Business Contracts – Distribution Agreements

Distribution Agreements

Distribution agreements can be part of a business’ scaling plans helping businesses to agree commercial terms for product distribution between a supplier or manufacturer and a distributor, usually within an agreed geographical location also called territory. Distributors can have exclusive rights to distribute a product within an agreed territory where the manufacturer is not permitted to supply, except for direct sales. In other cases, more than one distributor can supply the same product within the territory and may also have a right to appoint other distributors. This is called non-exclusive distribution.

We can help you navigate the related complex issues so that your negotiations with a counterparty regarding a distribution agreement are effective and efficient. For instance, failure to clearly define the distributor’s scope of authority and exclusive rights within the agreement can have damaging effects on both parties. We ensure that it is clear from the start as to the nature of the exclusivity rights accorded to the distributor; we make appropriate recommendations to address this issue where it is not correctly reflected in your contract.

Making distribution agreements compliant with UK competition laws and addressing any EU competition law concerns is daunting and requires expertise. Even though the UK left the EU, some agreements may still be caught in the EU competition law regime regardless that the business is established in the UK. We can assist you to consider the application of the competition laws in the UK and EU in the context of negotiating your distribution agreement to ensure it is legally compliant.

In most cases, you may just want assurance that the contract is legally compliant or does not expose you to any major risk without a need for us to make amendments to it. We are more than happy to do this for you, provided you understand that we retain the responsibility to signpost you to any huge concerns that we identify on our review so that you can consider whether they are worth pursuing.

Manufacturers or suppliers need to adequately protect their intellectual property to avoid exposure to misuse and infringement. If you are a supplier or manufacturer, our team can negotiate or draft intellectual property clauses that help to provide sufficiently robust protection for your intangible property.

When dealing with cross-border distribution agreements, choice of jurisdiction, applicable law or forum for dispute resolution can be heavily contested. This is because your business can potentially be involved in an expensive and time-consuming commercial claim logged in an unfamiliar legal system. In our experience, it is not always possible to agree to England and Wales as the preferred jurisdiction or English law as the applicable law for interpreting the contract. Together, we can explore ways to reach an amicable compromise with the counterparty.

For example, a client we advised opted to follow International Commercial Terms (Incoterms) to make some key clauses in a cross-border distribution agreement subject to international trade standards. There is also an option to use the International Chamber of Commerce as the forum for arbitration, providing neutral ground for any disputes that may arise in your cross-border agreements. We can advise you on the risks or benefits of adopting such approaches in comparison to choosing the jurisdiction of the counterparty who is not established in the UK.

Distribution Agreements – Scenarios

When it comes to getting expert legal advice on contracts, no matter what type they are, “dotting the I’s and crossing the T’s” is paramount – getting it right now could save a lot of time, money and inconvenience later. Talk to our expert team today on 0800 088 6004 for a free, confidential, no-obligation initial chat.