An international distribution agreement should set out in writing the business relationship between two or more parties to an international distributor arrangement. More often than not, the terms of an international distribution agreement will vary from instance to instance and depends a great deal on the type of business relationship, as well as how the arrangement is to be executed and maintained over a given period of time, whether it be a short-term relationship, a long-term relationship, or a one-time event.
An international distribution agreement implies the sales of goods and a supply contract over a given period and must set out the distribution terms relating to price, goods, terms of delivery as well as terms relating to insurance, warranties, mode and method of payment and risk. It shall also address the issues relating to payment of commissions and returns for damaged product or product under warranty. Ultimately, the goal of a well written international distributor agreement is to protect and benefit both parties to the agreement.
An international distribution agreement shall also set out the territory in which the distribution will take place, advertising and promotion that the distributor must handle vs. those activities that will remain the responsibility of the producer, discounts pertaining to volumes, and matters concerning incentives for both the producer and distributor. As far as the matter of international territory is concerned, the agreement should specify how sales of goods in international territory should be protected. International distributor agreements should contain information
related to fluctuating foreign currency exchanges as large fluctuations can have serious financial consequences to both parties. Also, provision should be made with the agreement for those countries or territories that historically experience significant political or economic instability.
As far as agents are concerned, the international distributor agreement needs to clearly state the authority of the intermediary agent. Distributors are usually not a representative of the supplier and are able to trade on their own account. In the event that the distributor has authority to complete deals that obligate the supplier, the supplier or principal is bound by the agreement, and any termination of the authority must be communicated to the third party in a timely manner so that future dealings with distributor do not take place.
There are also certain countries in which distributors are not allowed to represent competitors without getting permission from suppliers. The exact terms of any international distributor agreement may be governed by prevailing local laws. Most often, the supplier specifies the price of goods at which the distributor shall sell the goods. Distributors often set this price and compensating the seller may be calculated by spreading most of the cost to the distributor in their new sales price. The agreement should take care to state these pricing and compensation provisions.
After a professional agreement is formally executed, both parties can benefit from the new distribution channel and should periodically review the arrangement to ensure it remains mutually beneficial for both parties involved.
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