Distribution and Reseller Contracts

What are Distribution and Reseller Agreements?

A Distribution or Reseller Agreement stipulates the terms between a manufacturer or supplier and the ultimate seller or retailer of the goods or services. In addition to essential terms such as term, price and quantity, and territorial restrictions, such agreements can contain important clauses such as exclusivity requirements, restrictions against direct selling (selling directly to a customer rather than to the distributor or to a retailer rather than to the wholesaler), marketing rights, trademark licenses or restrictions, accounting and audit rights, and the means and form of terminating the relationship.

How Distribution Agreements Can Be Structured

If you are a manufacturer or supplier and want to work with a reseller or retailer to sell your products, a distribution agreement is a necessary tool that can allow you to control the path of your products to market.

For instance, if a company has only been selling products in one area but is looking to expand geographically into other markets, a distribution agreement can clarify territorial restrictions so that sellers or retailers can be restricted to selling in specified geographies to avoid overlap and competition between sellers and retailers.

For example, a flavored liqueur company located in Eugene, Oregon that has never sold its liqueurs outside of Oregon recently signed a distribution agreement with Whole Foods to sell the liqueurs only in stores located throughout Northern California and the Bay Area, the new territory coveted by the company for expansion.

Distribution agreements can also define the financial terms of such an agreement between a manufacturer and seller or retailer. If a product is in high demand, a manufacturer may be able to negotiate an upfront, one-time license fee in addition to a minimum purchase guarantee. A network marketing company, Laguna, recently went this route by acquiring the rights to market, promote, and distribute skincare products made by CannaCeuticals, a California skin care company, in exchange for a one-time license fee of $100,000 and a minimum purchase guarantee of $1.5 million of products priced at wholesale within two years of the date of the agreement.

Distribution + Reseller Contract Drafting & Reviews By Your Contract Lawyer

If your business is considering entering a distribution relationship, whether you are the seller/retailer or manufacturer/supplier side, Your Contract Lawyer can help you consider what elements would be necessary to include in a distribution agreement for you to reap the most benefits possible from the arrangement.

If your company is considering entering a reseller agreement from either position, Your Contract Lawyer can help you assess the circumstances surrounding your potential new business relationship and draft or review a reseller agreement that will best protect your business’s short- and long-term interests.

Whether you want to take your product global or merely want to allow another company to resell your product as its own, our office can get involved at any step of the process by drafting the initial contract, reviewing and editing an existing draft, or assisting your company in negotiating an entirely new reseller agreement that better reflects your business’ objectives in forging such a relationship.

To learn more about distribution and reseller contracts and how Your Contract Lawyer might be able to assist you, please contact us via phone or the contact form on this page. If you get a chance, head over to our Yelp page to read reviews of our past work.