Distribution Agreement Template (UK)
Create Your Professional Contract in Minutes

A comprehensive distribution agreement must include essential provisions defining the commercial relationship and protecting both parties:

Core Agreement Terms:

• Parties identification - Supplier/manufacturer and distributor full legal names, addresses, company numbers
• Products - Specific products/services covered (SKUs, model numbers, product lines)
• Territory - Geographic area (UK, EU, specific countries, regions, postal codes)
• Exclusivity - Exclusive (sole distributor) vs. non-exclusive (multiple distributors permitted)
• Term and renewal - Initial period (1-3 years typical), renewal options, termination notice
• Appointment language - "Supplier appoints Distributor as [exclusive/non-exclusive] distributor for Products in Territory"

Territory and Exclusivity:

• Territory definition - Precise geographic boundaries (country borders, regions, cities, postal codes)
• Exclusive rights - Distributor sole seller in territory, supplier cannot appoint other distributors or sell direct (except reserved customers)
• Non-exclusive rights - Supplier can appoint multiple distributors, sell direct, use other channels in same territory
• Reserved accounts - Large customers supplier can serve directly (even in exclusive territory)
• Cross-border sales - Passive sales (customer orders from outside territory) permitted, active solicitation prohibited
• Online sales - E-commerce restrictions (own website permitted, Amazon/eBay restrictions, pricing requirements)
• Competition law compliance - Exclusive territories must comply with EU/UK competition law (no absolute territorial protection)

Products and Services:

• Product specification - Exact products covered (SKUs, models, product lines, specifications)
• New products - How new products added (automatic inclusion, separate negotiations, right of first refusal)
• Product modifications - Supplier's right to modify specifications, discontinue products, introduce replacements
• Spare parts and accessories - Whether included in distribution rights
• Competing products - Non-compete provisions (distributor cannot sell competing products during term)

Pricing and Payment Terms:

• Purchase price - Wholesale price distributor pays supplier (fixed, volume discounts, percentage of RRP)
• Price adjustments - How supplier can increase prices (30-60 days' notice, annual adjustments, CPI-linked)
• Resale price - Recommended retail price (RRP), maximum resale price (if permitted), minimum advertised price (MAP)
• Payment terms - Net 30/60/90 days from invoice, advance payment, letter of credit
• Currency - Transaction currency (GBP, EUR, USD), exchange rate mechanisms
• Discounts and rebates - Volume discounts, early payment discounts (2% 10 days), annual rebates based on sales targets
• Price protection - Protection if supplier reduces prices after distributor's purchase

Minimum Purchase Commitments:

• Minimum order quantities - Per order (£5,000-£50,000 minimum), annual commitments (£500,000-£5,000,000)
• Sales targets - Annual/quarterly revenue targets, unit volume targets
• Consequences of non-performance - Termination rights, conversion to non-exclusive, reduced territory, penalty payments
• Ramp-up periods - Lower targets in year 1, increasing years 2-3
• Force majeure exceptions - Excused performance during events beyond control

Ordering and Delivery:

• Order procedures - How distributor places orders (EDI, email, portal), minimum order quantities
• Order acceptance - Supplier can reject orders (credit issues, capacity constraints)
• Delivery terms - Incoterms (Ex Works, FOB, CIF, DDP), delivery location, freight responsibility
• Lead times - Standard delivery periods (2-8 weeks typical), expedited options
• Title and risk transfer - When ownership and risk pass to distributor
• Inspection and acceptance - Distributor inspection period (7 days), defect notification requirements

Marketing and Promotion:

• Marketing obligations - Distributor must actively promote products (advertising, tradeshows, demonstrations)
• Marketing budget - Minimum annual marketing spend (£50,000-£500,000 or % of sales)
• Supplier support - Co-op advertising funds, marketing materials provision, training
• Trademark usage - Licence to use supplier trademarks, usage guidelines, approval requirements
• Marketing materials approval - Supplier pre-approves distributor marketing materials
• Trade shows - Participation requirements, booth sharing, supplier representation

Intellectual Property:

• IP ownership - Supplier owns all IP (trademarks, patents, copyrights, trade secrets)
• Trademark licence - Limited licence to use supplier marks for distribution purposes only
• Usage restrictions - Cannot modify marks, use for other products, register similar marks
• Domain names - Restrictions on registering domains containing supplier marks
• Termination provisions - Immediate cessation of mark usage upon termination
• Customer goodwill - All goodwill generated inures to supplier benefit

