Free Distribution Agreement Template
A distribution agreement outlines the terms under which a manufacturer grants a distributor the right to distribute, resell, and promote their products in a defined territory. This guide outlines best practices in creating a distribution agreement, and provides a template to kickstart your efforts.
What is a Distribution Agreement?
A distribution agreement is a legally binding contract between a manufacturer or supplier (the licensor) and a distributor (the licensee) that authorizes the distributor to purchase, stock, advertise, and resell the manufacturer’s products in a specific geographical region or territory.
The agreement grants the distributor access to the supplier’s products at wholesale prices for resale purposes but does not transfer ownership of the products to the distributor.
The key parties in a distribution agreement are the licensor/supplier who manufactures or supplies the products and the licensee/distributor who purchases, stores, markets, and resells the products to customers at a markup. The agreement outlines the product details, pricing, minimum order quantities, sales territory, marketing responsibilities, quality controls, inventory levels, payment methods, confidentiality, and other terms that govern the business relationship.
Distribution agreements provide mutual benefits to both parties. The manufacturer gains new sales channels and expanded market reach without significant overhead costs. The distributor obtains products to sell for a profit margin within an assigned territory.
When to Use a Distribution Agreement Template
A distribution agreement template is useful when a manufacturer wants to authorize a third party to market, sell, and distribute their products in a defined region without taking on the operational costs and responsibilities of managing sales channels themselves.
It’s an efficient way to expand into new territories and tap into an established distributor’s customer base without additional overhead. The formal agreement outlines all expectations upfront regarding product prices, order processes, promotional activities, territory boundaries, sales metrics reporting, and other logistics.
Having a template in place makes it simple to onboard new distributors as you grow and want to enter additional markets. It also ensures consistency across all partnerships regarding terms, rights, quality controls, etc. See the complete distribution agreement template below.
What is the Difference Between a Distribution Agreement and a Purchase Agreement?
The critical difference between a distribution agreement and a purchase agreement is that a distribution agreement authorizes a distributor to market and resell a supplier’s products, while a purchase agreement is for the one-time purchase of products or goods.
Under a distribution agreement, the distributor purchases inventory from the supplier at wholesale prices for resale purposes, but the supplier retains ownership of the products. The distributor acts as a channel partner to sell and promote the supplier’s offerings in an assigned territory.
Conversely, a purchase agreement is for the outright purchase of goods to become the buyer’s property. It transfers product ownership and is typically a one-off transaction, not an ongoing business relationship.
Understanding these differences is critical when establishing reseller partnerships to correctly structure expectations, rights, inventory, and compensation. Mistaking one type of agreement for the other can cause significant legal and financial issues down the road.
What to Include in a Distribution Agreement
A comprehensive distribution agreement clearly defines all critical elements of the business relationship so both parties understand their rights and obligations. Key components to include are:
Party Details
Identify the official legal names and addresses of the supplier/licensor and distributor/licensee. Define if either party has affiliates or parent companies bound by the agreement terms. Outlining detailed contact information ensures proper legal notices are delivered efficiently. Specify signatory titles like owners, presidents, etc.
Product Description
Provide specifics on the supplier’s products, product lines, brands, models, etc., that the distributor can purchase and resell. Detailed descriptions eliminate confusion over which offerings the agreement covers now and in the future as new products are added. Include technical specs, features, sizes, capacities, etc. Images or attachments help.
Supply Terms
Outline where, how, and when the distributor will provide inventory, such as direct shipping, 3PL delivery, will-call order pickup, just-in-time inventory, etc. Also, thoughtfully define clear rules regarding stocking adequate products to meet demand without excessive warehousing of goods, managing seasonal volume spikes or inventory shortages potentially causing backorder dilemmas, and contractually addressing supply chain disruptions regarding logistical or raw material issues. Articulating fulfillment processes upfront is essential for coordination.
