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What You Need To Know About Distribution Contract

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Author: Lam Seina


Many manufacturers are having problems in marketing their product and making it available in the market for consumers to use. This is also very common especially if the manufacturer is a newbie and has no venue for selling their products yet. Big time manufacturers are the ones that look for distributors so they have more avenues in selling their products and the possibility that their products become more sellable to the consumers.

The manufacturers are usually the ones that earn less in a distribution agreement. When the manufacturer and the distributor have already reached an agreement that satisfies both parties they will put it in a written agreement in the form of a contract. The contract will contain the basic clauses in the contract to protect both the right of the manufacturer and the distributor.

The basic elements of the distribution agreement will include the following:

Territory -This clause of the contract specifies the distributor's location and address. This clause will also discuss the issue of sub-distributors. The manufacturer should have a list of the sub-distributors and the distributor must agree to them.

Exclusivity or Non-exclusivity of the distribution -This clause will discuss on the right of the distributor's right to distribute in the area they cover. The distribution may be exclusive or non exclusive.

Performance -This clause will discuss standards of the manufacturer on the performance of the distributor to keep the distribution on track. The manufacturer will usually have a time frame that the distributor should keep up with to start the distribution in progress.

Competition -The manufacturer can also restrict or keep the distributor from distributing a rival product in this clause in the contract.

Price and Payment Terms -This clause will discuss the pricing of the products and the terms of payment between the manufacturer and the distributor. The clause will include the highest possible pricing that the distributor can tag to the product as well as the mode of payment and the due dates for the payments.

Ordering and Shipping Terms -This clause should discuss the minimum amount of order for the distributor that has been already agreed with the manufacturer. The shipping will usually be shouldered by the manufacturer.

Brand Ownership and Promotion -This clause will indicate that the brand is owned by the manufacturer and not by the distributor. This should be made clear to prevent confusion with the consumers. The promotion of the distributor will also be specified in the contract. The how's and the what's of the promotion should also be specified.

Responsibilities and Obligations -This clause will specify whose responsibility will the training, technical support and the after sales service of the employees be. These issues will be agreed upon by the manufacturer and distributor and should be written down in the contract in a clear and specified manner.

The manufacturer and the distributor should always maintain a good communication line to maintain a good relationship and operation of the distribution. Though you have a legal contract, you should still maintain a friendly relationship with your distributors.

About the author: Lam Seina is an Author living in Sydney, Australia. He is interested in reading and creating websites. His latest website is about Property Investment. http://www.propertyinvestmentguide.org/accounting-for-commercial-properties/


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