What is distributor agreement
A distributor Agreement is a form of contract where the Manufacturer (Distributor) is granting a right to the vendor (Distributor) to distribute his goods to the wholesaler or retailer.
Distributor Vs Dealer Agreement
Role: The dealer is a retailer who supplies to the end customer. But whereas the Distributor is a middleman between the manufacturer and the retailer, who supplies to the retailer or dealer.
Terms: The agreement for dealership mainly focuses on the sale of goods, warranty, payment terms, termination. But whereas the Distributor agreement mainly focuses on Territory, sales volume etc
Agreement: The Dealership contract is signed between the dealer and the Distributor. But whereas the distributorship agreement is signed by between the distributor and the manufacture.
Common Mistakes
Oral Agreement: The most common mistake that the companies or vendors does is that they follow the system of oral agreement. This means that there is no any written proof for the existence of relationship or acceptance of terms.
Termination clause: The most common mistake which is use to happen in the Distributorship is that less velocity of importance is given for termination clause of the agreement. Which leads to unwanted litigations.
Exclusivity: Without looking into any of the background of the distributor an exclusivity is given to the distributor. This restricts the manufacturer from the appointing additional distributor on underperformance.
Types of Warranty Agreement
Exclusive Distributor Agreement: This is the most common form of Distributorship. The Manufacturer allocates a exclusive territory to specific distributor & the distributor is the sole authority to distribute the products.
Non-Exclusive Distributor agreement: The distributorship is not granted on exclusive basis, that is to say, in one single location, the manufacturer can appoint many distributors.
Importance of having a written distributor agreement
- Proof of terms: Always a written agreement will acts as a proof on proving the terms between both the parties at the time of dispute or confusion.
- Avoid Litigation expenses: Where there is clarity on terms, both the parties will carry on their responsibilities and duties. hence this will avoid any litigations.
- Avoids misapprehension: When the agreement is very crystal on terms, this will avoid misunderstanding and gives clarity on the terms between both.
- Avoids risk: The indemnification clause always avoids risk and make the parties indemnity the loss which arises out of misrepresentation or falsification of either party.
- Clarity on duties and responsibilities: The written agreement always makes the duties and responsibilities of the parties more clear.
Elements of distributor agreement
Exclusive Territory
Indemnity clause
Commitment on Volume of sale
Consequence of termination
Payment terms: price of the document, and other terms
Warranty and Guaranty & Distributorship Period
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