Territory
Thoroughly define the geographical areas or market segments where the distributor maintains exclusive or non-exclusive promotional and sales distribution rights regarding the supplier’s covered products under this agreement. Carefully detailing this territorial scope ensures no conflicts occur with other authorized reseller partners already operating in the assigned region unless intentionally overlapping as indicated by explicitly defined terms.
Additionally, outline if broader ecommerce or internet sales also get permitted under this contract along with applicable usage policies around advertising channels, customer geo-mappings, web restrictions preventing cannibalizing physical resellers, etc.
Orders & Terms of Sale
Specify how the distributor will officially place routine product orders with the supplier, such as through an online B2B customer portal if available, emailed POs containing necessary data for fulfillment teams, etc. Explicitly detail expected timeframes regarding order acceptance, requested revisions if data is unclear, manufacturing/processing lead times if customization is involved, standard lead times for inventory items in stock, approved freight methods, and programs based on geographic cutoffs.
It’s also important to outline agreed-upon shipping terms if using Incoterms, including noting which party bears responsibility for insurance and formal transfer of ownership/title triggers, allowing customer acceptance while in transit.
Pricing & Payment Terms
Carefully provide the negotiated formula, bulk discount schedules, or framework for determining the exact wholesale pricing the distribution partner will prepay when positioning orders for the supplier’s covered product inventory being purchased for resale under this agreement. Pricing guides may involve formal price lists in exhibits that outline standard baseline retail costs to which preset trade discounts are applied at tiered graduated levels based on total order value thresholds achieved cumulatively over specified rolling periods.
Also, clearly outline formally approved payment methods and strict timing of when advance payments must be fully render from the distributor to the vendor to officially lock in supplied goods for fulfillment along with standard payment terms if credit gets extended, such as net 30 days after invoices get generated upon outgoing shipments.
Quality Control & Compliance
Address mandatory product quality control standards the distribution partner must uphold and maintain regarding climate-controlled storage conditions while warehousing inventory, handling procedures used when processing orders for maximizing preservation, inspection processes before final outbound transportation, ongoing monitoring criteria regarding aged packaged stock to ensure first-expiring first-out practices, etc.
Accordingly, include periodic random inspection rights the supplier reserves along with requirements around satisfactorily addressing any inventory found damaged or rendered defective for properly upholding brand standards customers anticipate associating with the manufacturer.
Party Rights & Responsibilities
Thoroughly characterize any permitted and prohibited operational activities, either contractually imposed or legally regulated, on both parties. Address aspects such as approved advertising procedures reviewed to safeguard branding guidelines compliance and guard against deceptive market practices. Outline protocols around authorized trade promotions – whether targeting end consumers to avoid channel conflicts or addressing reseller partnerships in assigned territories.
Detail usage terms and oversight governing the exploitation of trademarks, patents, and other protected intellectual property. List requirements to host educational training sessions and expectations around trade show participation. Explain proper sales reporting procedures needed for accurately tracking performance goals across regions.
Confidentiality
Include non-disclosure provisions regarding sensitive information like pricing, customer data, intellectual property, and other trade secrets. Such provision ensures critical supplier and distributor information remains protected. Outline what confidential data can be collected, stored, accessed, processed, and shared. Define security protocols required.
Time Frame
Define the distribution agreement terms, such as one year, three years, etc. Outline conditions for renewal, including new negotiations. This ensures expectations are reset periodically as business needs evolve. Include timing guidelines for essential written notice like non-renewal intent, breach of contract, etc.
Liability
Address liability caps for damages, uninsured losses, intellectual property infringement, injuries, etc., caused by either party. Including reasonable limitations prevents excessive unforeseen risks. Define what constitutes a default and material breach of the agreement. Outline dispute resolution approaches like arbitration clauses (that can be aided by the American Arbitration Association).
