Distribution Agreement UK Guide: Exclusivity, Territory Rights & Legal Requirements 2025

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• What is a distribution agreement?
• How to create a distribution agreement?
• What are the key elements of a distribution agreement?
• What are the three types of distribution?
• Are exclusive distribution agreements legal in Europe?
• What is the difference between agency agreement and distribution agreement?
• Who are the parties to a distribution agreement?
• What are the benefits of a distribution agreement?

What Is a Distribution Agreement?

Quick Answer: A distribution agreement is a legally binding contract where a supplier (principal) grants a distributor the right to purchase, market, and resell products within a defined territory. Unlike agency arrangements, distributors buy products outright, take ownership, and resell them at their own risk and profit margin.

In the UK legal context, distribution agreements are governed primarily by general contract law principles rather than specific statutory regulation. However, they must comply with the Competition Act 1998, UK GDPR for any personal data handling, and—where goods are supplied to consumers—the Consumer Rights Act 2015. The Commercial Agents (Council Directive) Regulations 1993 explicitly do not apply to distribution agreements, which is a crucial distinction from agency arrangements.

A distribution agreement creates a buy-resell relationship. The supplier manufactures or sources products, sells them to the distributor at wholesale prices, and the distributor then resells to retailers or end customers at market prices. This differs fundamentally from agency, where the agent merely facilitates sales on behalf of the principal without taking ownership of goods.

Distribution agreements typically cover products rather than services, though service distribution arrangements exist in specific sectors. The agreement defines the products covered (often by brand, model number, or product category), the territory where distribution is authorised, pricing structures, minimum purchase commitments, marketing obligations, and the terms under which the relationship may be terminated.

For UK businesses, distribution agreements serve several critical commercial purposes. They allow suppliers to expand market reach without establishing their own sales infrastructure. They enable distributors to build business value through product portfolios and customer relationships. And they create predictable supply chains for retailers and end customers who benefit from local stock availability and support.

How to Create a Distribution Agreement?

Quick Answer: Creating a distribution agreement involves identifying the parties, defining products and territory, establishing pricing and payment terms, setting performance targets, addressing exclusivity, specifying intellectual property usage rights, and including comprehensive termination provisions. Each element must be drafted with precision to avoid costly disputes.

The creation process begins with commercial negotiation before legal drafting. Both parties should agree on fundamental terms—territory scope, exclusivity level, pricing structure, and minimum commitments—before instructing lawyers or using templates. Attempting to draft without commercial clarity leads to ambiguous contracts and protracted negotiations.

Start by clearly identifying both parties with their full legal names, registered addresses, and company registration numbers. For UK limited companies, verify details via Companies House. Include provisions addressing what happens if either party undergoes corporate restructuring, acquisition, or enters insolvency proceedings.

Product definitions require careful attention. Vague descriptions like “the supplier’s products” create disputes when product lines evolve. Specify products by brand, model number, SKU reference, or attach a detailed schedule. Address whether new products automatically fall within the agreement or require amendment.

Territory definitions must be geographically precise. “The United Kingdom” is generally clear, but if you mean only England and Wales, or specific regions, state this explicitly. Consider whether online sales into the territory from outside distributors are permitted—this has become a significant source of modern distribution disputes.

Pricing mechanisms in distribution agreements typically follow one of three models: fixed price lists updated periodically, percentage discounts off recommended retail prices (RRP), or cost-plus arrangements. Whichever model you choose, specify how and when prices may be changed, what notice period applies, and how existing orders are treated when prices increase.

Payment terms should specify the credit period (commonly 30-60 days in UK commercial practice), whether payment is due from invoice date or delivery date, what interest applies to late payments under the Late Payment of Commercial Debts (Interest) Act 1998, and any credit limits or security requirements.

Minimum purchase commitments protect suppliers granting exclusivity but require careful calibration. Set targets too high, and the distributor cannot perform. Set them too low, and they provide no meaningful protection. Consider graduated targets that increase over the agreement term as the distributor builds market presence.

For businesses seeking professional templates that cover all these elements with UK-compliant drafting, the Distribution Agreement Template provides both guided interview and editor versions with comprehensive clause options.

