This article has been written by Ayush Tiwari, a student of Symbiosis Law School, NOIDA. This article aims to discuss why one should get a distribution agreement made with their distributor, what should be included in a distribution agreement and how it is different from other commercial agreements.
Table of Contents
When a business produces a product, it must be sold. Now, if the firm is well-established, it may be able to sell directly to its clients; but, there are occasions when the company lacks the competence to sell and advertise its products at the retail or wholesale level. In such a situation, it will work with a distributor that has the knowledge and a presence in the target market. It will need to enter into a legal agreement with the distributor for this reason, which will control their partnership and explicitly specify the terms of their agreement, as well as allow the distributor to sell and advertise the items.
In its most basic form, a distribution agreement is a legally binding agreement between a supplier and a distributor of products.
An informal distribution agreement between the supplier or manufacturer and the distributor is also possible. Many do, but these verbal agreements frequently result in misunderstandings, which can lead to disagreements and the need for legal action.
A comprehensive distribution agreement, with clearly specified transaction conditions, gives clarity for all parties, ensuring that they know precisely what they need to accomplish. When one side fails to fulfil the provisions of the agreement, the non-defaulting party will be saved by the agreement, which will protect it legally and provide legal remedies.
If you want to work with or learn more about distributors, you’ll need to understand distribution agreements and how they may safeguard your end of the business deal.
What are distribution agreements
The distribution agreement (also known as a “wholesale distribution agreement”) governs the distribution of items made by a producer (also known as a “supplier”) and sold by a distributor. There are two primary parts to the distribution agreement.
On one hand, like in a normal sales agreement, the supplier agrees to provide and sell its items to the distributor under specific conditions. The distributor agrees to acquire and accept delivery of the supplier’s products at regular intervals over the life of the agreement (sales agreement with successive deliveries), and the supplier agrees to deliver them at frequent intervals.
The parties’ economic goal, on the other hand, is to promote the supplier’s products in a certain region. This implies that the distributor is responsible for promoting and marketing the supplier’s goods. In this case, the supplier frequently offers the distributor exclusive rights to its items in the agreed-upon zone. It is natural for a distribution deal to be signed for a long period of time. As a result, the agreement’s wording is critical, because disagreements might occur long after the agreement has been signed.
The details of the agreement are defined in the distribution contract, which includes the cost of the items or the commission rate, the length of the contract, the distributor’s operating area, and other data.
Need for distribution agreements
Despite the fact that reselling is frequently done on the basis of an informal agreement, there are a few reasons why one should get into a formal distribution agreement:
- A misunderstanding may result from a verbal or informal agreement, and the parties may believe that it is not necessary to observe all of the provisions of an informal agreement.
- The possibilities of misunderstanding and misinterpretation are reduced when an agreement contains explicit terms and conditions expressed in straightforward words.
- In the event that one party willfully violates the terms and conditions agreed upon, the victim party will have a lot easier time obtaining legal protection.
Contents of a basic distribution agreement
The clause must specify the territory in which the distributor is permitted to sell and advertise the goods. It might be claimed that the distributor can increase or reduce the region after consulting with the supplier.
Duties and obligations
It is by far the most significant provision in the agreement since it specifies what both parties must do in order to fulfil their obligations under the agreement.
Some of the responsibilities for the manufacturer will include:
- Deliver the goods which are agreed-upon.
- Provide all necessary product information, education, and technical assistance.
- Follow the delivery dates and timetables.
- Allow for advertising or promotional expenses.
- Provide any additional information or data requested by the distributor.
- On-time payments
Some of the responsibilities of the distributor will include:
- Maintain a sufficient inventory.
- Purchase expectations at a minimum.
- Set goals for sales, accountability, and customer service.
- Other distributor responsibilities include sales quotas, sales campaigns, paperwork, and customer service after the sale.
