A Distribution Agreement is a legal document that formally ties together the relationship between a supplier of goods and/or services and a third party who the supplier wishes to appoint to sell their products in a particular part of a country. This can be a region, county, town or even country.

In essence, a Distribution Agreement regulates the relationship between the supplier and the distributor.

This agreement formally records and lays down how the parties will work together. often, the distributor will be compelled to purchase the products from the supplier and then sell them on. This is a standard clause in an agreement of this kind. In contrast however, this agreement can also apply when the distributor is to pay to the supplier the cost of the goods after they have been resold.  This would require a smply re-wording of one of the standard clauses to incorporate this.

The most frequent reason for having a Distribution Agreement in place is to outsource.  The supplier often chooses to outsource and use a separate distributor to save on costs and focus on only the manufacturing of the goods at hand. Although the supplier's income will be guaranteed where the distributor must first purchase the goods prior to reselling, a down side is the fact that the distributor will undoubtendly demand huge discounts on the goods that are to be resold.  A way of increasing this threshold may be to simply include a clause in the Distribution Agreement that states the distributor will have exclusive jurisdiction in that area and the supplier will promise to use any other distributor (subject to the termination terms in the agreement) in that designated area.

All agreements of this kind must specify whether the distributor is to have exclusive or non exclusive rights to sell the goods in a certain area.  Once signed, it is legally binding on each party (subject to any unfair terms) and so it is imperative that the terms suit each party.

In the event that changes need to be made to the agreement after it has been officially implemented, a new Distribution Agreement will have to be drawn up and signed, and the old one destroyed after the terms of termination have been fulfilled.