A distribution agreement is a form of long-term relationship, whereby the distributor purchases the products on its own account, and either resells them to an end-user, or to another business for further resale.  This is different from an agency situation, in which an agent obtains customers or sales leads for their principal, and the customers purchase the products directly from the principal; the agent then receives a commission on the sale.

A distribution arrangement can allow both the supplier and the distributor to obtain an element of exclusivity – the distributor may agree not to sell any competing products within their designated territory, and the supplier may agree not to sell their products to any other distributors within the territory.  Currently, of course, the supplier and the distributor may also want the distribution agreement to protect them against any potential risks arising out of Brexit, by the inclusion of a hardship clause, or by incorporating additional termination provisions.

Whether you are planning to engage a distributor for your products, or considering becoming a distributor for one of your suppliers, you will need a distribution agreement.  Such a distribution agreement will contain a number of obligations and rights applicable to both the supplier and the distributor, and it is important to get all of the terms right, whilst preserving your long-term relationship.

If you need any advice about distribution agreements, please contact Suzanna Patalong on 0121 698 2200 or s.patalong@sydneymitchell.co.uk.

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