A DISTRIBUTION AGREEMENT: A GOOD WAY TO START TO EXPAND YOUR BUSINESS IN A FOREIGN COUNTRY

Large exporters can afford to set up branches in distant markets and thereby handle their own distribution. Most other exporters must rely upon an independent distributor to buy and then distribute their products.
The selection of an independent distributor is perhaps the most critical decision an exporter will make. A good way to select a distributor in another country is to start with a subsidiary of a company you already work with. Another way is to go to international exhibitions and meet your eventual partner.
When you have found your potential partner, it is crucial that you check his credentials and background.
Then you can start to think about setting up a distribution agreement. If you are ready to do it, you really want to think about having an expert to advise you in that matter because it can take years to repair the damage and loss of goodwill caused by a poorly performing distributor.
A Distribution Agreement is to be used where one party is to act as a Distributor in order to sell the products or goods of the other party (the Principal) in a specified territory or territories. The agreement allows for either an exclusive or non-exclusive distribution arrangement. The products to be distributed are purchased from the Principal and can only be sold within the specified territory or territories. Distribution agreements come in many different sizes and shapes, ranging from a simple letter understanding to a twenty page formal contract. The essential ingredients of all distribution agreements are the same.
They are:
ü Territory Specify the distributor's territory
ü Exclusive or non-exclusive: specify whether the distributor has exclusive or non-exclusive distribution rights
ü Confidential and use of protected information: this article can be crucial especially if you have an innovative product ü Trademarks and proprietary notices (your distributor shall not remove or destroy any copyright notices, trademarks or other proprietary markings on the products, software, documentation or other materials related to the products)
ü Performance: specify minimum performance requirements that the distributor must achieve (including inventory, sales information, marketing developments…)
ü Products: specify the products covered by the distribution agreement
ü Price and payment terms: attach a price schedule and specify your payment terms
ü Shipping Terms; Risk of Loss
ü Restrictions on the Distributor Carrying Competitive Products
ü Limitation on Liability
ü Term of the Distribution Agreement
ü Governing Law



The exporter should be realistic. While a distribution agreement may encourage the distributor to comply, it is by no means a guarantee of compliance. However, experience has borne out that most disputes between an exporter and a distributor arise out of different expectations concerning their respective obligations to each other. A Distribution Agreement will thereby reduce the possibility of any surprises in the future


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