Duration of the agreement
One must address the terms such as how long this agreement will be valid when it will come into force, when it will terminate, and if it will be renewed or not in this clause.
All of the supplier’s intellectual property rights are guaranteed to be preserved. The clause must provide directions for the distributor’s use of the intellectual property. It should also limit the distributor’s ability to reveal trade secrets.
The distributor, supplier, or both may be in charge of marketing the product. If the distributor advertises the goods, the supplier may specify what resources it may use to market the product, what activities it engages in for the purpose of advertising, and what marketing rules it must follow.
The supplier may seek to report on sales, inventory, advertising, or other aspects of the agreement, which will be provided by the distributor at agreed-upon intervals. This is especially crucial if the distributor is paid a commission or if the supplier is required to purchase back unsold goods.
Details of the payment
One of the most significant aspects of a distribution agreement is how the distributor will make money, whether through sales commissions or earnings left over after purchasing things wholesale and reselling them for a profit. The contract should specify what happens to unbought inventory and whether there is any minimum or maximum pricing at which the distributor must sell the items, regardless of how it is set up.
Consumer training obligations
Many technological goods specify the degree of training and assistance that the supplier will offer to the distributor, as well as who is responsible for delivering customer training and assistance.
Just as the distributor is expected to satisfy minimum sales standards, so is the supplier. Occasionally, the distributor will be forced to buy a certain amount of the product. These minimum standards will be based on predictions that will be issued at intervals indicated in the contract over the duration of the agreement.
It’s critical to detail the distributor’s rights in terms of using intellectual property, such as brand names and trademarks. For instance, may one:
- just display the trademark on a sign in his window?
- Apply for the trademark on his letterhead or other printed materials?
- use a trademark in his name?
Otherwise, unless the trademark owner has specifically granted permission, the distributor cannot use the trademark without risking liability. The manufacturer must exercise caution when providing this right and in what way, since he does not want to lose his unique trademark ownership rights by allowing the distributor such rights.
These conditions are optional, and they prohibit the distributor from selling identical products from rival suppliers, selling similar items from the same supplier, or competing with the supplier during or after the agreed time. These normally only apply to things that are very unique, rather than those with dozens or hundreds of variations on the market.
If the parties disagree on the definition of “competition” and the matter goes to court, the judge will consider the following factors:
- the length of the prohibition;
- the restriction’s geographical region;
- the particular action that is prohibited;
- the level of difficulty imposed on the distributor; and
- any topics of public concern that may arise.
Restrictions on competition, on the other hand, may not apply to all products. They usually apply when the product is one-of-a-kind or when the distributor has more negotiating power.
Circumstances of termination
The circumstances under which either party can terminate the agreement, as well as the repercussions of such termination, must be specified, as one party or the other may need to nullify the agreement at some time.
Types of distribution agreements
The sort of distribution agreement one choose is determined by the type of transaction you’re conducting. It’s critical to select the correct agreement to ensure that it fulfils its contractual objective of safeguarding both parties’ rights.
There are five different types of distribution agreements:
- Agreement on exclusive distribution
- Agreement on non-exclusive
- Wholesale distribution agreement
- Distribution agreements for commission
- Developer distribution agreements
Let’s take a deeper look at each of the many types of distribution agreements:
Agreement on exclusive distribution
An exclusive distribution agreement can be used in a variety of ways by both parties. In certain cases, a distributor is the sole distributor of a supplier’s goods in a given geographic area. Other exclusive agreements provide the distributor unique permission to distribute the goods to certain clients, preventing any other distributor from doing so. Exclusive agreements are frequently utilised when the product is costly or unique and technological, necessitating a specialised understanding of the item and the market.
Agreement on non-exclusive distribution
There can be more than one distributor under a non-exclusive arrangement, and the seller is not obligated to offer exclusive rights to the distributor. With different distributors, the provider might enter into multiple distribution agreements.
