DISTRIBUTOR AGREEMENT #1

Distributor Agreements

Distributorship

A distributorship (or dealership) is an agreement between two independent parties, the vendor and distributor.  The distributor has a contract to stock the vendor’s product.  The distributor will usually be required by the vendor to hold adequate stock and maintain their outlet premises and infrastructure in a way that will reflect well on the vendor’s product.  The distributor’s profit arises from the difference between the price at which they pay for the goods and the price at which they are able to sell the goods.

Distributorship is distinct from agency, licensing, franchising, cooperatives and multi-level marketing but may share elements of these.  Although a clear distinction can be drawn between distribution and franchising, consider whether the relationship may be deemed a franchise or pyramid selling.

Distributor contracts involve concern agents or principals overseas.  Such contracts may include terms from Incoterms.  ‘Incoterms’ refers to the collection of essential international commercial and trade terms.  The terms were devised in recognition of non-uniform standard trade usages between various States.  When incorporated into a contract, the Incoterm code provides a detailed interpretation of rights and obligations between parties.

Incoterms do not possess legal status.  They are standardised and published, available for incorporation into international contracts at the parties’ discretion.  Parties should specifically refer to the Incoterms in the contract to indicate incorporation.  The International Chamber of Commerce (ICC) is responsible for revising Incoterms periodically to reflect changing practices in international trade. Explanations of these terms and their abbreviations (e.g. EXW and FOB) can be found on the website of the International Chamber Of Commerce.