Distributor Agreement Clauses
The agreement should also specify the duration of trade relations. In addition, procedures should be put in place to address renewal and shutdown issues. Most manufacturers, who have had long and relatively peaceful relationships with their distributors, with very few disputes, use approaches like this. Instead of simply sitting in an office in a remote city that dictates “quotas,” they work closely with traders to set pleasing goals and develop methods to achieve those goals. They are also cooperating to determine the additional efforts that will be made if the objectives are not met. The starting point is that international distribution agreements generally contain details on specific products and the specific area that will be included in the contract. As a first comment, we must keep in mind that the overwhelming majority of all disputes in the context of distribution will arise if the manufacturer wants to end the relationship against the will of the distributor. Therefore, the conclusion of this whole exercise is to do two things. First, spell the agreement so that everyone knows what the agreement is.
In other words, do what you would do in each contract. Second, when negotiating the franchise agreement, whether you represent the manufacturer or distributor, Jockey for the position that will have the upper hand if the manufacturer ever wants to terminate the contract. From the manufacturer`s point of view, if you set sales quotas or targets, be careful how you impose them. The general principles of law essentially say that actions speak louder than words. If you set high targets or quotas in distribution agreements, you should apply them consistently. Otherwise, if you later attempt to terminate a distribution place on the grounds that the distributor has not achieved its objectives, you will be faced with the argument that, since you have never achieved your goals before, you will have to achieve that specific goal against that special distributor for a malicious reason, z.B. as far as the resale price is concerned. Many factors are taken into account in the creation of a large distribution agreement. Errors in a distribution agreement are almost invisible during the balance between a distributor and a manufacturer. Unfortunately, the same mistakes at the end of a distribution partnership become glaring errors. In order to avoid any problems at the time of termination, the author of a distribution agreement must ensure that no non-solid clause is inserted and that certain formulations are not omitted. Here is a list of ten most common mistakes to avoid when developing your next distribution agreement.
The most serious situation is that the agreement absolutely prohibits the trader from selling outside a regulated area. For example, there could be an agreement that the distributor can only sell the products within the city of Cleveland, Ohio, and if the distributor sold products outside the city limits, the manufacturer would have the right to terminate the distributor. Clearly, the interests differ considerably depending on which side of the table the parties are on. The producer may at least want some kind of competition agreement. On the other hand, a non-compete agreement will never be in the distributor`s interest. Non-competitive agreements are one of the most sensitive subjective provisions of the treaty. Counsel for both parties can say with great certainty whether a particular clause is “reasonable” and therefore applicable.