Wholesale distribution agreement
A wholesale company sells its items in bulk at a lower price than it would if it sold them individually. While the phrase “wholesale distribution agreement” is often made up to characterise the sort of transaction, the basic premise is that the distributor contracts with a wholesale corporation to distribute things in bulk, either to retail stores for consumer purchase or directly to customers. When a wholesaler buys a product from a supplier, he or she becomes the owner of the product, allowing the wholesaler to sell it to the next firm for a profit.
Distribution agreements for commission
Many distribution agreements include a provision that specifies the amount paid to the distributor for selling the product, as well as a commission depending on the number of goods sold. Commissions provide an additional incentive for the distributor to sell as many of the supplier’s products as feasible. Because the distributor is paid a proportion of total sales, the more it sells, the more money both sides make.
Developer distribution agreements
Developer distribution agreements specify how software and application developers want their products distributed. They also describe the distributor’s and developer’s overall relationship. To eliminate the possibility of a future conflict, it’s critical to create an official agreement the first time.
Distribution arrangements : exclusive or non-exclusive
Business owners should consider if they want to designate an exclusive or non-exclusive distributor. Providing exclusivity to a distributor, for instance, would imply that only that distributor could sell their items in a specified geographic region. The supplier or vendor may provide other distributors as well in the same region if the agreement is non-exclusive.
In general, manufacturers believe that the benefits of offering exclusivity to potential distributors is appealing and can be related to meeting sales objectives. Suppliers, on the other hand, should be aware of any previous distributors they have designated in a certain geographic region. They may find it more cost-effective and beneficial to select a number of non-exclusive distributors in the very same region, allowing them to collaborate and pool resources to advertise items in the same territory.
Distinction with other commercial agreements
Difference between agency and distribution agreement
- On behalf of the provider, an agent is engaged to negotiate or close contracts. Contracts are formed directly between the distributor and the customer, and the distributor essentially becomes the provider.
- A percentage-based commission is given to an agent. A distributor sells a product to clients, generally with a profit margin to cover expenses and profit.
- The products are not owned by the agency. A distributor owns the products and is willing to take the risk that they will not sell.
Difference between a distribution agreement and a dealer agreement
- Dealers, such as retailers or value-added resellers, buy products from distributors and resell them to their consumers. The distributor operates as an intermediary between a supplier and dealers in a distributor-dealer relationship.
- A dealership agreement often outlines the conditions of sales for items acquired from the distributor, as well as the dealer’s expected obligations and responsibilities and the circumstances under which the agreement may be cancelled.
- A dealership agreement may also include the method of payment, delivery date, and territory rights of the dealer.
Difference between a distribution agreement and a franchise agreement
- The franchisee is allowed and encouraged to use the franchisor’s trademarks and brand name in ordinary business procedures under the terms of the franchise agreement. To aid the franchisee’s success, the franchisor also gives advertising and training assistance. To retain the franchisor’s brand identity, a franchisee must follow precise criteria while promoting and selling items. A distributor is not allowed to use the company’s trademarked name when distributing its items. Instead, the distributor does business under its own identity. It serves as a product reseller, but it does not conduct business on behalf of the firm that manufactures the things.
- A franchisee also pays an initial fee and continuing royalties to the franchisor in exchange for allowing it to continue operating under the franchisor’s trademark name. A distributor merely pays for the products it purchases from the manufacturer.
Advantages and disadvantages of a distribution agreement
Using a distributor has a number of apparent disadvantages. Under which the most apparent downside is the loss of control over the distributor’s actions, such as how items are sold in each area, how pricing is determined, and how products are eventually promoted.
Where customised items are supplied, the supplier may find it more acceptable to have direct contact with the final consumer and be more in control of their sales. At first, the provider may find it constraining to select an exclusive distributor in a territory. Suppliers should assess whether there is a chance to generate more revenue through a range of distribution channels in a certain area, which might lead to healthy competition and increased sales in the future.
