Copy - Copy - Distributorship Agreement

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Distributorship Agreement

distributor's duties

EXCLUSIVITY

Consider the following:

• Is there a minimum purchase obligation?
• Are there restrictions on the sale of competing products?
• Must the distributor purchase contract products only from the specified supplier?
• Is there a restriction on actively selling or establishing a distribution depot outside of the agreed territory?
• Must the distribtuor pay for the delivery costs, including any applicable custom duties, or to pay all sums due?
• Must the distributor hold adequate stocks of the products and/or purchase complete ranges of products?
• Is the distirbutor responsible for product maintenance and aftercare obligations?
• Are there any quality standards or criteria to meet for online sale of products?

• Important to determine if the distributorship is an exclusive one or not (ie. whether the distributor has the sole right to sell the products within a particular territory)
• Tension may arise where other distributors start approaching the supplier with more competitive terms so it will be useful to agree how such situations will be addressed

Impact of Parallel Imports

• Even if an exclusive distributorship is secured, the supplier and distributor may wish to agree on a strategy to address parallel imports
• Whilst parallel imports are prima facie not illegal in Singapore, this is a common cause of tension in distributorship agreements

suppliers' obligations

Consider the following:

• To supply the products, and possibly an obligation to satisfy all orders that are placed.
• To provide promotional information, literature, training and support.
• To provide after-sales support. This may be contained within a separate customers service agreement or set out in the schedule of the distribution agreement.
• Suppliers could be required to warrant that the products will be of satisfactory quality and that they comply with certain agreed specifications.

Intellectual Property

• The distributor should be given a licence to use the IP for a limited period of time
• One strategy in addressing parallel imports is to allege IP infringement in respect of non-authorised dealers

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General Provisions

Social Media Support

Do note the following key points:

• Negotiate the length of notice that should be given for price increase.
• Payment Terms & Conditions.
• Withdrawal of goods from contract.
• Passing title and risk of goods.
• Suppliers should resist product liability indemnity.

• Instagram, Facebook and other social media platforms have become a popular platform for influencers to sell their products
• If this is a channel of distribution, it is important to specify what support will be given when consumers have questions about the product or whether the distributor is an authorised dealer or not

Supplier / Distributor Duties

• Some common points of negotiation around supplier duties are:

(i) after sales support; (ii) product liability coverage; and (iii) payment terms

• Some common points of negotiation around distributor duties are:

(i) minimum purchase obligation; (ii) restrictions on the sale of competing products; and (iii) budget on marketing campaigns

Term

• Important to define the initial period of the distribution agreement, as well as the process for renewing the distribution agreement
• Some suppliers have a tendency to 'jump ship' or enter the territory directly after the distributor has invested substantial marketing efforts in the products

Termination

• To set out clear processes for the termination of the distributor agreement (whether for cause or without cause)

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