distribution agreement is used to appoint a distributor for products. The distributor typically will buy the products from a manufacturer or other owner of rights to distribute the goods. Sometimes this may be someone who has rights in a region such as Europe and then wishes to appoint sub-distributors. A distributor usually has to buy the goods and then resell them to its own customers. This may mean that a distributor is left holding stock that it cannot sell because the goods become obsolete or there is a lower market than is anticipated. Some key things to consider are:
● Will you be an exclusive or nonexclusive distributor? In a properly drafted exclusive distribution agreement this should mean that you have the sole rights to market and sell the products in that particular territory. If the agreement is non-exclusive, it means other distributors (or the owner itself) may sell the goods.
● How long does it last? You want to make sure that you have a reasonable period in which to beneft from the effort you put into developing the market for the products. You may also want an option to extend this period.
● Will you have to make a minimum commitment? There may be a minimum amount of product you need to purchase each year or maybe an increasing fgure year-on-year.
● Will you have a right to sell off unsold goods at the end of the agreement and for how long? In some cases, you may be able to negotiate that you’re able to sell back any unsold goods on termination.