It’s also vital to consider the advantages when deciding whether or not a distributor is the best option for your company. Like, the ability to raise worldwide awareness of the supplier’s brand and access a market in other countries that would otherwise be impossible to reach without investing the time and expense of establishing a permanent presence abroad.
By selling directly to distributors, suppliers can pass on the high level of risk that comes with medical items, as well as duties like adhering to local regulations and acquiring particular rights and consents to sell pharmaceutical products or medical devices in other countries.
Other advantages include the fact that the supplier is not responsible for selling items directly to end consumers; and, finally, the distributor is responsible for monitoring sales for various clients in other countries, reducing the provider’s administrative expenditures.
Sample of an exclusive distribution agreement
This Exclusive Distributor Agreement (“Agreement”) is made and effective on this, the 30th day of September 2005, by and between Laser Shot, Inc., a Texas corporation having offices at 12818 Century Drive, Stafford, Texas, 77477, United States of America (“Company”) and Lamperd Less Lethal, Inc., a Canadian Corporation with its principal place of business at 1200 Michener Road, Sarnia, Ontario, Canada N7T 7H8, (“Distributor”).
In consideration of the mutual promises contained herein, the parties agree as follows:
As used herein, the following terms shall have the meanings set forth below:
a. “Products” shall mean the following Company products to be sold by Distributor:
All products as referred to in “Attachment 1: Products” are incorporated herein by reference.
b. “Territory” shall mean the following described geographic areas and/or particular accounts:
All areas and accounts as referred to in “Attachment 2: Territory” are incorporated herein by reference.
c. “Other Terms and Conditions” shall mean all terms, conditions, limitations, and modifications as described in “Attachment 3: Other Terms and Conditions” incorporated herein by reference.
Company hereby appoints Distributor as its exclusive Distributor for the Products in the Territory. Distributor’s sole authority shall be to solicit orders for the Products in the Territory in accordance with the terms of this Agreement. Distributor shall not have the authority to make any commitments whatsoever on behalf of Company.
3. General Duties
The distributor shall use its best efforts to promote the Products and maximize the sale of the Products in the Territory. Distributor shall also provide reasonable assistance to Company in promotional activities of Company with respect to the Products. Distributor shall also provide reasonable “after-sale” support to Product purchasers and generally perform such sales related activities as are reasonable to promote the Products and the goodwill of the Company in the Territory. Distributor shall report monthly to Company by written report due by the 15th of the following month concerning sales of the Products and marketing activities of the previous month. This report, known as the monthly “Sales and Marketing Report”, shall include two parts, the “Product Sales Report” and the Marketing Activity Report”. The Product Sales Report shall include orders written and should include customer name and address, Product or Products ordered, and date of sale. Marketing Activity Report shall include a general synopsis of activities, such as advertisements, articles, trade shows, etc. The distributor will devote adequate time and effort to perform its obligations. Distributor shall neither advertise the Products outside the Territory nor solicit sales from purchasers located outside the Territory without the prior written consent of Company. The distributor’s task is to solicit orders from all potential customers in the Territory including individuals, businesses, government entities, resellers, dealers, retailers, and others.
4. Reserved Rights
The company reserves the right to exhibit, advertise, market, attend trade shows, and solicit orders directly from and sell directly to any end-users or other retail buyers within the Territory. Company further reserves the right to enter into any agreements, partnerships, associations, joint ventures, OEM contracts, or other business relationships with manufacturers, suppliers, or other parties. Any sales or leads of Products made directly by the Company in the Territory will be credited and attributed to the Distributor, except that such sales will not count towards any quarterly or annual minimum sales quotas that Distributor may be subject to elsewhere in this Agreement.
5. Conflict of Interest
Distributor warrants to Company that it does not currently represent or promote any lines or products that compete with the Products. During the term of this Agreement, Distributor shall not represent, promote or otherwise try to sell within the Territory any lines or products that, in Company’s judgment, compete with the Products covered by this Agreement. Distributor shall provide Company with a list of the companies and products that it currently represents and shall notify Company in writing of any new companies and products at such time as its promotion of those new companies and products commence.
