The 1 KEY clause every Distributor wants in a Distribution Agreement
What is the distributor’s one key clause every distributor wants in a distribution agreement? Interesting.
Hi everyone, Simon here from the contract company. Contracts are what we do all day every day and sometimes overnight. Lucky us right-o.
If you are a distributor so good to be supplied to you from a supplier. The supplier supplies goods to the distributor. You as a distributor get the right to distribution. To distribute those goods same thing at first what is the one key clause you want in the agreement?
Exclusivity.
Exclusivity: Distributor’s One Key Clause
That’s right, you will want exclusivity. Why?
You as the distributor are going to spend time and money marketing that brand or that product in the region that you’ve been granted the rights for.
You want to ensure that you are the exclusive person. I.e the only person and that means to the exclusion of the supplier. So you’re the only person who can distribute or sell the goods in that region. That’s why you as a distributor will want the exclusive rights.
Now one other thing you might want to think about too. Not only do you want the exclusive rights to distribute in the region. You want to ensure that the supplier is stopped from supplying goods to someone else who can then supply goods to your region.
What I mean by that is I’m thinking about websites. So let’s say your supplier makes one on mountain bikes and they’re based in Switzerland.
What you need to be worried about is.. (maybe mountain bikes isn’t a good example because they’re too big).
Case in Point
Let’s say they make perfume. What you want to be concerned about is someone – let’s say your exclusive region is the distributor is Australia.
What you’re worried about is that someone in Australia jumps online and buys perfume from somewhere in japan. That Japanese person sends the goods to Australia.
So you as the exclusive distributor in Australia want to try and ensure that you are the only person that has the rights to sell in this case perfume in Australia.
So what you can do is you can make a clause in the agreement with the supplier. That [clause] mandates that if you become aware of any goods being sold in the country, then you can tell the supplier.
They can then take action against the relevant third party that has been supplying goods into in this case Australia.
So that’s why if you are a distributor the one key clause you want is exclusivity. You have some certainty and a business that you can develop and potentially sell to generate money.
There’s a long way of saying if you’re a distributor you want exclusivity. [because] You’re going to tip time and money into marketing products.
You also want exclusivity because if you have generated lots of sales from your marketing efforts then you then have a legitimate business that can be sold as long as that distribution has relevant assignment and novation rights in there. That’s a separate subject of a separate video though.
So anyway that’s the one key clause you as a distributor want in every distribution agreement exclusively.
If you have any questions, please feel free to get in touch simon@contractcompany.com.au or 1-800-355-4555. Thanks very much.