Modification & Termination
Outline how each party can request changes to the agreement terms and approvals required with prior written consent. Allow reasonable flexibility to modify non-essential clauses over time while protecting core components. Outline specific conditions that enable early termination with sufficient notice periods. To transition smoothly, define termination implications like inventory buybacks, financial obligations, customer communication, etc..
General Agreement Terms
Include standard legal clauses like entire agreement, severability, waiver, force majeure, assignability, third-party rights, notices, and governing law stipulations. This is also the section in which you define if the other party will be the exclusive distributor. These protect both parties while allowing flexibility to address unforeseen situations fairly. Define rules of interpretation and hierarchy related to conflicting agreement terms.
Signatures
Once final negotiations are complete, the distribution agreement template must contain signature fields for authorized representatives from the supplier and distributor. Using e-signatures through a solution like Signaturely to sign and manage agreements digitally makes the process fast, efficient, and legally binding. Signaturely also enables sending automated reminders when it’s time to renew existing contracts.
Adding signatures finalizes the formal distribution partnership, allowing the exciting work of bringing products to market under the outlined cooperative terms to begin! With a comprehensive contract, both parties can focus on collaborating to drive brand growth rather than haggling over legal uncertainty.
Download our free example
Distribution Agreement Template
We’ve got your back here at Signaturely, and we’re ready to help make stress-free contracts a reality. Forget the confusing paperwork and overwhelming legal jargon – get easy, breezy contract templates in minutes with our free template.
How to Create and Manage Distribution Agreement Templates With Signaturely
Signaturely provides the ideal solution for digitally creating, signing, and managing distribution agreements to establish and maintain reseller partnerships.
With Signaturely, suppliers can set up branded templates tailored to your business needs that outline all necessary legal terms, conditions, and details for your distribution contracts. Create templates for territories, products, or agreement types that can be reused and customized.
Once final negotiations are complete, Signaturely enables both parties to e-sign the agreements instantly online from anywhere, on any device—no more printing, scanning, faxing, mailing, or overnighting signature pages. The fully executed contract is automatically stored in secure Signaturely cloud storage for easy access with built-in permissions controls for sharing.
When the existing entire agreement is set to expire, Signaturely sends automatic reminders to prompt renewals or terminations. It also allows you to create schedules for any required business or compliance reviews, and maintain complete visibility into what agreements are active, expired, or coming due for each partner.
With streamlined workflows, standards, and automation, Signaturely reduces the friction, risks, and overhead costs of distribution partnerships. Intuitive features like search, tagging, activity audit trails, and reporting provide operational efficiency and insights.
Say goodbye to distribution agreement headaches! Adopt Signaturely for a complete system to establish and scale channel relationships smoothly as your business grows.
FAQs About Distribution Agreements
Distribution agreements are complex legal contracts that establish formal business partnerships. Here are answers to common questions:
How do you set up a distribution agreement?
First, identify a reputable distributor that is well-matched to sell your products. Outline mutual goals, capabilities, and benefits during initial discussions before drafting the agreement terms. Get the necessary approvals internally and externally before executing the final contract.
What are the essentials of a distribution agreement?
At a minimum, include authorized territory, product details, order/delivery procedures, inventory requirements, payment terms, sales/marketing obligations, confidentiality, liability caps, agreement duration, and signatures. Customize to your specific situation.
How do you structure a distribution deal?
In return, offer compelling sales incentives like discounts, marketing assets, or exclusivity, asking for sales minimums, customer service standards, and consistent brand representation. Build periodic reviews to reset expectations.
How do you negotiate a distribution agreement?
Compromise on territories, pricing thresholds, quotas, or support responsibilities to find an arrangement that provides value for both parties based on core capabilities. Ask “what-if” to explore contingencies.
What is another name for a distribution agreement?
Reseller agreement, channel partner agreement, or authorized distributor agreement. The legal name depends on the specific business relationship structure.