6. Independent Contractor
The distributor is an independent contractor, and nothing contained in this Agreement shall be construed to (1) give either party the power to direct and control the day-to-day activities of the other; (2) constitute the parties as partners, joint venturers, co-owners or otherwise; or (3) allow Distributor to create or assume any obligation on behalf of Company for any purpose. The distributor is not an employee of the Company and is not entitled to any employee benefits. Distributor shall be responsible for paying all income taxes and other taxes charged to Distributor on amounts earned hereunder. All financial and other obligations associated with the Distributor’s business are the sole responsibility of the Distributor.
A. Indemnification by Distributor
Distributor shall indemnify and hold Company free and harmless from any and all claims, damages, or lawsuits (including attorneys’ fees) arising out of intentional or negligent acts or omissions by Distributor, its employees or agents.
B. Indemnification by Company
Company shall indemnify and hold Distributor free and harmless for any and all claims, damages, or lawsuits (including attorneys’ fees) arising out of defects in the Products caused by Company.
8. Software invention and video scenario creation
Distributor may at its own cost and expense construct special software or video scenarios (“Custom Software and Video Scenarios”) for use and sale with the Products. All Custom Software and Video Scenarios shall be deemed to be “work made for hire” and all copyrights shall vest with Company. Distributor agrees to execute any and all forms, documents, licenses, and releases to fully transfer all copyrights of Custom Software and Video Scenarios from Distributor to Company. A company must review and approve all Custom Software and Video Scenarios before it will be released back to the Distributor to sell as part of the Products. The Distributor shall be allowed to sell the Custom Software and Video Scenarios royalty-free. However, the Company reserves the right to charge a reasonable royalty in future distributor agreements or renewals.
9. Purchase and Sale of Products
A. Company agrees to sell to Distributor and Distributor agrees to purchase from Company the Products subject to the terms and conditions as referred to in “Attachment 3: Terms and Conditions of Sale of Products” incorporated herein by reference.
B. Orders. All orders for the Products shall be submitted to the Company in writing by fax or mail (regular postal mail and other delivery services are acceptable) sent to the attention of the Controller. All fax orders must be followed up with a written order by mail sent to the attention of Controller. All orders received shall be verified by email sent from the Controller.
C. Inquiries from Outside the Territory. Distributor shall promptly submit to Company, for Company’s attention and handling, all inquiries received by Distributor from customers outside the Territory. All inquiries shall be submitted to the Company by email within five (5) business days and shall be included in the next monthly Sales and Marketing Report.
10. Product Warranty
Any warranty for the Products shall run directly from the Distributor to the purchaser of the Products. Pursuant to any such warranty, the purchaser shall contact the Distributor directly to make arrangements for repair, return, or replacement of any allegedly defective Products. Distributor shall have sole authority to deal with customers regarding any such warrantable repairs, returns, or replacement. Upon receipt of any such warrantable products, Distributor shall separately contact Company to arrange for return or credit for these defective products. The decision for determination of defect and replacement or credit for these products shall be solely at the Company’s discretion.
NOTE: The existing Company Containerized Shooting Range (“CSR”) is provided to the Distributor on an “as is” basis. The company specifically disclaims any maintenance, warranty or support obligations on the existing CSR.
11. Product Availability
The company shall use its best efforts in filling orders submitted by the Distributor in a reasonable and timely fashion. Company shall immediately notify Distributor of any known or anticipated delays in filling new or previously entered orders and the estimated duration of any delays so that Distributor may fairly represent this information to existing or potential customers. Under no circumstances shall Company be responsible to Distributor or anyone else for its failure to fill accepted orders, or for its delay in filling accepted orders, when such failure or delay is due to strike, accident, labour trouble, acts of nature, freight embargo, war, civil disturbance, vendor problems, or any cause beyond Company’s reasonable control.
