A distribution agreement is a contract between a manufacturer or wholesaler and a distributor that sells and markets the products. A distribution agreement is a legally binding agreement between an entity supplying goods and an agreement that markets goods. In this case, the supplier may be either a manufacturer or another distributor, who resells the products of another supplier. The distributor is a company that plans to market and sell the products, either to the public or to other companies. The distribution contract defines the terms of the agreement, including the cost of the goods or the commission rate, the duration of the contract during which the distributor can operate and other important details. When a company manufactures a product, it needs it to access its customers. Sometimes that means selling and marketing the product directly, but not all companies have the know-how or market presence to do it themselves, so they have to work with a distributor who has experience and support in the target market. A distribution agreement sets out the terms of an agreement between these two parties, which allows the distributor to sell and market the supplier`s products. Like all contracts, these agreements should be legally binding and it is important to ensure that they follow the law to ensure their validity, which is why distribution agreements should always be reviewed by a lawyer before being signed by either party. It is also important to ensure that these contracts are customized for each deal. This applies not only because each deal will be subject to different conditions, but also because the purpose of distribution agreements can vary considerably. Some suppliers are looking for distributors to bring their products to their desired markets, while others are more focused on the distributor`s marketing know-how.

The details of these transactions will vary considerably depending on the intent of these agreements and the terms specifically negotiated. Of course, the distributor benefits from exclusivity agreements, but there is a compromise on exclusivity, which means that suppliers generally define a kind of minimum performance obligation that the distributor must accept. Failure to comply with these obligations results in fines, a reduced commission rate or a loss of exclusivity rights. Non-exclusive agreements allow the supplier to enter into contracts with as many distributors as it wishes (it can even market the products itself), including in the same market sectors. A selective strategy is to enter into agreements with a small number of distributors to ensure that all target markets are achieved, while an intensive strategy is to bring the product to as many buyers as possible by working with a wide range of distributors, while this can lead to competition between distributors.