What Is a Distribution Agreement?

A distribution agreement is a contract between a supplier or manufacturer and a distributor that governs the terms under which the distributor sells or resells the supplier’s products in a defined territory or market. Distribution agreements are essential for businesses that rely on third-party distributors to bring their products to market, and for distributors who need clear contractual protections for their investment in building a distribution channel.

Russo Law LLC drafts, reviews, and negotiates distribution agreements for suppliers, manufacturers, and distributors throughout New York and New Jersey.

What Does a Distribution Agreement Cover?

Products covered – which products the distributor is authorized to sell
Territory – the geographic area or market segment in which the distributor is authorized to sell
Exclusivity – whether the distributor has an exclusive right to sell in its territory, or whether the supplier can appoint other distributors or sell directly
Pricing and payment terms – wholesale pricing, minimum order quantities, invoicing, and payment obligations
Performance obligations – minimum purchase or sales targets the distributor must meet to maintain its rights
Marketing and promotional obligations – each party’s responsibilities for marketing the products
Intellectual property – the distributor’s right to use the supplier’s trademarks and brand materials in connection with sales
Term and termination – the duration of the agreement and each party’s right to terminate
Dispute resolution – how disputes are resolved, including governing law and jurisdiction

Exclusive vs. Non-Exclusive Distribution

Exclusive distribution – the supplier agrees not to appoint other distributors or sell directly to customers in the distributor’s territory. Exclusive arrangements typically come with minimum purchase or sales performance requirements
Non-exclusive distribution – the supplier retains the right to appoint other distributors or sell directly in the same territory
Sole distribution – a middle ground where the supplier won’t appoint other distributors but retains the right to sell directly in the territory

Frequently Asked Questions – Distribution Agreements in New York and New Jersey

What happens if a supplier terminates a distribution agreement?

The consequences of termination depend on the terms of the agreement. Most distribution agreements allow either party to terminate with notice, and some allow immediate termination for cause. Distributors who have invested significantly in building a distribution channel may have claims for damages if the supplier terminates without proper notice or in breach of the agreement. New Jersey has specific statutes that provide additional protections for certain categories of distributors and sales representatives. Russo Law LLC represents clients in distribution agreement disputes throughout New York and New Jersey.

What are the special considerations for international distribution agreements?

International distribution agreements involve additional layers of complexity beyond a domestic distribution relationship. Because the parties are located in different countries and the products are being distributed across borders, international distribution agreements commonly include an international arbitration clause – specifying that disputes will be resolved through arbitration under the rules of an international arbitration body such as the International Chamber of Commerce (ICC) or the American Arbitration Association’s International Centre for Dispute Resolution (ICDR), rather than through domestic courts. This is particularly important because enforcing a court judgment across national borders can be difficult or impractical. International distribution agreements may also need to address import and export regulations, customs and tariff obligations, foreign currency and payment terms, compliance with applicable foreign laws, and which country’s law governs the agreement. Russo Law LLC advises clients on commercial contracts with international dimensions.

Does a distribution agreement need to be in writing?

While oral distribution arrangements can be legally enforceable in some circumstances, they are extremely difficult to prove and enforce. A written distribution agreement is essential for defining the parties’ rights and obligations clearly and providing a basis for enforcement if the relationship breaks down.

Schedule a Free Consultation

If you need a distribution agreement drafted, reviewed, or negotiated for your business in New York or New Jersey, call 929-262-1101 or schedule a free consultation with Russo Law LLC.

The information on this page is general in nature and does not constitute legal advice. Every situation involves unique facts, and no specific strategy or recommendation can be made without a full review of your circumstances.