What You Need to Remember About Distribution Agreement Templates
Defining the partnership terms, rights, and responsibilities upfront is essential to avoid misunderstandings that undermine success. Take time to negotiate patiently, consult lawyers with questions, and finalize professional contracts. Using Signaturely’s robust distribution agreement template helps you get through to the finish line in your legal process, while capturing the nuances that go into complex distribution operations.
Distributor Agreement
DISTRIBUTOR CONTRACTUAL AGREEMENT
PARTIES
- This Distributor Agreement (hereinafter referred to as the “Agreement”) is entered into on ________________ (the “Effective Date”), by and between ________________________, having an address of ________________ (hereinafter referred to as the “Distributor”), and ________________ with an address of ________________ (hereinafter referred to as the “Supplier”) (collectively referred to as the “Parties”).
SCOPE
- The Supplier hereby appoints the Distributor as its exclusive/non-exclusive distributor for the distribution of the following products/services: [describe the specific products/services in detail]. The Distributor shall have the exclusive/non-exclusive right to distribute the specified products/services within the territory of [insert geographical limitations, if any]. The Parties agree that any modifications or expansions to the scope of distribution must be mutually agreed upon in writing.
EXCLUSIVITY
- The Parties agree that [Distributor’s Name] shall have [exclusive/non-exclusive] rights to distribute the Supplier’s products/services within the designated territory of [insert territory] for the duration of this Agreement. [Exclusive/Non-exclusive] rights mean that the Supplier shall not engage in the distribution of the specified products/services directly or through any other distributor within the designated territory. The Parties acknowledge that any breach of this exclusivity clause shall constitute a material breach of the Agreement, subject to termination as outlined in the termination clause.
TERM AND TERMINATION
- This Agreement shall commence on the Effective Date and shall remain in effect for an initial term of [insert duration], unless terminated earlier as provided herein. Upon expiration of the initial term, this Agreement may be renewed for successive [insert duration] terms upon mutual written agreement of the Parties. Either Party may terminate this Agreement by providing [insert notice period] prior written notice to the other Party in the event of a material breach of any provision of this Agreement, subject to a cure period of [insert cure period]. Additionally, either Party may terminate this Agreement immediately in the event of insolvency, bankruptcy, or dissolution of the other Party. Upon termination of this Agreement, the Distributor shall cease all distribution activities and promptly return any remaining inventory to the Supplier. Any outstanding payments or obligations shall survive the termination of this Agreement.
PRICING AND PAYMENT
- Payment for the products/services shall be made by the Distributor to the Supplier within 30 days of the date of invoice, in the currency and via the method specified by the Supplier. The Supplier shall provide the Distributor with a price list for the products/services, subject to change with mutual agreement. Any discounts or commissions payable to the Distributor shall be outlined separately. The Distributor is responsible for any applicable taxes, duties, or charges. The Supplier reserves the right to audit the Distributor’s financial records to ensure compliance with payment terms.
INTELLECTUAL PROPERTY
- All intellectual property rights, including but not limited to patents, trademarks, copyrights, trade secrets, and any other proprietary information related to the products/services, shall remain the exclusive property of the Supplier. The Distributor acknowledges that it has no rights or claims to the Supplier’s intellectual property except as expressly granted in this Agreement. The Distributor agrees to use the Supplier’s intellectual property solely for the purpose of promoting and distributing the products/services in accordance with this Agreement and shall not reproduce, modify, or distribute the Supplier’s intellectual property without prior written consent. Any use of the Supplier’s intellectual property must be in compliance with applicable laws and regulations. Upon termination of this Agreement, the Distributor shall cease all use of the Supplier’s intellectual property and return any materials containing such intellectual property to the Supplier.
MARKETING AND PROMOTION
- The Distributor agrees to actively promote and market the Supplier’s products/services within the designated territory, using reasonable efforts to maximize sales and brand awareness. The Distributor shall develop and implement marketing strategies, campaigns, and promotional activities in accordance with the Supplier’s branding guidelines and standards. The Parties may collaborate on joint marketing initiatives and promotional events as mutually agreed upon. The Distributor shall bear the costs associated with its marketing and promotional activities unless otherwise agreed upon in writing by the Parties. Both Parties shall maintain open communication and provide mutual support to ensure the success of marketing and promotional efforts.
