Distribution Agreements

A distribution agreement usually involves a manufacturer (i.e. supplier) selling goods onto a wholesaler (i.e. distributer), who then sells/ distributes the goods onto his customers. (e.g. retail stores/consumers).

The distribution agreement is between the supplier and the distributer, therefore no contractual relationship is in existence between the supplier and the distributers customers. (This does not prevent the end users of the products from making a claim against the manufacturer for a defective product in tort/product liability as the manufacturer still owes a duty of care to the consumers of their products.)

The main legislation governing distribution agreements is the Competition Act 1998 in the U.K and Article 101 of the EC Treaty for Europe. Distribution agreements come in a number of forms such as:

  • Exclusive Distribution: In a strait foreword exclusive distribution agreement only one distributer may sell goods in a particular territory, the supplier/manufacturer is also prevented from selling goods within the defined territory.
  • Â Non Exclusive Distribution: This type of agreement allows the manufacturer/supplier to sell and appoint other distributers in a certain defined territory where he has already appointed a distributor.
  • Â Sole Distribution: In a sole distribution agreement only one distributer is allowed to sell products in a certain defined territory. However this does not prevent the manufacturer/supplier from selling goods in that territory.

The above is not an exhaustive list and distribution agreements may be tailored (in line with legislation of course) to the specific needs of a particular business.

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