Although I enjoy the day-today challenges of international litigation, I’m often called upon to structure international business deals. These are fun too, as I get an inside look at the business side of many different kinds of industries.
Lately, I’ve seen a considerable increase in the number of distribution deals being forged. Distribution agreements are simply contracts to distribute a product made by Company X to the dealers and remarketers of the product.
The distributor assures Company X that it has the facilities, personnel, and technical expertise necessary to market the specified product in a given territory.
At minimum, an international distribution agreement should contain the following terms:
- Term: This clause sets the duration of the agreement and should specify whether it’s automatically renewed after the term expires or whether the parties intend to re-negotiate terms after the term expires. Duration can vary widely depending on your industry.
- Products: You should specifically describe and identify the product developed or owned by a company along with all options to the products; all future versions of the products; and all enhancements, revisions, or modifications made to the products by company.
- Territory: Be sure to always indicate the specific geographic areas where the product(s) will be distributed. Also be sure to include terms of exclusivity to keep your channel clear of competitors.
- End-User: Identify all persons or entities that will obtain the product(s).
- Intellectual Property Rights: This provision is immensely important. Always identify the intangible legal rights or interests that cover any idea, design, concept, technique, invention, discovery, or improvement. This extends to any work of authorship and any other similar rights. I’ll be covering international intellectual property protection in a future post.
- Quota: Be sure to specify minimum quantities of the products. The quota will consist of an initial purchase order and a continual minimum monthly volume commitment.
- Termination: All good things come to an end. Be sure to carefully articulate the terminating conditions of the agreement. The more thorough you make it, the better off you’ll be.
To guide you along, I’ve embedded a sample international distribution agreement below: (solely for illustrative purposes):
The agreement above should give you a pretty good idea of what an international distribution agreement should look like. Of course, every situation is different. Be sure to contact an attorney to structure a distribution agreement that satisfies your particular needs.
-Santiago
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