A distribution agreement is a legally binding contract between a company (the supplier or manufacturer) and a distributor that outlines the terms and conditions of the distribution of the company's products in a specified territory. This document is entered into by two parties, a company and a distributor, with the aim of extending the area in which sales are made for the company's products.

The agreement contains a number of important definitions, including 'Business Day', 'Business Plan', 'Distribution Rights', 'Intellectual Property', 'Materials', 'Products', 'Sub-Distributors', 'Sub-Distributorship Agreement', 'Territory', 'Trademarks', and 'Force Majeure'. It also clarifies that any reference to 'writing' or cognate expressions includes a reference to email, facsimile transmission, or comparable means of communication, and any reference to an enactment shall be construed as a reference to that enactment as amended, reenacted, or extended at the relevant time.

The distributor is appointed as an exclusive distributor for the company's products within the territory, and the company may distribute, sell, or install the products either directly or by appointing any number of third parties to do so on a non-exclusive basis. The distributor is allowed to sell the products directly to end-users or indirectly through sub-distributors by entering into sub-distributorship agreements within the territory, provided that such agreements are not in conflict with the agreement's terms. Each sub-distributorship agreement must include an acknowledgement of the terms contained in the agreement and be approved by the company beforehand.

The agreement also covers other important aspects, such as the duration of the agreement, the terms of payment, and the obligations and responsibilities of both parties. It includes provisions for minimum purchase and sales figures, marketing plans, and capital expenditures. The distributor is required to maintain proper records of sales and to provide regular reports to the company. The company is responsible for the design, manufacture, and packaging of the products, and the distributor is responsible for their distribution and marketing within the territory.

The agreement outlines the company's intellectual property rights and prohibits the distributor from disclosing confidential information or making unauthorised use of the company's intellectual property. It also includes provisions for termination, renewal, and assignment of the agreement, as well as for dispute resolution and governing law.

In summary, a distribution agreement is an essential document for companies looking to expand their sales reach into new territories, and for distributors seeking to profit from the distribution of a company's products in a specific territory. By carefully negotiating and drafting the agreement's terms, both parties can ensure a successful and mutually beneficial business relationship.

How to use this Document? 

1. Read through the agreement carefully to understand its terms and conditions. It is important to ensure that both parties, the Company and the Distributor, are aware of their obligations and responsibilities.

2. Take note of the definitions in the agreement, as they will be used throughout the document. For instance, the term "Territory" refers to the geographical area in which the Distributor is authorised to sell the products.

3. Check the business plan, budget, and minimum purchase and sales figures in Schedule 4 to understand the Distributor's business activities and income estimates.

4. Determine the appointment and term of the Distributor. The Company appoints the Distributor as its exclusive distributor for the Products under the Trademarks within the Territory. The Distributor may sell the Products directly to end-users or indirectly through Sub-Distributors by entering into Sub-Distributorship Agreements within the Territory.

5. Be aware that any Sub-Distributorship Agreement requires the prior written approval of the Company, as well as an acknowledgement of the terms contained in the Agreement. The Distributor shall submit a proposed Sub-Distributorship Agreement together with information about the proposed Sub-Distributor that may be reasonably requested by the Company subject to the applicable data protection laws within the Territory.

6. Note the Force Majeure clause, which exempts both parties from liability if they are unable to perform their obligations due to circumstances beyond their control.

7. Make sure to comply with the restrictions on distribution and use of the Products set forth in this Agreement.

8. Keep track of any changes or updates to the Agreement, as they may affect the Distributor's rights and obligations.

9. Seek legal advice if there are any doubts or questions about the Agreement.

By following these steps, the Company and the Distributor can establish a clear and mutually beneficial relationship for the distribution of the Products within the specified Territory.