Guide to the Distributorship Agreement

Distributorship agreement is a contract between channel partners who stipulate the responsibilities of both parties. The agreement is usually between the manufacturer and distributor. In some cases, it may involve two distributors or a distributor & some other channel entity.


The basic elements of this agreement includes the time period for which the contract is in effect, exclusivity or non-exclusivity, terms & conditions of supply. In an exclusive agreement, the specified distributor will be the only one having the right to sell the products in a specified geographic location.

A well drafted agreement is the key to maintaining and establishing a good working relation in a channel partnership. Negotiations which result in mutually agreed terms & conditions are vital whether you are the owner of the business or the distributor. Incorporate a checklist into contract negotiations to make sure the agreement defines clear expectations, addresses the duties and the responsibilities and also includes safeguards which are designed to protect interests of both the parties.

Following is a checklist of agreements which are necessarily to be considered while drafting a distribution contract:

  • Terms and conditions of sale
  • Term for which the contract is in effect
  • Marketing rights
  • Trade mark licensing
  • Exclusivity or non-exclusivity.
  • Non-competition.
  • Performance
  • Reporting
  • The geographical territory covered by the agreement
  • Circumstances under which the contract may be terminated

Types Of Distributorship Agreements

A distributorship may take any one of the following forms:

Sole Distribution Where a ‘sole’ distributor sell products in a region or to a customer group, then no other distributor is appointed in that territory or for that customer group- it’s a condition of the governing agreement.
Exclusive Distribution

In case of exclusive distribution, the supplier/ manufacturer is close out from selling the goods direct to the territory and may not appoint other distributor to do so.


Non-Exclusive Distribution

This ‘non-exclusive’ distributorship allows the supplier/ manufacturer to sell directly and to appoint more distributors within the area.


Selective distribution

Selective distribution agreements are those in which a network is established through outlets which meet certain minimum requirements such as premises, ability to provide proper sales service, staff training etc. These types of agreements are often used for hi-tech goods where specialization is important.


Exclusive purchasing

Those agreements in which the distributor agrees to buy certain goods for re-sale only from the supplier.


Both the parties i.e. the distributor and the manufacturer should have adequate knowledge of the above mentioned points. Browse the most lucrative distribution business opportunities online.

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