How To Use
This review list is provided to inform you about the document in question and assist you in its preparation.
- The Manufacturer should be alert to the dangers in establishing any long-term exclusive relationship with a Distributor. Most of these relationships accrue to the benefit of the Distributor, not the Manufacturer. Notable cases include Coke, Pepsi, McDonald’s and others who had to buy back their rights at considerable expense from these parties. The reverse is true for Distributors. It is usually in their best interests to acquire as many of these agreements as possible in the hopes that one or two will turn into the gold mine that a Coke, Pepsi, or McDonald’s franchise has done.
- Manufacturer should consider long and hard whether they can get the same result, or nearly the same result, with a nonexclusive Agreement. Nonexclusive Agreements give the Distributor less leverage over the Manufacturer in situations where the Distributor performs poorly. These agreements are more common today, for that reason, than exclusive Agreements. If the Manufacturer chooses to go ahead with an Exclusive agreement, they must extra cautious about investigating the financial and marketing power and commitment of the Distributor. In simple terms, the back door or exit position is much weaker, and distributors that seek exclusive agreements, and don’t back off the request easily, are usually prepared to fight hard to keep their exclusive agreements, no matter how poorly they perform.
- This agreement creates an exclusive right on behalf of the Distributor to market the products in the territory defined by the parties. This means that other distributors cannot in the territory. Make sure that an exclusive arrangement is what both parties have negotiated and can tolerate, especially the Manufacturer.
- Manufacturers, once again, need to also be alert that terminating a Distributor with our without cause, can lead to serious legal charges being brought against the Manufacturer involving everything from the broad category of “good faith” dealing to antitrust claims. This is an area ripe with dangerous legal traps that are different in many states. Before entering into an Exclusive Distributor Agreement we strongly recommend you consult with a knowledgeable business attorney about the implications in your state and the Distributor’s state regarding such agreements.
- Print two copies of the Agreement so each party can have a copy that is an original.