5 Key Points You Must Cover in Your Distribution Agreements


Whenever you are working with an external party or company always ensure that you sign up for a legal or professional agreement which will not only safeguard your interests but also help you give the complete clarity of the terms of working with the party.

Following are the benefits of signing up an agreement with the party

  1. Complete clarity on Terms of working

  2. Pricing structure

  3. Deliverables by both the parties

  4. Additional costs or taxes involved

  5. Complete information on the companys products and services

  6. You get binded to a legal proceedings if anything goes wrong which helps in the long run

Distribution agreements will vary greatly depending on the laws of the territory in which the distribution is occurring, and it all depends upon the companys requirements and terms of working. So, when you are signing up for an agreement, always keep important pointers in mind that will help you land up a win-win agreement and safeguard your interests.

  1. Distribution Scope

    1. Territory: The agreement should specifically define the area in which the distributor is allowed to sell and promote the products. Especially metros that are massive and require multiple distributors. This clarity will give you the complete outlook on your business.

    2. Products: The agreement should specify what products, product lines, or brands are included under the agreement. The agreement should also address whether and to what extent any new brands developed or acquired by the supplier would be included, or specifically, excluded from the agreement. When you are taking Ayurvedic Distributorship or Sanitizer Distributorship you have to specify the Categories & SKUs you will be selling because not categories or SKUs will have a good sell through for your area.

    3. Exclusivity: The agreement should specifically state whether the distributor is given the exclusive right to sell the products within the defined territory, or whether other distributors will also be permitted to promote and sell the same products, or other products produced by supplier, in the territory (subject to state and local rules regarding exclusive distributorships). Exclusivity is only successful if you have the scale to reach out to the entire area with sufficient manpower and capital.

    4. Terms: The agreement should set forth an initial term for the agreement and also define any renewal terms that may be either elected by the parties or that may occur automatically. As a super stockist, wholesaler or distributor you should always check the companys terms of working and their deliverables on sales & marketing

  2. Pricing & Terms of Payment

    1. Pricing: The company must set the price for the products being sold to the distributor, but the agreement should also include provisions governing resale pricing. The distributor may have the sole right to set the resale price or the parties may agree on, or at least discuss, the resale pricing for the products.

    2. Payments: The agreement should clearly set forth the terms for payment, including timing and location for payments and any penalties in the event of any late or missed payments.

  3. Rights and Obligations of Parties: The agreement should clearly set forth the rights and obligations of both parties to the agreement. For example, where termination can often only occur for good cause or just cause, a company may elect to include a detailed list of distributor obligations to help support its arguments for termination of a distributor in the event of a breach. Some of the most important points to detail in the agreement include

    1. Scope of Advertising, Marketing and Sales Efforts: The parties should consider and include in the agreement the extent to which the distributor will be responsible for promotional, advertising and marketing. The agreement could include defined marketing and/or sales targets, refer to a marketing plan to be agreed on between the parties or simply require the distributor to use reasonable efforts to sell and market the product. The costs and oversight for advertising and marketing should also be addressed as well as any consequences for failing to satisfy specified sales or marketing goals.

    2. Reporting requirements: To the extent required by a company, the agreement should include details regarding the format and timing of sales, inventory, marketing or other reports to be generated and provided by the distributor.

    3. Delivery, Inventory or Quality Control: The agreement should specify delivery parameters for both company and distributor, minimum inventory requirements, and any quality control measures that a distributor or supplier would be expected to undertake. If agreed to by the parties, the agreement could also include minimum purchase requirements. When taking ayurvedic products distributorship, kindly ensure how will the company take back expired or damaged stocks.

  4. Intellectual Property:

    1. While brand-related intellectual property is typically held by the company, a thorough ayurvedic products distribution agreement or FMCG distribution will always include an intellectual property clause that will give the distributor the legal right to use the suppliers intellectual property, including brand names and trademarks, for purposes of its sales and marketing efforts. This provision will also protect the companys rights in the intellectual property.

  5. Termination:

    1. When Is Termination Permitted: The termination provision in a distribution agreement should always include a provision allowing for termination for cause by the parties. This means that if one party breaches the agreement, the other party can terminate. However, these provisions should also include notice requirements and provide the breaching party the opportunity to cure any breaches before the agreement is actually terminated. Termination provisions also typically include an exhaustive list of items, such as bankruptcy or loss of licenses or business closure that can result in immediate termination of the agreement. However, the enforceability of this type of provision varies from state to state.

    2. Post-Termination Obligations: One of the most important provisions to include in the fmcg distribution agreement or sanitizer distribution agreement concerns the parties dealings once the relationship is terminated. The agreement should always include a detailed post-termination section that sets forth the obligations of both the supplier and distributor. This provision should address outstanding orders after termination, the return, buy-back or transfer of remaining inventory, and any ongoing marketing or other obligations that would continue beyond the termination date of the agreement.

I am sure this agreement will help you in finalizing the agreement with the company. These agreements work best when you are signing up for a sanitizer distributorship, ayurvedic products distributorship of fmcg distributorship.

Whether you are an ayurvedic doctor, distributor, super stockist, wholesaler or trader, these pointers will always be helpful for you.

Kairali Ayurvedic Products is a 111 Year Old Ayurvedic Brand that always believes in working with partners who want to spread a healthy lifestyle across the globe. We are always looking for distributors, super stockists, wholesalers, traders for helping you expand your business and increase your sales and profits.

Contact us for business opportunities at +91-9555156156 or email us at support@kairaliproducts.com

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