Precedents Online

Australian Legal Templates

Distributor Agreement – Are you thinking of signing??

Are you thinking of signing a distributor? Working with a distributor can help you increase sales and expand your market. Before you sign a distributor, arm yourself with a distributor agreement. Here are some tips to consider:

Exclusive vs. Nonexclusive

Distributors may ask you to give them exclusive rights to sell your product in a geographic region. This means you will not be able to work with any other distributor in this region for the length of the contract. Granting an exclusive arrangement with a distributor should only be done if you are absolutely they will generate amazing sales. Check that previous clients were satisfied and they have experience selling products in your industry.

Territories big and small

Consider what territories your distributor is planning  to cover before you sign them up. If you give a distributor too much territory, you may not see great results. Make sure you are not giving more territory than the distributor can handle. You can always hire other distributors to handle additional markets.

Termination

The distributor you choose may not work out. Have a contract that details what will happen once the relationship ends. Spell out the responsibilities of both parties—including what to do with excess inventory, how the distributor will be notified of the termination of the contract and other issues. This will save you expensive legal disputes after the contract is terminated.

Price Adjustments

Distributors may ask you to include price restrictions in the contract that prohibit you from making price adjustments for a certain period of time or limit the number of adjustments you can make. Whether you agree to this or not is your choice. Keep in mind you can’t control some factors that could impact your price. If a supplier raises their price, you may need to increase yours if you don’t want this change to affect your margin. If your distributor agreement prohibits you from doing so, you could find yourself dealing with thin margins until the contract term is up.

 

 

 

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Written by Eric Kalde

Eric Kalde is the author of over 30 practice guides published through the leading Australian legal publishers Precedents Online. Lawyers all over Australia rely on Eric Kalde’s precedents and practice guides in their legal practice.