A distributor agreement is a commercial contract between a supplier of goods and a distributor of goods. The supplier may be a manufacturer, or it may be a reseller of the products.
In the modern business world, more and more companies are involved in distribution arrangements that cross international boundaries. According to data provided by The World Bank, international trade accounted for nearly one third of U.S. gross domestic product (GPD) in 2017.
Companies engaged in this type of cross-border business need well-structured international distributor agreements.
Key Clauses in an International Distribution Agreement
An international distribution agreement is essentially a contract that creates a framework for a business relationship between global parties. To ensure effective and efficient transactions, an international distribution agreement should be comprehensive.
Among other things, some of the main clauses that you typically will find in an international distribution contract include products and territory, obligations of the parties, exclusivity provisions, renewal/termination, and dispute resolution.
Products and Territory
As a starting point, international distribution agreements will generally provide details regarding the specific products and the specific territory that will be covered by the contract.
Obligations of the Parties
Similar to other commercial agreements, it is imperative that an international distribution contract clearly outlines the responsibilities of each party. Both the supplier and the distributor must have clarity regarding their duties to perform under the terms of the deal.
Exclusivity Provisions
Some international distribution agreements include exclusivity provisions. While not all of these agreements are exclusive, this is an issue that should be addressed within the contract negotiations.
Renewal/Termination
The agreement should also define the length of the commercial relationship. In addition, procedures should be created to deal with issues related to renewal and termination.
Dispute Resolution
Finally, distributor agreements should include dispute resolution provisions. No matter how good the relationship between the supplier and the distributor, there is always a risk of dispute.
With international business contracts, it is often advisable to include an arbitration provision. Arbitration offers many advantages compared to handling disputes under local laws.
Of course, this list is just a brief sampling of the important contract terms that you will find in an international distributor agreement. These agreements should always be customized to meet the unique needs of each party.
Get Help From an International Business Attorney Today
If your company is considering entering into an international distributor agreement, it is essential that you seek professional guidance.
As these are complex agreements, there are a number of different unique issues that need to be addressed. I will make sure that the agreement is properly drafted and that it protects the rights and business interests of your company.
I frequently represent American clients doing business abroad and German speaking clients doing business in the United States. If you have questions about international distributor agreements, I’m happy to help.
To schedule a fully confidential consultation, please contact me today.
Timo Becker
Timo Becker works with U.S. business owners throughout America and overseas, and he also assists people from German-speaking countries looking to invest or start a business in the United States.
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