Step-by-Step Creation Process

Follow this structured approach to create your distribution agreement:

Step 1: Commercial Terms Negotiation — Before any drafting, both parties should agree in writing (even informally) on territory, products, exclusivity, pricing, targets, and term length. This prevents wasted legal costs on provisions that won’t be accepted.

Step 2: Due Diligence — Suppliers should investigate the distributor’s financial stability, market reputation, existing product lines (checking for conflicts), and distribution infrastructure. Distributors should verify the supplier’s product quality, delivery reliability, and intellectual property ownership.

Step 3: Draft Core Commercial Terms — Begin with recitals explaining the agreement’s purpose, then draft the grant of distribution rights, territory definition, product specification, and exclusivity provisions.

Step 4: Draft Operational Provisions — Address ordering procedures, delivery terms, acceptance and inspection, returns and defects, stock holding requirements, and after-sales service obligations.

Step 5: Financial Provisions — Specify pricing, payment terms, minimum purchase requirements, reporting obligations, and consequences of missing targets.

Step 6: Intellectual Property — Define how the distributor may use the supplier’s trademarks, branding, and marketing materials. Address whether the distributor may create derivative marketing content and who owns customer data.

Step 7: Term and Termination — Specify the initial term, renewal provisions, notice periods for termination without cause, grounds for immediate termination, and post-termination obligations.

Step 8: Boilerplate and Governing Law — Include standard provisions for notices, amendments, entire agreement, severability, and specify English law and jurisdiction for UK agreements.

What Are the Key Elements of a Distribution Agreement?

Quick Answer: The essential elements of a UK distribution agreement include: clear party identification, product definitions, territory specification, exclusivity terms, pricing and payment provisions, minimum purchase requirements, intellectual property rights, term and termination clauses, and liability limitations. Missing any element creates legal vulnerability.

Party Identification goes beyond simply naming the companies. Include registered addresses, company numbers, and consider who signs on behalf of each party. If the supplier is part of a group, clarify whether the agreement covers only products from that entity or from group affiliates.

Product Definition should use objective criteria. Reference specific model numbers, SKUs, or attach a detailed schedule. Address whether the agreement automatically includes product updates, new models, or product line extensions—or whether these require formal amendment.

Territory Specification requires geographic precision and consideration of online sales. A territory defined as “England” may seem clear, but does this prevent the distributor from selling to Scottish customers who place orders? Does it prevent online sales to customers browsing from England but shipping to Europe? Address these scenarios explicitly.

Exclusivity Terms represent one of the most negotiated elements. Suppliers often want non-exclusive arrangements to maintain flexibility. Distributors want exclusivity to protect their investment in market development. The compromise often involves exclusivity conditional on meeting minimum purchase targets, with provisions to reduce territory or remove exclusivity if targets are missed.

Pricing and Payment provisions should address not only current prices but how future pricing works. Specify notice periods for price changes (30-90 days is common), whether existing orders are honoured at old prices, and what happens if currency fluctuations significantly affect the commercial basis of the agreement.

Intellectual Property Rights grant the distributor licence to use the supplier’s trademarks, logos, and marketing materials for authorised distribution purposes. This licence should specify permitted uses, quality standards for materials, approval processes for distributor-created content, and automatic termination of IP rights when the agreement ends.

Termination Provisions should distinguish between termination for convenience (typically requiring 3-12 months’ notice depending on agreement length), termination for material breach (often with cure period), and immediate termination for specified events (insolvency, change of control, regulatory breach).

What Are the Three Types of Distribution?

Quick Answer: The three primary types of distribution arrangement are exclusive distribution (only one distributor in a territory), non-exclusive distribution (multiple distributors permitted), and sole distribution (one distributor appointed, but supplier retains direct selling rights). Each type carries different risk profiles, investment expectations, and competition law implications.

Exclusive Distribution grants the distributor the sole right to sell the supplier’s products in the defined territory. The supplier cannot appoint other distributors and typically cannot sell directly to customers in that territory. This arrangement gives distributors maximum protection for their market development investment but requires suppliers to rely entirely on one partner’s performance.

