34+ Sample Distributor Agreement Templates

What Is a Distributor Agreement?

Did you know that the wholesale trade in the US as of 2019 was approximately $7,582.3 billion? That is, according to Statista. And with that massive amount generated, it would be hard to imagine if the results would still be the same without proper authorization, management, and arrangements. So, distributors and suppliers must come into terms through the distribution or distributor agreement. The said agreement describes and outlines all the requirements, clauses, and conditions under distribution.

The American wholesale trade reached $7,582.3 billion in 2019.

Also, Statista reported that 44.1% of the 2019 wholesale trade was under the subindustry of durable goods.

According to Entrepreneur, 300,000 American wholesale distributors reached about $3.2 trillion in total revenue.

What Is a Distributor?

As literal as it sounds, a distributor distributes. Distributors buy from suppliers, who sell goods to distributors. After that, the distributor markets and sells the purchased goods to customers. Thus, both parties get paid in the process—a win-win situation. But the roles of both suppliers and distributors are more complex than that. There are conditions, terms, liabilities, payments, and other details to talk about. And that reason explains why you devise a distribution agreement.

What Are the Common Elements of a Distributor Agreement?

There was a time when 300,000 wholesale distributors in the US reached around $3.2 trillion in total revenue. And, of course, there is a system involved to ensure operations would go well as intended. This system includes using the distributor agreement or contract. But what exactly is included inside that agreement? In this section, we will note the typical elements incorporated in the distribution agreement.

Preamble: While the “Distributor Agreement” label serves as the agreement sheet’s title, the introduction starts in making the preamble. This part is where you formally state what the document is about. And maintain a narrative in writing here, like when you have to introduce Section 1.b as the “Products” content. Or maybe, Section 1.c for “Territory.”Party Information: Who are the parties involved in the first place? And what is their relationship to each other? Be sure to mention everyone’s legal names and correct contact info for identification purposes. Also, don’t forget to assign roles. Specify who are the supplier and the distributor. And if there are more parties expected, note their roles as well.Scope of the Agreement: One of the important elements in a distributor agreement is the scope. Here, indicate if the distribution is done via exclusive appointment, selective strategy, or maybe intensive appointment. Also, will the business supply products directly or indirectly? And when you introduce specific terms here, be sure to indicate the meaning of such words to ensure everyone understands what was stated.Price, Sale, and Payment Terms: In business, dealing with money is not rare. And involving the price and amount behind orders, shipments, sales, and payments cannot be ignored. Will there be discounts or chances that the prices increase after a year? And will shipping services be free of charge or not? Money-related matters will be critical in this segment.Duration of the Agreement: It is important in jotting down when the agreement begins to take effect and when it may end. Be sure to set realistic dates, too, wherein it isn’t very early or a hassle to begin the process. It is wise to inform parties about the significant dates to be prepared in marking the yearly, monthly, or weekly plans involved in the agreement.Representations: If applicable, distributors and supplying companies should address every representation, warranty, and covenant. Should the supplier warrant and represent the products to be free from damages or defects? And will that supplier promise to provide the expected design, materials, or quality to the distributors? Answer such queries in this section.Responsibilities of Parties: Aside from identifying the parties and learning their relationship, your agreement must note every responsibility expected to fulfill for each party. The distributor might be tasked to distribute the durable or nondurable goods to a specific territory. Meanwhile, the supplying company could give a training period for distributors to familiarize the job. Writing these responsibilities is vital. Creating assumptions that everyone knows their job, but they really don’t will only invite issues.Confidentiality Agreement: Distribution may involve confidential data, proprietary information, and other details not to disclose. Hence, a confidentiality agreement can be added to ensure all parties will not disclose important topics. And don’t forget to explain why certain matters are confidential, so all parties know the risks behind such decisions.Dispute and Termination Clause: While the duration of the agreement clarifies when distribution processes may end, the dispute or termination clause would clarify what aspects will lead to ending the contract or service. Therefore, there will be regulations observed when any party commits a breach along the way. Aside from mentioning what unacceptable practices can lead to termination, indicate what conditions are acceptable too.Indemnification and Liability Clause: Liability, hold harmless, and indemnity agreements are common in a distribution agreement. Who knows there could be legal actions taken when parties disagree with certain factors? Instead of blaming each other on who is accountable or liable for particular aspects, the agreement itself should discuss the limitations on indemnification and liabilities.General Provisions: A basic agreement surely cannot forget its general provisions. Involving these terms and rules is what makes the agreement respectable in the first place. And this segment is where your binding agreement or contract will be enforceable by law. Thus, write the general provisions regarding amendments, disputes, assignments, schedules, notices, severability, and more.Signature Blocks: To end the agreement, incorporate the signature blocks—the complete names and positions of all parties in capital letters. Everyone is expected to sign above their respected names. Although signing agreements is not required, having those signatures will certify that everyone has read and in favor of the contract.

