Dec 21, 2020 / by OsmondMarketing / No Comments

The first question that a producer and distributor must answer when entering into a distribution agreement is whether a distribution agreement should be concluded in writing. From the manufacturer`s point of view, not having such an agreement would be ridiculous. On the merchant`s side on the side of the table, however, the problems are much less clear. If you do not sign a written agreement, your contract is based on the oral statements and behavior of each page. If there is no oral or behavioural and there is a conflict, then the courts will simply use the implicit theory of contracts. This essentially means that the courts enter into their own contracts. Often, this approach is more beneficial to the distributor than to the manufacturer. It may also be more favourable to the distributor than an agreement, including an agreement drafted by the manufacturer, where the distributor had little or no say in its content. To ensure that a distribution agreement is in your best interests, it is important to know and understand your most important concepts. The main conditions of a distribution agreement can vary in several factors, including: From the manufacturer`s point of view, if you set quotas or sales targets, make sure 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. Include Distributor Commitments: Suppose you and your distributor have set revenue targets or even minimum purchase amounts, otherwise you are entitled to terminate the exclusivity or the entire contract. In the real world, you cannot impose these sanctions as quickly. They are often subject to long grace periods, other conditions or both, so that they do not in fact give them any real guarantees. Therefore, it is very important that you conduct due diligence for your distributor and receive a detailed business plan. This business plan should at least include commitments with respect to marketing expenses and the details of human resources to be allocated to distribution.

If you add an appropriate incentive to achieve revenue goals, you will gain some confidence in the fact that you have an appropriate, competent and motivated distributor. Think about your intellectual property: if you appoint a distributor, you also license the use of your intellectual property for distribution purposes. You give them access to your most sensitive assets. It is allowed to use your domain name, logo and trademarks. If these issues are not specifically addressed in the agreement, this can lead to situations where your distributor takes possession of your intellectual property and effectively blocks you out of the territory. Most distribution agreements involving experienced dealers and manufacturers allow termination for reasons and conveniences (or not at all).