Exclusive arrangements typically require minimum purchase commitments to ensure the supplier’s products achieve adequate market penetration. If the exclusive distributor underperforms, the supplier has limited options—they cannot simply appoint a competing distributor without terminating the existing agreement. For this reason, exclusive agreements often include performance clauses allowing conversion to non-exclusive status or territory reduction if targets are missed.

Non-Exclusive Distribution allows the supplier to appoint multiple distributors in the same territory and typically permits the supplier to sell directly. This provides suppliers with flexibility and market coverage but offers distributors limited protection. Distributors operating under non-exclusive arrangements may be reluctant to invest heavily in market development when competitors (including other appointed distributors) may benefit from their efforts.

Non-exclusive arrangements work well for commodity products where price competition is expected, or where the supplier wants rapid market penetration through multiple channels. They suit products with established market demand where distributors need not invest significantly in customer education.

Sole Distribution represents a middle ground. The supplier appoints only one distributor in the territory (as with exclusivity) but reserves the right to sell directly to customers. This protects the distributor from competing distributors while allowing the supplier to handle major accounts or strategic customers directly.

Sole distribution suits arrangements where certain customer types—government contracts, national account retailers, or OEM relationships—are better managed centrally by the supplier, while smaller accounts are served through the distributor network.

Beyond these three primary types, distribution arrangements may incorporate additional structures. Selective distribution limits the supplier to appointing distributors who meet specified qualitative criteria (such as technical competence or showroom standards) without territorial exclusivity. Franchise distribution adds operational controls, branding requirements, and ongoing royalty obligations. These hybrid structures require specialist drafting to address their particular legal requirements.

The choice between distribution types has significant competition law implications, discussed in the section on exclusive distribution legality below. UK businesses must ensure their distribution structure complies with the Competition Act 1998 and, where relevant, retained EU competition rules.

Are Exclusive Distribution Agreements Legal in Europe?

Quick Answer: Yes, exclusive distribution agreements are legal in both the UK and EU, but they must comply with competition law. Under UK competition law (Competition Act 1998) and EU competition law (Article 101 TFEU), exclusive distribution arrangements are permitted when they fall within safe harbour provisions—typically when both parties have market shares below 30%.

The UK left the EU single market on 31 December 2020, but competition law principles remain substantially aligned. The Competition Act 1998 mirrors EU competition rules, and UK courts continue to consider EU case law as persuasive (though no longer binding). For practical purposes, distribution agreements compliant with EU competition rules will generally comply with UK rules, though divergence may develop over time.

Exclusive distribution agreements potentially restrict competition because they limit where distributors can sell and prevent suppliers from appointing competing distributors. However, competition authorities recognise that exclusivity can deliver pro-competitive benefits: distributors invest more heavily in market development when protected from free-riding competitors, and consumers benefit from better service and product availability.

The UK’s Vertical Agreements Block Exemption Order (VABEO) and the EU’s Vertical Block Exemption Regulation (VBER) provide safe harbours for distribution agreements. Under these rules, exclusive distribution arrangements are automatically exempt from competition law prohibition when: both parties have market shares below 30%, the agreement contains no hardcore restrictions (such as resale price maintenance or absolute territorial protection), and any non-compete obligations do not exceed five years.

Hardcore restrictions that void the safe harbour include resale price maintenance (fixing minimum retail prices), restricting where buyers can resell products (with specific exceptions for exclusive and selective distribution), and restricting sales to end users by members of a selective distribution system.

Exclusive distribution agreements may restrict active sales by the distributor into territories or customer groups exclusively allocated to other distributors. However, they cannot restrict passive sales—responding to unsolicited orders from customers in other territories. This distinction is crucial for online commerce, where sales inherently cross territorial boundaries.

For agreements outside the safe harbour (either party exceeds 30% market share, or agreement contains non-exemptible restrictions), individual assessment is required. The agreement may still be lawful if it generates efficiencies that benefit consumers and does not eliminate competition. However, this assessment requires legal advice and involves litigation risk.

UK businesses with exclusive distribution arrangements should document the competitive benefits their arrangements deliver, maintain records demonstrating market share compliance with safe harbour thresholds, and review agreements when market conditions change materially.