PRODUCT RETURNS AND WARRANTY CLAUSE:
- The Supplier agrees to accept returns of defective or non-conforming products in accordance with its standard return policy, which shall be provided to the Distributor upon request. The Distributor shall promptly notify the Supplier of any product defects or non-conformities and provide reasonable evidence to support the return request. Upon approval by the Supplier, the Distributor shall return the defective or non-conforming products to the Supplier at the Distributor’s expense. The Supplier shall, at its discretion, either replace the defective products or issue a credit to the Distributor for the returned products. The Supplier warrants that all products provided to the Distributor shall conform to the specifications and quality standards agreed upon by the Parties. This warranty shall remain in effect for a period of [insert warranty period] from the date of delivery. The Distributor shall pass on the Supplier’s warranty to its customers and shall not make any additional warranties or representations on behalf of the Supplier without prior written authorization.
CONFIDENTIALITY AND NON-DISCLOSURE
- During the term of this Agreement and thereafter, both Parties agree to maintain the confidentiality of all proprietary information disclosed by one Party to the other (“Confidential Information”). Confidential Information includes, but is not limited to, trade secrets, business plans, customer lists, financial information, pricing structures, and any other information marked as confidential or which should reasonably be understood to be confidential. Both Parties agree not to disclose, reproduce, or use Confidential Information for any purpose other than the performance of their obligations under this Agreement without the prior written consent of the disclosing Party. This obligation of confidentiality shall not apply to information that (a) is or becomes publicly available through no fault of the receiving Party, (b) is independently developed by the receiving Party without reference to the disclosing Party’s Confidential Information, or (c) is rightfully obtained by the receiving Party from a third party without breach of any confidentiality obligation. Upon termination of this Agreement, both Parties shall promptly return or destroy all Confidential Information received from the other Party, including any copies thereof, and provide written certification of such action upon request. This confidentiality obligation shall survive the termination of this Agreement.
FORCE MAJEURE
- Party shall be liable for any failure or delay in performing their obligations under this Agreement due to circumstances beyond their reasonable control, including but not limited to acts of God, war, terrorism, government actions, natural disasters, or epidemics. If a Force Majeure Event occurs, the affected Party shall promptly notify the other Party and make reasonable efforts to mitigate the impact. The affected Party’s obligations shall be suspended during the Force Majeure Event, and the time for performance shall be extended accordingly. If the Force Majeure Event continues for [insert duration], either Party may terminate this Agreement upon written notice to the other Party.
RENEWAL OF AGREEMENT
- The Parties agree that this Agreement, prior to its termination, is subject to renewal provided that both parties submit a signed addendum agreeing to the renewal.
AMENDMENTS
- The Parties agree that any amendments made to this Agreement must be in writing where they must be signed by both Parties to this Agreement.
- As such, any amendments made by the Parties will be applied to this Agreement.
SEVERABILITY
- In an event where any provision of this Agreement is found to be void and unenforceable by a court of competent jurisdiction, then the remaining provisions will remain to be enforced in accordance with the Parties’ intention.
DISPUTE RESOLUTION
- Any dispute or difference whatsoever arising out of or in connection with this Agreement shall be submitted to [insert means] (Arbitration/mediation/negotiation) in accordance with, and subject to the laws of [insert applicable law].
GOVERNING LAW
- This Agreement shall be governed by and construed in accordance with the laws of [insert applicable law].
SIGNATURE AND DATE
- The Parties hereby agree to the terms and conditions set forth in this Agreement and such is demonstrated throughout their signatures below:
DISTRIBUTOR |
SUPPLIER _______________________________ |
DATE
_______________________________
|
DATE
_______________________________ |
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