Distribution Agreement for Supplier

Under a distribution agreement, a manufacturer or supplier of goods appoints an independent distributor to promote and sell its products in a particular geographical area. 

The distributor undertakes to purchase the supplier’s products and re-sell them to its clients in this area, in its own name and for its own account. 

As the distribution agreement primarily serves to expand sales, the supplier will be keen on including minimum purchase quantities, minimum sales targets or minimum resale prices. These provisions are regularly scrutinized by anti-trust authorities, because they can have the effect of restricting competition in the distribution area. Therefore, it is crucial to carefully draft these provisions in order to avoid any regulatory issues with the distribution of the products.

Also, there is increasing support in doctrine and case law for the principle of financial compensation in favour of the distributor for the customers it has acquired during the term of the agreement. Since the law is unclear on this subject, it is necessary to draft the provisions concerning the settlement of contractual relations carefully, to avoid any unpleasant surprises when the agreement comes to an end.