Distribution and supply agreements


Supply and distribution agreements are similar arrangements with slight differences. A supply agreement is a binding legal contract between parties that agree to buy and sell quantities of goods over a specific period of time. On the other hand, a distribution agreement is one between the manufacturer and a supplier to distribute or sell manufactured items. 

Essential Characteristics

Distribution and supply agreements should contain terms that consider the following:

  • Sign-on fees
  • Duties of the supplier or distributor
  • Term or length of the agreement
  • Where the goods or services will be distributed
  • How payment is to be made and when it will be due
  • Exclusivity and whether suppliers may appoint other distributors
  • Whether the agreement can be renewed or extended
  • Termination clauses
  • Whether distributors are obliged to market goods and services
  • Intellectual property clauses
  • Sales Targets and Reporting Obligations
  • Restraint of trade or clauses that prevent distributors or suppliers from competing with each other after the agreement ends
  • Personal Property Securities Act Clauses that detail whether there is a security interest over the assets of the Distributor in favour of the Supplier to secure debts owed by the other party