How to Craft an Acceptable Distributor Agreement

You already know what a distribution agreement is. And the same thing applies to its elements. The big question now is, how do you make the distributor agreement itself? In fact, the process is quite easy when you know the basic steps. Without further ado, here are the steps on how to create a distributor agreement:

Step 1: Download a Template and Format It

Don’t assume that you have to start from scratch, which will only delay you in finishing the agreement. With our sample distributor agreement templates, the content of your agreement is already tailored and pre-formatted. You only need to fill between the lines on what to add. Also, the templates are editable. You can decide how you wish the format, design, and the whole document turns out like.

Step 2: Fill in the Distributor Agreement Elements

Remember those elements of a distributor agreement discussed earlier? From the preamble down to the signature blocks, insert such factors individually in the form. But don’t just enumerate. Maintain a sequence in presenting details. The names of the elements are already your basis on how to divide the agreement into sections anyway. Thus, a well-arranged presentation commences.

Step 3: Keep the Words and Sentences Brief

The last thing parties want is to read very lengthy forms before getting the gist of the agreement. Keep it brief instead. If there are words that can be simplified, then do so. Just because your words sound fancy doesn’t mean that such words are necessary for this business agreement. A tip is to reread your sentences and check if there are words making things wordy and complicated. Then, improve them.

Step 4: Be Specific

There is a fine line between being brief and being broad. And it is a no-no to be broad in an agreement. Otherwise, people may not know what you specifically mean. For example, you might say that distributors shall market at an international territory. Which specific geographic location is that? Jot it down. And as much as possible, don’t use idioms, jokes, or jargon to confuse other parties.

FAQs

What are durable and nondurable goods?

In wholesale trade, durable and nondurable goods are terms that are heavily used. Although the two terms refer to products being traded or distributed, they are quite different in meaning. Durable goods refer to furniture, office, or industrial supplies and equipment. And such products are used repeatedly. Meanwhile, nondurable goods cannot be used repeatedly. Examples include papers, periodicals, grocery items, and chemicals.

What is wholesale distribution?

Wholesale distribution applies to suppliers that provide products in bulk, meaning items can be bought cheaply. This example commonly applies to any retailer, reseller, or vendor. Suppliers no longer need to sell directly to consumers since distributors already take that job. And wholesalers may sell to other companies for profit.

What is a distribution for commission?

Distribution for commissions refers to a clause of an agreement that determines what distributors are paid for in selling items. The same thing applies to a commission regarding the number of items sold. Why is this necessary, you might ask? Commissions offer distributors with incentives in selling. So, distributors gain a percentage of the total sales. And when more sales apply, more profits go to both parties.

What is exclusive distribution?

In distribution agreements, exclusive distribution is one of the common ways to distribute. This example applies to a supplier who only sells to a single distributor at a specific location. On another note, exclusive distribution works by having a distributor with the direct authority to sell goods to consumers. In other words, other distributors cannot sell to such consumers.

What is developer distribution?

If the distributed goods refer to software and intellectual property of that software, the developer distribution is at play. This binding contract between app developers and app distributors enables such developers to grant a license to customers in using the software. And this approach works for both small and big companies of apps that involve distribution.

Despite being a new employee or a white-collar professional, distribution as a business is a good idea. But, you must learn the overall system. Indeed, you trade items for profit. Yet, there is more to distribution than just profit—you build relationships. Suppliers and distributors that do not work as a team can lead to conflicts in distribution. And to ensure that no party commits disputes, a distributor agreement serves as everyone’s guide.