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A distribution agreement is a contract between a supplier (manufacturer or brand owner) and a distributor. It should clearly set out how the distributor buys, markets, and resells the supplier’s products within a defined territory or market segment. A well drafted distribution agreement is essential for both parties, providing clarity on pricing, exclusivity, marketing responsibilities, and termination rights.
Before entering into an agreement, due diligence is also vital, whether you’re a manufacturer or brand owner expanding into new markets, or a distributor negotiating fair and secure terms.
Our commercial solicitors act for both suppliers and distributors, advising UK and international clients across industries including retail, food and drink, technology, and manufacturing. We help you structure, negotiate, and enforce agreements that are commercially effective and legally sound.
Our services include:
Drafting bespoke distribution agreements tailored to your business and market strategy.
Reviewing and negotiating existing contracts before signature.
Advising on termination, breach, and enforcement.
Resolving distribution disputes, including termination claims and breach of exclusivity issues.
Different commercial strategies call for different structures:
Exclusive distribution – only one distributor is appointed in a defined territory. This provides brand control and loyalty but limits flexibility for the supplier.
Sole distribution – the supplier won’t appoint another distributor in the same territory but retains the right to sell directly.
Non-exclusive distribution – multiple distributors can operate, giving broader market reach but less commitment from each.
Selective distribution – used for high-value or specialist goods, where distributors must meet specific standards to protect brand quality.
Exclusivity - does the agreement grant the distributor exclusive rights to sell the goods within a defined territory? Or is it non-exclusive, allowing competition from other distributors or even the supplier itself?
Minimum order quantities - are there minimum purchase requirements for the distributor to maintain? This ensures predictable revenue for the supplier while motivating the distributor to actively sell.
Pricing and margins - how are prices and profit margins determined? Fixed prices might provide stability, while flexible pricing can offer negotiation room and market adaptability.
Product scope - detailed specifications, variations allowed, and future product inclusion mechanisms
Marketing and sales - who is responsible for marketing and sales? The agreement should define shared or individual responsibilities, ensuring coordinated efforts towards market penetration.
Intellectual property rights - how are intellectual property rights, such as trademarks and patents, protected? Protection measures generally including counterfeit prevention, parallel import handling, and infringement reporting. Customer database ownership and usage restrictions and rights are also important.
Risk allocation and mandatory legal protections - a clear liability framework is essential including any agreed liability limits reflecting risk allocation, insurance required coverage types and levels and indemnities for product liability, IP infringement, and regulatory compliance.
Breach and Termination – define what constitutes a material breach (e.g. underperformance, non-payment, or IP misuse) and allow for swift termination if necessary. Include insolvency, non-compliance, and reputation clauses.
Post-Termination Obligations – unsold stock, outstanding payments, and ongoing confidentiality obligations to ensure a clean exit.
Without careful drafting, distribution arrangements can create significant risk:
Ambiguous exclusivity or territory definitions - causing overlap and confusion.
Weak performance terms - leaving suppliers unable to act against underperformance.
Inadequate termination rights - making it hard to exit unproductive relationships.
Misuse of intellectual property or brand materials.
Jurisdiction and enforcement issues in cross-border arrangements.
Loss of control - supplier has limited influence over how the distributor markets, prices, or represents the brand and poor distributor performance can harm brand reputation.
Dependancy on Distributor, Over-reliance on a single distributor (especially in exclusive deals) - can expose the supplier if the distributor underperforms or exits the market.
Pricing and margin issues - suppliers may have to sell at discounted rates to distributor whilst distributors may set retail prices that affect brand positioning.
Disputes can arise over issues such as exclusivity, territory, pricing, or termination. We advise both suppliers and distributors on resolving disputes quickly and commercially, whether through negotiation, mediation, or formal proceedings.
Our team is experienced in claims for breach, and exit negotiations to protect your position and minimise business disruption.
Our commercial and contract solicitors advise on drafting, reviewing, and enforcing UK and international distribution agreements. Whether you’re appointing a distributor or negotiating one, we’ll help you protect your position and resolve any issues efficiently.
Contact us today to discuss how we can support your business.
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