Quality and Customer Support:

• Quality standards - Distributor maintains professional standards, qualified staff, proper facilities
• Customer support - Technical support obligations, warranty administration, complaint handling
• Product training - Supplier provides product training to distributor staff
• Warranty handling - How warranty claims processed (distributor handles directly, returns to supplier)
• Reputation protection - Distributor actions must not damage supplier reputation

Reporting and Records:

• Sales reports - Monthly/quarterly reports (units sold, revenues, inventory levels, customers)
• Customer information - Provide customer details (names, contact information, purchase history)
• Market intelligence - Competitor information, market trends, customer feedback
• Audit rights - Supplier can audit distributor's records (sales, inventory, customer lists)
• Record retention - 6 years typical (Companies Act requirements)

Termination:

• Term length - Initial term (1-3 years), automatic renewal unless notice given
• Notice periods - 3-12 months' notice for termination without cause
• Termination for cause - Material breach, insolvency, failure to meet targets, reputational damage
• Post-termination obligations - Return marketing materials, cease mark usage, sell-off inventory (30-90 days)
• Customer transfer - Distributor provides customer list to supplier
• Inventory buyback - Supplier repurchases unsold inventory (at cost or discounted price)

Our distribution agreement includes all essential provisions for comprehensive channel management and protection.

Legal and Commercial Risks:

