What you need to know about the Distribution Agreement
Distribution contracts are agreements between companies that seek to establish a commercial relationship in which one of them distributes the products or services of the other. These contracts are critical to the success of any company looking to expand its reach and increase its market share.
In this article, we will provide you with everything you need to know about the distribution agreement, both nationally and internationally, as well as some important legal advice to keep in mind.
What is a distribution contract?
A distributorship contract is a legal agreement between two companies in which one of them, the distributor, agrees to sell the products or services of the other company, the supplier.
In this contract, the conditions of the commercial relationship between both companies are established, including the obligations and responsibilities of each one, the sale prices, the duration of the contract and the conditions of its termination.
Elements of the distribution contract
The main elements of a distribution contract are:
- Identification of the parties involved: the supplier company and the distributor must be clearly identified.
- Geographic area: the territory where the distributor can sell the products or services must be established.
- Obligations of the supplier: the obligations of the supplier must be specified, such as the delivery of the products or services, the guarantee and the after-sales service.
- Distributor Obligations: The distributor's obligations, such as promoting the products or services, making sales, and managing the relationship with customers, must be specified.
- Prices and payment terms: sales prices and payment terms must be established.
- Duration of the contract: the duration of the contract and its termination conditions must be specified.
Types of distribution contracts
There are three types of distribution contracts:
A. Exclusive Distribution Agreement
In this contract, the supplier undertakes not to sell its products or services to other companies in the same territory in which the distributor has exclusivity. The distributor, for its part, undertakes to sell only the supplier's products or services and not to distribute competing products in that territory.
This type of contract is beneficial for the distributor, since it has exclusivity in the sale of the supplier's products in a certain territory, which allows it to have greater control over the market.
B. Selective distribution contract
In this type of contract, the provider selects distributors who will sell their products or services in a given territory.
The provider sets certain requirements for distributors, such as the level of quality of customer service or the number of sales they must make. This type of contract is common in the sale of high-quality products or luxury brands.
C. Non-exclusive distribution contract
In this contract, the supplier can sell its products or services to other companies in the same territory in which the distributor operates.
The distributor does not have exclusivity in the sale of the products or services of the supplier. This type of contract is beneficial for the supplier, since it allows him to sell his products or services to multiple companies and increase his market share.
Legal advice for the distribution contract
Registration of the intellectual property
It is important to register the intellectual property of the products or services to be distributed, as this ensures that the intellectual property rights are protected. This helps prevent unauthorized use of the products or services by third parties.
It is advisable to include non-compete clauses in the distribution contract, which means that the distributor will not be able to sell competing products for a certain period after the end of the contract. These clauses help protect the provider's interests and prevent unfair competition.
It is important to establish a procedure for the resolution of conflicts between the parties in the distribution contract. This may include mediation or arbitration in case of disputes. It is also important to specify the conditions for termination of the contract in case of breach of the obligations of one of the parties.
Distribution contracts nationwide
Nationwide distribution contracts refer to the distribution of products or services within a country. These contracts can have different durations, from a few months to several years.
Advantages and disadvantages
The advantage of nationwide distribution contracts is that they are less complex than international distribution contracts and are easier to manage. The downside is that the market can be limited, which can affect sales.
International distribution contracts
International distribution contracts refer to the distribution of products or services in different countries. These contracts are often more complex than nationwide distribution contracts and require a higher level of coordination.
Advantages and disadvantages
The advantage of international distribution contracts is that they can generate higher sales and profits for the supplier and distributor. However, the complexity of the international market and the regulations of the countries can increase the risk and complexity of the contract.
At Forcam Lawyers we are experts in distribution contracts between national and international companies. Our team of lawyers specializing in commercial law can help draft a solid distribution agreement tailored to your business needs.
Do not hesitate to contact us for more information and legal advice on distribution contracts.
In addition to having extensive experience in the field of commercial law, our firm offers legal advisory services in other areas relevant to companies, such as labor, tax and intellectual property law.
In our personalized and client-oriented approach, we make sure to understand the specific needs and objectives of each company in order to provide the best possible legal advice.
We work closely and transparently with our clients, always looking for practical and effective solutions to any legal problem they may face.
If you are looking for a law firm in Barcelona with experience in national and international distribution contracts, as well as in other relevant areas for companies, do not hesitate to contact Forcam Lawyers Barcelona. We are here to help you protect your interests and achieve success in your business operations. If you have more questions about the distribution contracts in Spain, you can click here.