INTRODUCTION
Dubai is known for its ease of doing business, which means setting up companies in the UAE is a manageable task. Therefore, setting up a company in UAE can be formulated as quickly as eating bread with butter. Every individual in UAE, whether a businessman or entrepreneur investing in the business relating to the manufacturing of goods and services, needs a Distributor to proceed or play in the market. Therefore, not every business requires the need of a Distributor, but in most cases, there are categories of businesses which requires a Distributor. Thus, in this article, we will deal with the importance and role of a Distributor Agreement as well as the essential points that a Distributor Agreement shall possess.
What is the meaning of the Distributor Agreement?
A Distributor Agreement is an agreement executed between the Manufacturer and Distributor to grant the right to the Distributor to supply the specified goods and services in a defined territory. This Agreement creates a working outline for the business and sets certain rights and obligations upon the Distributor.
Who are the Parties of the Distributor Agreement?
Our Small Business Contract Lawyers states:
The Parties to the Distributor Agreement are generally Manufacturer and Distributor. Whereas in situations wherein the Distributor wants to appoint any sub-Distributor, in such cases, the Distributor must obtain written permission from the Manufacturer.
What is the importance of the Distributor Agreement?
Our Small Business Contract Lawyers states:The importance of the Distributor Agreement varies on the nature of the manufacturer\’s business. Therefore, in this answer, we will be dealing with the general significance of the Distributor Agreement. Thus, for a better understanding of the reader, the following benefits are mentioned below which will highlight the importance of the Distribution Agreement:
- Specific Rights regarding the Sale, Advertising, and Marketing of any goods or services belonging to Manufacturer are mentioned.
- The Distributor is bound to work under the limited rights and responsibilities as mentioned under the Distributor Agreement.
- Rights regarding the appointment of any sub-Distributor are clearly mentioned in the Agreement.
- Liabilities for the Distributor, even for the acts of the Sub-Distributor are specified.
- Protects Intellectual Property Rights and other licenses, and permits required for sale and distribution.
- Security in terms of Payment.
- Limits the liability of the Manufacturer.
- Protection of any Confidential Information.
The points mentioned above relate to the importance of the Distributor Agreement, and more protection to the Manufacturer or Distributor depends upon the case-to-case basis.
What are the key provisions that a Distributor Agreement shall include?
Our Small Business Contract Lawyers provide some of the significant provisions that a Distributor Agreement shall include. The said provisions are mentioned hereinunder in a chronological manner for the better understanding of reader:
- Details of the Parties
This clause is initially used for any agreement, including the Distributor Agreement as this clause will specify all the correct information of the parties involved in the Agreement.
- Purpose or Scope Clause
This clause will identify the purpose or scope of the Agreement, which provides a general or clear understanding between the parties and their relationship.
- Product Details clause
In this clause of the Agreement, each detail about the product or service involved in the relationship between Manufacturer and Distributor shall be specified.
- Rights for Sale, Advertising, and Marketing Clause
This clause will specify the Distributor\’s rights in relation to the sales, advertising, and marketing for the product which belongs to the manufacturer.
- Rights regarding the appointment of Sub-Distributor Clause
This clause will define the procedure if Distributor to an agreement wants to appoint a sub-Distributor for emanating the obligations levied by the Distributor.
- The obligation of the Distributor Clause
This clause will provide the use of Trademark and Intellectual Property Rights to the extent permitted by the Manufacturer. Moreover, imposes a bar upon the Distributor to take all licenses and permits required for the sale and distribution of goods/services. It also obligates the Distributor to act in good faith to maintain the reputation of the goods/services and to advise the manufacturer about market trends after conducting surveys.
- Payment Terms Clause
The mode of payment or the payment plan as agreed between the Manufacturer and Distributor shall be specified so that better understanding can be given of the payment terms.
- Limited Express Liability Clause
This clause will limit the liability of the Manufacturer regarding warranty and claim for the product. In other words, this clause will ascertain the liability of the Manufacturer to some extent which can be in terms of product warranty or compensation relating to such product.
- Confidential Information Clause
This clause will keep the confidential information secured as exchanged between the contracting parties while performing their duties and obligations as specified in the Agreement.
- Term and Termination Clause
This clause will specify the term of the Agreement between the parties and also lay down the conditions wherein termination can be done by either party to the Agreement after serving prior notice in writing to the other party. The terms of the termination and days of information depending upon the requirements of the case or client.
- Indemnification Clause
This clause will indemnify the contracting party against the loss suffered due to the actions of any third party. Suppose in case if Distributor has appointed any Sub-Distributor. Any loss sustained to the Manufactured due to the efforts of Sub-Distributor then Distributor is liable to indemnify the Manufacturers against such acts.
- Entire Understanding Clause
This clause will provide the entire understanding of the Agreement between the contracting parties and make all the previous agreements or promises, whether made in writing or orally, null and void from the effective date of this Agreement.
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Our Small Business Contract Lawyers possess legal contract review and drafting skills, which ensures our clients\’ protection, and their work matches our clients\’ expectations. Therefore, to avail the benefits of the best Legal Document Drafting Service and Legal Contract Review, contact us.
