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Summary A Distribution Agreement reflects the rights and obligations of manufacturer/supplier and a distributor/seller. As you can imagine, these sorts of agreements can vary substantially in their degree of complexity and in how they are structured to favor one party over the other. For example, a Distributor will want special assurances from the supplier that there will be a shared cooperative advertising effort and the Supplier will want assurances from the Distributor that they will only sell branded products at stipulated prices. They will both prefer assurances from the other that they are working on an exclusive basis.
Definitions "Products" or "Merchandise" and "Prices" should be specifically defined and all products being distributed should be listed in an attached exhibit. The Supplier wants flexibility as to adding and discontinuing products while the Distributor wants stability and consistency. "Territory" should also be defined as well as any future expansion.
Engagement Supplier names Distributor as its representative and intermediary for the purpose of marketing and distributing Products in the Territory. Right to be exclusive distributor would be favored by Distributor while obligation to distribute exclusively on behalf of Supplier would be favored by Supplier.
Prices of Products Price for the Products are set out specifically in an attached Exhibit. All price changes should require the prior express written approval of the interested party. Payment Distributor pays for Products within a specified period following receipt of such Products. Responsibility for payment of all applicable taxes, shipping charges, and other charges should be expressed in Agreement. Acceptance All orders should be in writing. Supplier signs and returns via facsimile a confirmation of receipt of the order and estimated time of shipment within a specified period after the receipt of any written order. Appointment of Sub distributors Favors Distributor. Distributor will want to be able to appoint sub distributors to act on its behalf. However, Supplier will want to limit any exposure to liability by requiring the Distributor to take on all of the financial responsibility of maintaining any sub-agents. Warranties and Representations of Distributor Favors Supplier. Supplier will want control over how its products are marketing to customers. Therefore, the Supplier will want Distributor to control how the Distributor makes use of promotional materials that are supplied by Supplier from time to time in promoting the Products. In addition, the Supplier will probably want to "Brand" all of its products to avoid and prevent the possibility of confusion as to source. Warranties and Representations of Supplier Favors Distributor. Supplier should furnish Distributor with detailed quotations and price lists covering the suggested retail prices of all Products as may be required. Supplier should be limited in its ability to make wholesale changes to product lineups and prices without adequate notice to Distributor. The same applies to any new promotion or marketing technique requested by the Supplier. Supplier should pay a fee for all customers that Distributor refers to Supplier. Supplier should be bound by a provision restricting all attempts to circumvent or bypass the activities of Distributor by negotiating directly or indirectly with a prospective customer located in the Territory. Rights of First Refusal Favors Distributor. If the Supplier at any time hereafter decides to distribute its Products in additional territories outside of the Territory, then the Distributor should be given the first opportunity to accept the right to distribute in said territories. License of Marks Favors Distributor. Supplier grants to Distributor a license, to use the Supplier's trademarks, trade names and service marks in connection with carrying out the services described. Supplier will probably want to strictly limit Distributor's right to use its marks and may require one- time only licenses on a case-by-case basis. Indemnification Each party indemnifies and holds harmless the other party, its officers, and directors against all claims, obligations or liabilities including court costs and attorneys' fees, arising out of either party's tortuous or unauthorized acts, misrepresentations, omissions, failure to perform his/her obligations hereunder, or any acts no expressly authorized in writing , related to or beyond the scope of this agreement. Alteration Favors Supplier. The Distributor should be prohibited from changing or diluting the composition of the Products as furnished to the Distributor by Supplier unless authorized by Supplier. Independent Contractor Favors Supplier. Important to distinguish this hire from an employee to avoid any tax liability in the future. The onus of responsibility falls onto the Factor for payment of social security or federal or state income taxes. Factor acknowledges that it is his/her legal responsibility to pay all applicable federal and state income taxes (including estimated taxes), social security, Medicare and all applicable federal and state self-employment taxes. Severability In the event any part, portion or provision or paragraph of this Agreement is declared void or invalid, the remaining portions of this Agreement are not affected and remain in full force and effect. Mediation and Arbitration Mediation and Arbitration should always specify a location in a convenient jurisdiction (preferably, in the same county where they run their business). Mediation is a non-binding way to settle the dispute quickly and amicably. If unable to settle in mediation, arbitration is first option available. Arbitration is the preferred alternative to litigation because of speed, cost, and ability to maintain low profile (no info is publicly available). Governing Law Always stipulate that the contract will be governed under the law and jurisdiction where business is conducted. Always make sure that venue and jurisdiction are convenient. No Modification or Waiver No modifications except those specifically agreed upon by the parties in writing. Any waiver of a term or provision will not act as a waiver of any other provision. Entire Agreement This agreement constitutes the entire agreement of the parties and may be modified only in a writing executed by both parties. Notices Notices should always list the current and best addresses where each party may contact the other for whatever reason.
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