A large percentage of merchants enjoy exclusive or monopolistic rights at each geographic boundary decided. In an exclusivity agreement, only the designated distributor can sell the manufacturer`s products in the regions/regions indicated. In a non-exclusive agreement, the manufacturer reserves the right to sell to other distributors. The reporting requirement should also be defined in the agreement. What exactly does the manufacturer ask distributors and how many times do they have to be submitted? Does the distributor have to draw up and submit a written sales plan or will the manufacturer do so? Some state franchise laws say that if the distributor is responsible for developing the marketing plan, the franchise law does not apply – the theory is that the franchise law only applies if the manufacturer prepares the plan and requires the distributor or franchisee to follow it. Therefore, from the manufacturer`s point of view, it may be good, at least in these countries, for the distributor to take responsibility for developing a marketing plan. Signing a distribution agreement can be exciting and fruitful, but we always recommend it. B consider all options (for example, clauses you need or competitive risks) before locking yourself into such an agreement. Of course, the distributor benefits from exclusivity agreements, but there is a compromise on exclusivity, which means that suppliers generally define a kind of minimum performance obligation that the distributor must accept. Failure to comply with these obligations results in fines, a reduced commission rate or a loss of exclusivity rights. As a first comment, we must keep in mind that the overwhelming majority of all disputes in the context of distribution will arise if the manufacturer wants to end the relationship against the will of the distributor. Therefore, the conclusion of this whole exercise is to do two things. First, spell the agreement so that everyone knows what the agreement is.
In other words, do what you would do in each contract. Second, when negotiating the franchise agreement, whether you represent the manufacturer or distributor, Jockey for the position that will have the upper hand if the manufacturer ever wants to terminate the contract. It is important to note that the principles mentioned above represent the generally accepted principles of 4 types of agreements, but there is no defined legal definition for each of them. It is therefore not enough to label your contract as one of the four types of distribution agreements.