When deciding on a distribution agreement it is vital to make the decision on whether the agreement is an exclusive agreement or a selective agreement. An exclusive distribution agreement is one where the supplier agrees to sell its products to only one distributor for resale in a particular territory. Therefore, the supplier agrees not to distribute the products themselves or through another party. At the same time, there is also a “sole distributor agreement” whereby the supplier can also distribute their own goods but the other party within the contract is the only external distributor of the goods. Such agreements usually refer to specific locations and can therefore not be taken to be an indefinite exclusive agreement. If your exclusive or sole distribution agreement has been breached by the other side or there is dispute over the nature of the agreement, make sure to contact our legal experts for further analysis and advice.
Where parties desire more flexibility in their arrangements, a non-exclusive distribution agreement is a good alternative. Non-exclusive distributorship allows the supplier to both sell to customers and appoint other distributors within the specified territory.
For branded, high-quality products selective distribution agreements is the preferred route of choice. Similar to exclusive distribution agreements these agreements limit the number of authorised distributors. However, the key difference with exclusive distribution agreements is this limitation of the number of authorised dealers is based on factors relating to the nature of the product. The other vital element which differentiates this means of distribution from exclusive distribution is that the restriction on resale refers to sales to non-authorised distributors. Therefore, the buyers are only selected dealers.
Determining the best form of distribution agreement for your company can be determined by careful analysis and due diligence of the potential distributing partners. Our lawyers will carry out such due diligence as well draft the distribution agreement itself.