For comprehensive guidance on structuring compliant distribution arrangements, see the Financial and Commercial Contracts Guide which covers competition law compliance across various commercial agreement types.

If you haven’t already, download the free Distribution Agreement Compliance Checklist.

What Is the Difference Between Agency Agreement and Distribution Agreement?

Quick Answer: The fundamental difference is ownership of goods. A distributor purchases products from the supplier, takes ownership, and resells at their own risk. An agent facilitates sales on behalf of the principal without taking ownership—the sales contract forms directly between principal and customer. This distinction has profound legal consequences for liability, termination rights, and statutory protections.

In an agency arrangement, the agent acts as the supplier’s representative in the market. They introduce customers, negotiate deals, and facilitate transactions, but the supplier sells directly to the customer. The agent earns commission on sales facilitated. In distribution, the distributor is the customer—they buy from the supplier at wholesale and resell to their customers at retail. The distributor’s profit is the margin between purchase and resale prices.

The most significant legal distinction in the UK concerns termination rights. The Commercial Agents (Council Directive) Regulations 1993 provide commercial agents with mandatory compensation or indemnity rights upon termination. These rights cannot be contracted out of and can result in substantial payments—typically 1-2 years of average commission. Distributors have no equivalent statutory protection; their termination rights depend entirely on the contract.

This distinction affects strategic structuring of commercial arrangements. Suppliers may prefer distribution to avoid agency termination compensation obligations. However, distribution requires the distributor to fund stock purchases, which may limit market reach to financially capable partners. Agents can often reach smaller customers that wouldn’t justify stock investment by distributors.

Liability exposure differs significantly between models. Agents who merely introduce customers generally bear limited liability for product defects—the supplier, as seller to the customer, bears product liability obligations. Distributors, as sellers to customers, assume product liability and must comply with the Consumer Rights Act 2015 for consumer sales, including implied terms about satisfactory quality, fitness for purpose, and conformity with description.

Customer relationships belong to different parties under each model. Agency customers are technically the principal’s customers; upon termination, the principal retains these relationships (though the agent may seek compensation for their development). Distribution customers belong to the distributor; upon termination, the supplier has no automatic right to access these customer relationships, which may require careful transition provisions.

Some arrangements blur agency and distribution elements. Consignment stock arrangements, where the distributor holds supplier-owned stock and only pays upon sale, share characteristics of both models. The legal characterisation depends on economic reality rather than labels used in the contract. Courts will examine who bears inventory risk, who sets retail prices, and who has the customer relationship.

For employment law purposes, the distinction between agents and distributors also matters. Agents with sufficient control and economic dependence may, in some circumstances, be classified as workers entitled to employment protections. Distributors operating as independent businesses are clearly not employees. Proper contractual structuring helps maintain intended relationships.

Who Are the Parties to a Distribution Agreement?

Quick Answer: The two primary parties are the Supplier (also called Principal or Manufacturer) who provides products, and the Distributor (also called Reseller or Wholesaler) who purchases products for resale. Additional parties may include guarantors, parent companies providing support, and sub-distributors if sub-distribution is permitted.

The Supplier (or Principal) is typically the manufacturer or brand owner, though they may also be an importer or master distributor with rights to appoint sub-distributors. The supplier grants distribution rights, delivers products, provides marketing support, and maintains quality standards. Their key obligations include reliable supply, honouring agreed prices, and supporting the distributor’s marketing efforts.

Suppliers should be identified by their full legal name as registered at Companies House, their registered address, and their company registration number. Where the supplier is part of a corporate group, clarify whether the agreement is with a specific entity or extends to products from group affiliates.

The Distributor is the party purchasing products for resale. They commit to developing the market, maintaining adequate stock, providing customer service, and meeting any minimum purchase requirements. Their commercial interest is building a profitable business reselling the supplier’s products.

Distributors should similarly be fully identified with legal names and company details. For distributors without established credit history, suppliers often require personal guarantees from directors or parent company guarantees to secure payment obligations.

