Definition
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