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INTERNATIONAL DISTRIBUTION CONTRACT:

MAIN CLAUSES

 

The purpose of an International Distribution Contract is to establish one or more sales points within a geographical area in a foreign country from which goods and services can be offered to a specific clientele.

This type of contract enables suppliers - i.e. manufacturers of different products - to benefit from existing commercial facilities and to select their trading partners. This commercial contract model also has the advantage of enabling suppliers to impose sales methods and practices associated with their products or brands.

The international distribution contract is a framework agreement, which means that it establishes general obligations for each of the parties over a lengthy period and is supplemented by general conditions of sales  which are often annexed to the contract in order to specify the products and/or services in question, prices, delivery arrangements, etc.

Below are mentioned and explained briefly the main clauses of the International Distribution Contracts.

 

Products and Territory

Specify, in Annexes if necessary, the precise definition of the territory and the supplier's product range to be distributed.

Obligations of the Distributor

Establish the Distributor will take care of distribution in its own name and for its own account. If necessary establish a system of direct sales commissions.

Distribution exclusivity

Mention the commitment or not, to grant the exclusive distributor for the sale of the products in the territory.

Commitment not to compete

Specify the prohibition on sales of competing products and the dealer's obligation to give prior notice of the sale of other products.

Sales Conditions

Establish, usually in an Annex, the terms of sale and the prices of the products.

Resale prices

Declare that the Distributor is free to fix resale prices, but always respecting the product image.

Commitment to inform the Distributor

On the local market situation, regulations, competitors, new products, etc.

Sales objectives

Indicate how to set objectives and establish penalties for non-compliance.

Distribution network

Define the obligations with respect to sales staff, after-sales service, etc.

Sales outside the Territory

Specify the conditions for advertising and selling products outside the territory, especially in contracts for the European Union.

Advertising activities

Mention the need for prior agreement on the advertising budget and cost sharing.

Intellectual property

Set the limits of the right of use of the brands by the Distributor and the prohibition for assignment and registration on his name.

Stocks

Remember the obligation of the Distributor to maintain a sufficient stock of products and the obligations for post-sales service.

Term of the Contract

Mention whether the contract has a duration (1, 3, 5 years) or indefinite, and set the notice period.

Early termination

Specify the conditions that justify early termination of the contract and situations that are considered non-compliance.

Compensation for termination of the Contract

Determine if the Distributor is entitled to compensation for customers in the event of early termination.

Arbitration

It is advisable the alternative of arbitration. Opt for the "General Principles of Law" rather than by local country laws.