12. Product Samples
It is not the policy of the Company to provide or loan Product Samples to its Distributors. However, in the exceptional case where a Product Sample is provided or loaned to a Distributor, the following language shall apply: Any Product Samples of the Products provided by the Company to the Distributor shall remain the property of the Company. Distributor shall have full responsibility of keeping each Product Sample in proper operating condition during the entire time the Product Sample is in the possession of Distributor. Upon written notice from Company, Distributor shall, within thirty (30) days, arrange for return of each Product Sample to Company in good condition less reasonable wear and tear.
13. Additional Responsibilities of Distributor
Not later than the 15th day of every month, Distributor shall provide Company with a three (3) month rolling forecast of orders showing Products requested.
B. Expense of Doing Business
The distributor shall bear the entire cost and expense of conducting its business in accordance with the terms of this Agreement.
Distributor shall provide itself with, and be solely responsible for, (1) such facilities, employees, and business organization, and (2) such permits, licenses, and other forms of clearance from governmental or regulatory agencies, if any, as are necessary for the conduct of Distributor’s business operations in accordance with this Agreement.
D. Promotion of the Products
Distributor shall, at its own expense, vigorously promote the sale of and stimulate demand for the Products within the Territory by direct solicitation. In no event shall Distributor make any representation, guarantee, or warranty concerning the Products except as expressly authorized by Company.
E. Customer Service
Distributor shall diligently assist customers’ personnel in using the Products and shall perform such additional customer services as good salesmanship requires and as Company may reasonably request.
F. Advising of Changes
Distributor shall promptly advise Company of any changes in Distributor’s status, organization, personnel, and similar matters; any changes in the key personnel, organization, and status of any major customers of Company in the Territory; and any political, financial, legislative, industrial, or other events in the Territory that could affect the mutual business interests of Distributor and Company, whether harmful or beneficial.
G. Books and Records
Distributor shall maintain and make available to Company accurate books, records, and accounts relating to the business of Distributor with respect to the Products. Distributor shall also maintain a record of any customer complaints regarding either the Products or Company and immediately forward to Company the information regarding those complaints.
14. Additional Obligations of Company
A. Assistance in Promotion
Company shall provide Distributor with marketing and technical information concerning the Products, including samples of brochures, instructional materials, advertising literature, and other Product data in the English language. Distributor shall be responsible for translating these materials to other languages, the costs related to translation and printing of the translated materials as a cost of doing business.
B. Assistance in Technical Problems
Company shall assist Distributor and customers of the Products in all ways deemed reasonable by Company in the solution of any technical problems relating to the functioning and use of the Products.
C. New Developments
Company shall inform Distributor of any new product developments that are competitive with the Products and other market information and competitive information as discovered from time to time.
15. Trademarks and Trade names
During the term of this Agreement, Distributor shall have the right to indicate to the public that it is an authorized Distributor of Company’s Products and to advertise within the Territory such Products under the trademarks, service marks, and trade names that Company may adopt from time to time (“Company’s Trademarks”). Nothing herein shall grant Distributor any right, title, or interest in Company’s Trademarks. At no time during the term of this Agreement or at any time thereafter shall Distributor challenge or assist others in challenging Company’s Trademarks or the registration thereof or attempt to register any trademarks, service marks, or trade name confusingly similar to those of Company. Company indemnifies Distributor for all use of Company’s Trademarks.
B. Approval of Representations
All presentations of the Company’s Trademarks that the Distributor intends to use shall first be submitted to Company for written approval (which shall not be unreasonably withheld) of design, colour, and other details or shall be exact copies of those used by Company.
This Agreement shall commence on the date first written above and shall continue for ___ year(s) unless terminated earlier as provided herein. Thereafter, this Agreement shall continue until terminated upon at least ninety (90) days notice by Company or ninety (90) days notice by Distributor.
