If annual termination and semi-automatic renewal are included in the agreement, both parties have the option of terminating the agreement once a year without proof of contract. The partnership is maintained together according to this method according to performance and not a set of words in the agreement. Experienced partners always prefer performance as a force of commitment to partnership. Distribution agreements are an integrated instrument for establishing a relationship between a distributor and a supplier. A well-written agreement can help develop this relationship. The agreement cannot extend the life of a relationship as soon as the relationship expires. A poorly written agreement often results in legal litigation, which in turn consumes management time, financial resources and the involvement of lawyers, courts and arbitration proceedings. A well-written agreement can eliminate resource expenditures for these non-productive activities and encourage the distributor and manufacturer to do their business at the end of the relationship. The distribution agreement defines the responsibilities of both parties during and after the duration of the agreement. All distributors and manufacturers understand that the responsibilities of the parties must be defined during the period of operation of the agreement. However, fewer people really understand that responsibilities must be defined for the period following termination.
Distributors and manufacturers must decide in detail what products can be returned to credit and when to return them. A reliable distribution contract must clearly state the responsibilities and obligations of both parties during the term of the contract, in the event of termination and after the official termination of the contract. Distributor franchises may be exclusive, where there will be no other franchised distributor in the territory; or not exclusively if the new distributor could be one of the distributors of several franchisees in the territory. Distributors sometimes use exclusive territory to argue that, without an exclusive area, the distributor is not encouraged to provide adequate resources to the producer to develop sales. As soon as a vendor accepts an exclusive domain, it loses the ability to franchise an additional distributor for a certain period of time. The allocation of an exclusive distribution in an area is an unnecessary leap of confidence on the part of the supplier. An alternative to the allocation of exclusive territory is to design the distribution agreement so that the distributor is not exclusive, but is only a distributor. An oral agreement would indicate that if a supplier`s objectives were met, no additional distributors would be allowed into the non-exclusive territory. Such an agreement encourages the distributor to promote it without restricting the manufacturer`s options. Problems with distribution agreements are often identified after negotiations and agreements have been signed, even if agreements have been verified by corporate or outside lawyers. How did we get to this point? Too often, lawyers remove incriminating clauses, but are simply not aware of industry standards. They do not understand the most common agreement problems.
It is a good practice to have the agreement verified by a lawyer and an industry professional. If your company lacks an industry expert who knows the distribution agreements, such support should be sought. A legal technical review is necessary for the creation of a large distribution agreement, but it is never sufficient. Relationships between manufacturers and distributors are organic. They were born. They`re growing. They`re growing up. They`re maturing. They`re disintegrating. They ended up perishing.
External factors regularly put the distributor and manufacturer under pressure. These pressures sometimes change the distribution agreement.