Reading a distribution agreement: territory, targets, price and what is left at the end

Distributor, agent or reseller decides who carries the risk

The three words are used interchangeably in commerce and mean different things in law. Getting the category right is the first decision, because everything downstream — credit risk, price control, tax, termination rights — follows from it.

That last point is worth being precise about. In the UK, the Commercial Agents Regulations give a self-employed intermediary who negotiates the sale of goods on a principal's behalf a right to compensation or indemnity when the relationship ends — a right that cannot be excluded, and that does not apply to distributors. The UK government consulted on repealing the Regulations and confirmed in 2025 that they stay. Equivalent rules apply across the EU. Call the relationship what it actually is — and where the arrangement is genuinely a single shipment rather than a channel, use a sales agreement instead of appointing anyone.

Exclusive, sole and non-exclusive are conventions, not definitions

Practitioners generally use "exclusive" to mean the supplier appoints nobody else and stays out of the territory itself, and "sole" to mean one appointed distributor but the supplier reserves the right to sell direct. Usage is not consistent, and no statute defines either. Read the reservation of rights, not the adjective.

Three carve-outs are worth naming explicitly in any exclusive grant: named house accounts the supplier keeps, sales through the supplier's own website, and sales to global customers with a central purchasing function. Each is a legitimate supplier need and each destroys the distributor's expectation if it appears only after signature. If the control being sought extends to premises, systems and staff training, the model is a franchise, with disclosure duties attached.

Minimum commitments, and what missing them does

Exclusivity without a volume obligation is a gift. The commitment is what pays for the territory, and there are two quite different ways to write it. A target is a forecast the distributor will use reasonable efforts to hit; a commitment is a purchase obligation, and missing it is a straightforward debt. Suppliers frequently think they bought the second and actually bought the first.

Two refinements make the clause fair enough that a distributor will accept it. Excuse the shortfall where the supplier failed to deliver — otherwise the distributor loses its territory because of your own stock-outs, a risk explored further in supply and manufacturing agreements and in the supply agreement clause checklist. And measure over a rolling twelve months rather than a calendar quarter, so one seasonal miss does not end a working relationship.

Price: what a supplier may and may not control

The distributor owns the goods, so the resale price is its decision. Suppliers dislike this, and the clauses they reach for are the ones most likely to create liability that dwarfs the commercial point.

In the United States, minimum resale price maintenance stopped being automatically unlawful in 2007, when the Supreme Court in Leegin Creative Leather Products v PSKS overruled *Dr. Miles* and put vertical price restraints under the rule of reason. That is a federal answer, not a national one. Maryland amended its antitrust statute in 2009 to make a minimum resale price agreement per se unlawful under state law, and California's position under the Cartwright Act remains unsettled, with courts differing.

In the EU and the UK there is no such argument to have: resale price maintenance is a hardcore restriction, which removes the block exemption from the whole agreement rather than just the offending clause. Maximum and recommended resale prices are treated differently from minimum ones, and minimum advertised price policies sit in their own category. None of this is a drafting preference — it is the point in a distribution agreement where a routine commercial clause becomes a regulatory exposure, and it deserves local advice rather than a template.

The trademark licence needs a leash attached

A distributor cannot sell branded goods without permission to use the brand, so every distribution agreement contains a trademark licence whether or not it is labelled as one. Leaving it implicit is a mistake for the owner rather than the distributor: under US law, use by a licensee benefits the owner only where the owner controls the nature and quality of the goods and services. A licence with no quality control — a "naked" licence — puts the mark itself at risk.

• List the marks by registration number and the goods they may be used on. A general permission to use "the Brand" covers arguments you did not intend to lose.
• Reserve approval over packaging, advertising and any co-branding, and actually exercise it.
• Prohibit registration by the distributor of the marks, confusingly similar marks, domain names or social handles in the territory — this is the single most common post-termination dispute.
• Require use to stop on termination, with a defined period to run off existing signage and printed material.

Where the brand relationship is the substance of the deal rather than an accessory to it, a separate trademark licence sitting alongside the distribution agreement keeps the quality-control obligations visible instead of buried in clause 14.

Termination: the stock and the customer list

On the last day of a distribution agreement two assets are in the wrong place. The distributor is holding stock it can no longer sell under licence, and the supplier has no relationship with the customers who have been buying its product for years.

The stock question has three standard answers, and the agreement should pick one: a sell-off period, typically three to six months on existing terms; a buy-back at the original invoice price less a handling deduction; or no obligation at all, which is common but leaves a distributor with an incentive to dump inventory below cost on its way out. Whichever is chosen, deal separately with spare parts, warranty support to end customers, and any product held on consignment.

In law the distributor's customers are its own — it bought the goods and sold them on its own account. A supplier who wants that list has to contract for it: periodic reporting of end-customer sales during the term, a clear statement that the data is provided for the supplier's use, and an obligation to hand over a current list on termination. Add the practical caveat that transferring personal data about named contacts is a data-protection exercise in most jurisdictions, so the clause should require the distributor to have a lawful basis for the transfer rather than simply promising one.

Where local law will not let you contract out

Appointing a distributor abroad imports that country's termination rules. Belgian law on exclusive distribution can require very long notice or an indemnity in lieu, together with additional compensation for customer goodwill and staff costs. French law requires reasonable written notice scaled to the length of the relationship. German courts apply agency protections to distributors by analogy where the distributor was integrated into the supplier's network, and several Gulf states treat a terminated distributor's compensation claim as mandatory law.

The clause to read first

Read the term and termination clause before the territory clause. A one-year term renewing automatically, terminable on 30 days' notice, is a completely different commercial proposition from a five-year term terminable only for cause — and the distributor's willingness to invest in the market is a direct function of which one it signed. Everything else in the document is a description of a relationship whose length that clause decides.