Guarantors may be added as parties where credit support is required. A personal guarantee from the distributor’s directors makes them personally liable for the distributor company’s payment obligations. A parent company guarantee provides similar protection where the distributor is a subsidiary of a larger group.

Where sub-distribution is permitted, the agreement should address how sub-distributors are appointed, what approval the supplier has over sub-distributor selection, and how the distributor remains responsible for sub-distributor performance. Sub-distribution rights are often restricted in exclusive arrangements to maintain quality control.

For multi-territory arrangements, the agreement may identify different distributors for different territories within a single framework agreement, or establish a master distributor with rights to appoint and manage territory distributors.

What Are the Benefits of a Distribution Agreement?

Quick Answer: Distribution agreements benefit suppliers through expanded market reach without capital investment, local market expertise, and reduced operational complexity. Distributors benefit from established products with brand recognition, supplier marketing support, and the opportunity to build business value through customer relationships and territorial rights.

Benefits for Suppliers

Market expansion without capital investment: Establishing direct sales operations in new markets requires significant investment in premises, staff, inventory, and local regulatory compliance. Distribution arrangements allow suppliers to access new markets using the distributor’s existing infrastructure, reducing capital requirements and operational risk.

Local market expertise: Distributors understand local customer preferences, purchasing patterns, competitive landscape, and regulatory requirements. This local knowledge helps position products effectively and avoid costly market entry mistakes.

Reduced operational complexity: Managing logistics, customer service, collections, and warranty support across multiple markets stretches internal resources. Distributors handle these functions locally, allowing suppliers to focus on product development and manufacturing.

Improved cash flow: Distribution involves selling to one creditworthy partner rather than managing accounts receivable across numerous customers. Payment terms with distributors are typically 30-60 days, often more favourable than extended retail credit requirements.

Shared marketing investment: Distributors contribute to marketing costs within their territory, extending the supplier’s promotional reach without proportionate budget increases.

Benefits for Distributors

Established products with demand: Distributing products with established brand recognition and market demand reduces the distributor’s sales effort compared to building markets for unknown products.

Supplier marketing support: Suppliers typically provide marketing materials, training, product information, and cooperative advertising contributions. This support reduces the distributor’s marketing costs and improves sales effectiveness.

Exclusivity protection: Where exclusive rights are granted, distributors have protected territories for market development. This protection justifies investment in customer development, technical training, and stock holding.

Technical support: Suppliers provide product training, technical documentation, and ongoing support for complex product queries. This expertise enables distributors to serve customers effectively without developing all knowledge internally.

Business value creation: Distribution businesses with strong supplier relationships, established territories, and customer bases have transferable value. This creates exit opportunities beyond simple business wind-up.

Benefits for Both Parties

Risk sharing: Distribution arrangements spread commercial risk between parties. Suppliers reduce market entry risk; distributors reduce product development risk. This mutual risk-sharing aligns incentives for cooperative success.

Scalability: Distribution networks can expand incrementally as demand develops, without the fixed costs of owned infrastructure. Both parties can grow their operations in proportion to market success.

Relationship stability: Formal distribution agreements create stable, long-term commercial relationships that benefit both parties through continuity, predictability, and mutual investment in success.

How to Write a Distribution Agreement: Practical Drafting Guidance

Beyond understanding key elements, effective distribution agreement drafting requires attention to language precision, practical enforceability, and anticipation of common disputes. This section provides practical guidance for creating robust agreements.

Use precise language throughout. Ambiguous terms like “reasonable” or “promptly” invite interpretation disputes. Where possible, use specific numbers, dates, and objective standards. Instead of “the Distributor shall maintain reasonable stock levels,” specify “the Distributor shall maintain minimum stock of [X units / £Y value] at all times.”

Address online sales explicitly. Modern distribution disputes frequently involve e-commerce. Specify whether distributors may sell online, whether they may use marketplace platforms (Amazon, eBay), how territory restrictions apply to online orders, and how pricing consistency is maintained across channels. The Website Legal Documents Guide covers online sales compliance requirements.

Include change management procedures. Commercial relationships evolve. Include mechanisms for amending the agreement, adding or removing products, adjusting territory boundaries, and modifying targets. Requiring written amendment signed by both parties prevents informal understandings creating uncertainty.

