A distributor agreement is a legal contract between a manufacturer or supplier and a distributor that outlines the terms and conditions of their business relationship. In the United Kingdom, distributor agreements are governed by the Competition Act 1998, which regulates anti-competitive behavior and unfair business practices.
The purpose of a distributor agreement is to establish a clear understanding of each party’s roles and responsibilities. It typically includes details such as the territory and customer base the distributor will serve, the products or services that will be distributed, pricing, payment terms, and intellectual property rights.
One of the most important aspects of a distributor agreement is the exclusivity clause. This clause stipulates whether the distributor has the exclusive right to sell the products or services in a particular region or market. Exclusive agreements can help protect both parties from competition and ensure a stable business relationship.
Another key element of a distributor agreement is the termination clause. This outlines the circumstances under which the contract can be terminated and the procedures that must be followed in such situations. For example, a distributor may be terminated if they breach the terms of the agreement or if the manufacturer chooses to sell their products themselves.
When drafting a distributor agreement, it is important to consider the requirements of the Competition Act 1998. The Act prohibits anti-competitive agreements, such as agreements that prevent or reduce competition or restrict the market in any way. As such, it is important to ensure that the terms of the distributor agreement comply with competition law.
Overall, a distributor agreement is an essential tool for manufacturers and distributors in the UK. It can help establish a solid business relationship and protect both parties’ interests. However, it is important to seek legal advice when drafting a distributor agreement to ensure it complies with competition law and protects your business interests.