A. Termination for Breach
If either party defaults in the performance of any material obligation in this Agreement, then the non-defaulting party may give written notice to the defaulting party and if the default is not cured within thirty (30) days following such notice, the Agreement will be terminated.
B. Termination for Insolvency
Either party shall have the option to terminate this Agreement without notice, (1) upon the institution of actions against the other party for insolvency, receivership or bankruptcy, or any other proceedings for the settlement of other party’s debts, (2) upon other party’s making an assignment for the benefit of creditors, or (3) upon initiation of dissolution proceedings against the other party.
C. Termination of Exclusivity
Company retains option upon termination to terminate Distributor’s exclusivity rights and may allow Agreement to continue as a non-exclusive distributor agreement.
D. Return of Materials
All of Company’s trademarks, trade names, patents, copyrights, designs, drawings, formula, or other data, photographs, demonstrators, literature, and sales aids of every kind shall remain the property of Company. Within thirty (30) days after the termination of this Agreement, the Distributor shall return all such materials to Company at the Distributor’s expense. The distributor shall not make or retain copies of any materials or confidential items that may have been entrusted to it. Effective upon the termination of this Agreement, Distributor shall cease to use all trademarks, service marks, and trade names of Company.
18. Limitation on Liability
In the event of termination by either party in accordance with any provisions of this agreement, neither party shall be liable to the other, because of termination, for compensation, reimbursement or damages on account of the loss of prospective profits or anticipated sales or on account of expenditures, investment, leases or commitments in connection with the business or goodwill of Company or Distributor. The company’s sole liability under the terms of this Agreement shall be for any unpaid commissions if applicable.
19. Export Law
Distributor acknowledges and agrees that the Products may be subject to export restrictions and controls. Distributor agrees and certifies that neither the Products nor any component thereof is being or will be acquired, shipped, transferred, exported or re-exported, directly or indirectly, into any country prohibited by export restrictions and controls. Distributor bears all responsibility for export law compliance. Without limiting the generality of the foregoing obligation, Distributor hereby expressly agrees that, without the prior written authorization of Company and the United States Government, Distributor will not, and will cause its representatives to agree not to, export, re-export, divert or transfer any Product to any destination, company or person prohibited by the Export Administration Regulations or other export control laws and regulations. Distributor shall make its records available to Company at Company’s request, in order to permit Company to confirm Distributor’s compliance with its obligations as set forth in this Section 19. Distributor will indemnify Company against all claims based on Distributor’s exporting the product.
Distributor acknowledges that by reason of its relationship to Company hereunder it will have access to certain information and materials concerning Company’s business plans, customers, technology, and products that is confidential and of substantial value to Company, which value would be impaired if such information were disclosed to third parties. Distributor agrees that it shall not disclose to any third party, any such confidential information revealed to it by Company. Without other notice, the Distributor shall treat all information as confidential in nature. Upon specific request, Company shall advise the Distributor whether or not it considers any particular information or materials to be confidential. Distributor shall not publish any technical description of the Products beyond the description published by Company. In the event of termination of this Agreement, there shall be no use or disclosure by Distributor of any confidential information of Company, and Distributor shall not manufacture or have manufactured any devices, components or assemblies utilizing Company’s patents, inventions, copyrights, know-how or trade secrets.
All notices required or permitted by this agreement shall be deemed given if sent by certified mail, postage prepaid, return receipt requested or by recognized overnight delivery service. Notices shall be made as follows:
In this article, we have analysed all the information regarding distribution agreements and after reading the whole article one can easily conclude that using distributors can give a low-risk, cost-effective approach for entering into new, expanding international markets. However, before going down the path of a distribution agreement, make sure you have a clear written distribution agreement in place. Signing up for a distribution agreement may be exciting and productive, but one should always think about all of your alternatives before committing to one such agreement.
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