Term and Territory
How long is the Term for which distribution rights are being granted? Will you grant any extension at the end of the Term? Or a period to sell-off existing stock? What events enable you to trigger a termination? Breach? Failure to achieve performance targets?
For which countries are the distribution rights being granted? Can the Distributor add other countries as the Term progresses? Can you terminate if there are any guarantees of sales or marketing which the Distributor does not meet? If the Territory is less than worldwide, are you free to exploit your products and services in countries outside the Territory, without any restrictions?
Grant of Rights
Are the rights you are granting exclusive to this Distributor or non-exclusive? If they are exclusive, are they limited to a particular sales channel or type of outlet? What rights are you granting along with distribution? Manufacturing? Selling? Advertising and promotion? Can the Distributor sub-distribute to anybody else? Are all other rights, except those granted, explicitly kept by you?
Does the Distributor have to get approvals from you before any particular activities are carried out? If so, are there any time limits you must comply with? Must you be “reasonable” about granting approval? How is pricing set – can the Distributor negotiate discounts and rebates from your prices for end customers, or give away free goods, or does this need your approval?
Delivery and Recollection
What needs to be delivered by you? Software? Masters? Artwork? Manufactured product? When does it need to be delivered by and in what format? Who pays for all of these things? Does the Distributor have to pay all costs of picking, packing and onward shipment to end customers out of their own share? Are you responsible for repairing or replacing faulty goods? If so, how does the process of collecting and examining faulty product work?
Commission, Costs and Accounting
What payment is the Distributor entitled to for their distribution services? How is it calculated? Are there any additional charges such as for handling returns of product from end consumers, sending out promotional material, bad debts, insurance and shipping? How often must reportings and accountings be made, and in what format? In what currency must you be paid? How are withholding taxes dealt with – can the Distributor deduct them? Do you have audit rights? How often?
What promises do you have to give about your ownership of the product and your entitlement to grant all rights? Will you have to clear and pay for any rights or is the Distributor responsible for any of that?
Changing Contractual Partners
Can you assign the agreement to someone else if you need to? Can they, or does that need your approval? If the Distributor takes in investment, or sells the company so that there is a change of control, does it affect their rights? Can you terminate if that happens?
LawBite Legal Advice
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