Not like a normal product distribution contract, an exclusive distribution contract is exclusive to one wholesaler/ retailer / distributor in a particular city or a marketplace (the exclusive distribution contract sample will be provided briefly in this article). Exclusive distribution contract is sometimes called ¨sole distribution agreement¨, however because sole distribution means the distributor retains the right to distribute the products in the territory, albeit forfeiting the right to appoint any third party to do so[i], it is in fact a misleading. In an exclusive distribution agreement, the supplier will be restricted from supplying to any third party, including agencies or other distributors in the covered regions under the agreement.
Generally speaking, for the low risk of commercial expanding to a new territory, there are three common types of commercial agreements that enterprises and individuals would select for commercial considerations: distribution agreement, agency agreement and franchise agreement. The key difference of a distribution agreement and an agency agreement is that the titles to the goods can be passed from supplier to the distributor while in the agency agreement the title does not pass.
There are three basic types of distribution agreement,: intensive distribution, selective distribution and exclusive distribution; in which, intensive distribution aims to provide wide coverage to make a brand available for customers while selective distribution works better when a customer´s preference is clear for a particular brand or price range or a particular consuming area. It is worth noting that exclusive distribution is one extreme situation of a selective distribution in which only one distributor is used in a specific geographical area. The exclusive distributor is given exclusive right to commercialize the sell the products within the territory, should the suppliers sell any other products within the territory, they shall inform the distributor in order to determine the possibility of including it in the products described in the exclusive distribution agreement[ii].
Here is a brief exclusive distribution contract sample (headings of a contract) to ensure the rights of both parties. An exclusive distribution contract / agreement involves:
- Distribution Grant
- Purchase Orders and Supply of the Product
- Product Pricing and Payment
- Quality and Changes in Product
- Packaging and Warehousing Responsibilities
- Product Registration
- Sales and Marketing of the Product
- Additional Obligations of Distributor
- Representations and Warranties of Distributor
- Confidential Information and Non-Competition
- Existing Stock
- Limitation of Liability and Indemnities
- Force Majeure
- Governing Law and Arbitration