Define dispute resolution procedures. Specify escalation processes for commercial disputes before legal proceedings commence. Many distribution agreements require senior management discussion, then mediation, before litigation or arbitration. This protects valuable commercial relationships from premature legal escalation.

Consider post-termination obligations carefully. What happens to existing stock when the agreement ends? How long may the distributor sell remaining inventory? What happens to warranty obligations on products already sold? Must the distributor assist with customer transition? Detailed termination provisions prevent chaotic relationship endings.

Include practical operational schedules. Attach detailed schedules covering products (by SKU), territories (by geographic definition), pricing (current price list), and minimum purchase targets (by period). These schedules can be updated without renegotiating the main agreement, providing flexibility with certainty.

For professional drafting support, see the Distribution Agreement Template which includes comprehensive clauses for all these considerations.

Distribution Agreement UK 2025: Current Legal Requirements

UK distribution agreements in 2025 must comply with several legal frameworks beyond general contract law. This section summarises current compliance requirements.

Competition law compliance under the Competition Act 1998 prohibits agreements that restrict competition. Distribution arrangements are assessed under the Vertical Agreements Block Exemption Order (VABEO), which provides safe harbour for agreements where both parties have market shares below 30% and no hardcore restrictions are included. Agreements must not fix minimum resale prices, absolutely restrict territories (subject to exceptions for exclusive distribution), or restrict sales to end users in selective distribution systems.

UK GDPR compliance is required where distribution involves personal data handling. Distributors collecting customer data, managing marketing lists, or processing warranty information must comply with data protection requirements. Distribution agreements should address data processing responsibilities, controller/processor relationships, and data protection obligations. The ICO provides guidance for organisations on compliance requirements.

Consumer Rights Act 2015 applies to distributors selling to consumers. Distributors become sellers for consumer protection purposes and must comply with implied terms about satisfactory quality, fitness for purpose, and conformity with description. Distribution agreements should address how product liability is allocated between supplier and distributor for consumer claims.

Product safety requirements under the General Product Safety Regulations 2005 require all products placed on the UK market to be safe. Distribution agreements should address compliance responsibilities, product recall cooperation, and liability allocation for safety issues.

Intellectual property licensing within distribution agreements must comply with trade mark and copyright law. Improper IP provisions may create unintended assignments or inadequate licences. Distribution agreements should specify IP ownership remains with the supplier and grant specific, limited licences for distribution purposes. The Intellectual Property Assignment Guide covers IP transfer and licensing considerations.

Late payment legislation under the Late Payment of Commercial Debts (Interest) Act 1998 allows businesses to claim statutory interest (currently 8% + Bank of England base rate) and compensation for late payment. Distribution agreements typically specify payment terms and interest rates, which may override statutory provisions if more favourable to the creditor.

Common Distribution Agreement Mistakes to Avoid

Analysis of distribution disputes reveals common drafting and management mistakes that create unnecessary risk and cost.

Vague territory definitions: Defining territory as “the Midlands” or “Southern England” invites boundary disputes. Use defined geographic references—counties, postcode areas, or local authority boundaries. Address cross-border considerations for online sales explicitly.

Unclear product scope: Describing products as “the Supplier’s electronic products” creates uncertainty when product lines evolve. Use specific references to product families, model numbers, or SKUs. Attach updated product schedules rather than relying on general descriptions.

Missing performance metrics: Exclusive distribution without minimum purchase targets leaves suppliers vulnerable to underperforming distributors. Include specific, measurable targets with clear consequences for non-achievement (territory reduction, loss of exclusivity, or termination rights).

Inadequate termination provisions: Simply specifying a notice period fails to address numerous termination scenarios. Include provisions for breach termination (with cure periods), insolvency termination, change of control termination, and force majeure events. Address post-termination stock handling, customer transition, and ongoing warranty obligations.

Ignoring IP considerations: Distribution inherently involves trademark use. Agreements that fail to grant proper IP licences create enforcement problems and may constitute trademark infringement by distributors. Include explicit trademark licence provisions with quality control requirements.

Failing to address dispute resolution: Jumping directly to litigation damages commercial relationships. Include graduated dispute resolution—management escalation, mediation, then arbitration or litigation—to preserve relationships where possible.

Not reviewing regularly: Distribution agreements signed years ago may not reflect current commercial terms, compliance requirements, or market conditions. Schedule regular reviews (annually or with each renewal) to ensure agreements remain fit for purpose.

If you’ve read this far, you’re already ahead of 95% of UK businesses when it comes to understanding distribution agreement requirements.

Frequently Asked Questions

How long should a distribution agreement last?

Most UK distribution agreements run for initial terms of 1-5 years, with 3 years being common. Shorter terms suit new relationships where either party wants early exit options. Longer terms reward established relationships and justify significant distributor investment. Consider including automatic renewal provisions with notice periods (typically 90-180 days) for non-renewal, providing continuity with exit flexibility.

Can a supplier terminate a distribution agreement early?

Subject to the agreement’s termination provisions, yes. Most distribution agreements permit termination for material breach (typically with a cure period), insolvency events, or change of control. Some agreements permit termination for convenience with specified notice. Unlike agency agreements, distributors have no statutory compensation rights upon termination—their rights depend entirely on the contract terms.

Do distribution agreements need to be in writing?

No legal requirement mandates written distribution agreements. However, oral or informal arrangements create significant uncertainty about terms, rights, and obligations. Complex commercial relationships involving territorial rights, pricing, targets, and IP licensing should always be documented in formal written agreements. For business protection, use the Distribution Agreement Template to ensure comprehensive documentation.

Can distributors set their own resale prices?

Yes, distributors generally have freedom to set resale prices. Competition law (specifically the prohibition on resale price maintenance) prevents suppliers from fixing minimum resale prices. Suppliers may suggest recommended retail prices but cannot enforce them. Maximum resale prices may be specified where there is objective justification. Breaching resale price maintenance rules voids the vertical agreements safe harbour.

What happens to stock when a distribution agreement ends?

The agreement should address post-termination stock handling. Common approaches include: the distributor may sell remaining stock for a specified period (often 90-180 days), the supplier repurchases stock at original purchase price, or the distributor returns stock for credit. Without clear provisions, disputes frequently arise over stranded inventory.

Are distribution agreements affected by Brexit?

Post-Brexit, UK distribution agreements no longer fall under EU competition rules directly, though UK competition law remains substantially aligned. Territory definitions may need updating—”European Union” now excludes the UK. Cross-border distribution between the UK and EU involves customs, regulatory, and VAT considerations that didn’t apply pre-Brexit. Agreements should address which party bears regulatory compliance responsibilities for cross-border movement.

Can I have multiple distributors in the same territory?

Yes, with non-exclusive distribution arrangements. However, this reduces each distributor’s market development incentive. Consider whether multiple distributors serve different customer segments (retail vs. trade, different industries) or genuinely compete in the same market. Some suppliers use selective distribution—appointing only distributors meeting specified criteria without territorial exclusivity.

What minimum purchase requirements are reasonable?

Targets should be achievable based on realistic market assessment while providing meaningful protection for suppliers. Consider graduated targets that increase over the agreement term as the distributor builds market presence. Set targets based on market size, product type, and investment required rather than arbitrary figures. Include mechanisms for target review if market conditions change materially.

Related Guides and Resources

For comprehensive coverage of related commercial contract topics, see these resources:

• Intellectual Property Assignment Guide UK — Essential for understanding IP transfer and licensing within distribution relationships
• Free IP Assignment Compliance Checklist — Verify your IP provisions meet current requirements
• Website Development Agreement Guide UK — For distributors developing e-commerce capabilities
• Free Website Development Compliance Checklist — Essential for online distribution infrastructure
• Financial and Commercial Contracts Guide — Comprehensive coverage of commercial agreement types
• UK Business Legal Templates — Full range of professional contract templates

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Last reviewed: November 2025 | Next scheduled review: April 2026

Disclaimer: This guide provides general information about UK distribution agreements and should not be considered legal advice. Specific circumstances require professional legal consultation. Laws and regulations current as of November 2025. Regular updates are recommended as legislation evolves.