• Channel conflict destroying £500,000-£5,000,000 revenue: Without written exclusive territory agreements, suppliers sell direct into distributor territories or appoint competing distributors. Distributor invests £200,000-£500,000 building market (advertising, staff, inventory, customer relationships), then supplier appoints second distributor or sells direct undercutting prices by 20-30%. First distributor loses £500,000-£2,000,000 annual revenue, ceases promoting products, relationship collapses. Or multiple distributors in same territory compete viciously on price destroying 40-60% margins worth £1,000,000-£5,000,000. Written territorial exclusivity prevents these catastrophes defining who can sell where. Competition law limits: absolute territorial protection illegal under Chapter I Competition Act 1998, but exclusive appointments with passive sales permitted valid.
• Pricing chaos eroding £100,000-£1,000,000 margins: Without pricing terms, distributors undercut each other destroying brand positioning and margins. Premium product positioned at £500 RRP, rogue distributor sells at £299 on Amazon bankrupting other distributors. Or distributor demands 60% wholesale discount when supplier offers 40% - disputes cost £50,000-£200,000 litigation. MAP (minimum advertised price) policies preserve pricing integrity but must comply with competition law (resale price maintenance illegal - recommendations permitted). Price protection clauses (if supplier reduces prices, reimburses distributors for inventory losses) essential for distributor confidence. Without written pricing, £100,000-£1,000,000 annual margin erosion from price wars.
• Performance failures costing £1,000,000-£10,000,000 lost sales: Distributors sit on exclusive territories doing nothing - no marketing, minimal orders, poor customer service. Without minimum purchase commitments (£500,000-£5,000,000 annual) or sales targets, suppliers cannot enforce performance. Result: entire market underdeveloped, £1,000,000-£10,000,000 potential sales lost. Written targets with termination rights for non-performance (or conversion to non-exclusive) force distributor activity. Typical structure: Year 1 £500,000, Year 2 £1,000,000, Year 3 £1,500,000 minimums. Failure to meet = supplier terminates exclusive rights or entire agreement.
• Brand damage from poor distributor performance: Distributors provide terrible customer service, sell defective products without support, make false claims damaging brand worth £5,000,000-£50,000,000. Customers blame supplier not distributor. Without quality standards, customer support obligations, and marketing approval rights, suppliers cannot control brand presentation. Consequences: £500,000-£5,000,000 reputation repair costs (advertising, customer compensation, PR), loss of 30-50% future sales from damaged reputation. Quality standards with termination rights for brand damage essential.
• Intellectual property abuse costing £100,000-£1,000,000: Distributors register supplier trademarks in their own names, create competing products using supplier's trade secrets, continue using marks after termination. Without IP ownership clauses, trademark licences with restrictions, and post-termination cessation obligations, suppliers cannot stop abuse. Costs: £50,000-£200,000 litigation cancelling trademark registrations, £100,000-£500,000 lost licensing value, £200,000-£1,000,000 competitor advantage from stolen trade secrets. Clear IP provisions with immediate cessation upon termination prevent these disasters.
• Payment defaults and credit exposure £50,000-£500,000: Distributors order £100,000-£500,000 products then don't pay, become insolvent owing £200,000-£1,000,000. Without payment terms (net 30 days), late payment interest (8% annually), and retention of title clauses, suppliers have weak collection rights. Extended payment terms (net 90 days) typical for distributors create £500,000-£2,000,000 credit exposure. Mitigation: letters of credit for new distributors, progressive payment terms (COD → net 30 → net 60 as relationship develops), personal guarantees from distributor owners, title retention until payment. Unpaid invoices cost £50,000-£500,000 annually plus legal fees £20,000-£100,000.
• Regulatory compliance failures £50,000-£500,000 fines: Distributors sell products without required certifications, make illegal health claims, violate advertising standards, breach data protection. Supplier liable for distributor violations in many jurisdictions - £50,000-£500,000 regulatory fines plus legal costs £100,000-£300,000. Agreements must include: compliance with all laws obligations, indemnification for distributor violations, audit rights, termination for non-compliance. Critical for regulated products (medical devices, food, cosmetics, electronics).
• Parallel imports and gray markets destroying pricing: Without territorial restrictions (compliant with competition law), distributors buy products cheap in low-price territories, export to high-price territories undercutting authorized distributors. UK distributor pays £100 wholesale, EU distributor pays €80 (£70), EU distributor exports to UK at £85 undercutting UK distributor. Result: UK distributor loses business, ceases promoting products, market collapses. While absolute territorial restrictions illegal under competition law, practical mechanisms available: different product specifications per territory, supply limitations, contractual restrictions on active sales outside territory.
• Post-termination competition £200,000-£2,000,000: Distributor builds £2,000,000 customer base over 3 years using supplier's marketing funds, products, training. Relationship terminates, distributor switches to competing products retaining all customers. Supplier loses £2,000,000 revenue stream with zero customer retention. Prevention: customer lists must be provided during term, non-compete clauses (12 months post-termination reasonable), customer contract assignment to supplier at termination. UK restrictive covenants enforceable if reasonable: scope (specific products), duration (12 months maximum typically), geography (actual territory). Absent protections, lose entire customer base built with your investment.
• Inventory buyback disputes £100,000-£1,000,000: Supplier terminates distributor who holds £500,000 unsold inventory. Distributor demands buyback, supplier refuses, litigation costs £50,000-£150,000. Or supplier agrees buyback but disputes price - distributor demands original wholesale price (£500,000), supplier offers 50% (£250,000). Agreements should specify: inventory buyback obligations (supplier must repurchase), pricing mechanism (original cost less 20% restocking, or 50% of cost), sell-off periods (90 days to deplete inventory), condition requirements (saleable condition only, not damaged/obsolete). Prevents £100,000-£1,000,000 disputes.

Common Distribution Problems:

Verbal distribution arrangements worthless in disputes, vague territory definitions enabling overlap, no minimum purchase commitments allowing inactive distributors, missing pricing terms causing margin wars, inadequate quality standards permitting brand damage, no IP protections enabling mark abuse, weak termination provisions trapping parties in bad relationships, missing customer transfer obligations losing years of market development, no competition law compliance creating regulatory violations, and forgetting parallel import restrictions enabling gray markets. These gaps cost £1,000,000-£10,000,000 in lost revenue, legal disputes, and brand damage.

A £10 professional distribution agreement prevents £1,000,000-£10,000,000+ in channel conflicts, performance failures, and brand damage.

Comprehensive Distribution Contract:

• ✓ Parties and Appointment
  • Supplier and distributor identification
  • Appointment language (exclusive/non-exclusive)
  • Territory definition
  • Product specification
  • Effective date and term
• ✓ Territory and Exclusivity
  • Geographic territory (precise boundaries)
  • Exclusive or non-exclusive rights
  • Reserved accounts (direct sales exceptions)
  • Cross-border sales rules
  • Online sales provisions (e-commerce, marketplaces)
  • Active vs. passive sales distinctions
  • Competition law compliance
• ✓ Products
  • Product list (SKUs, models, specifications)
  • New product additions
  • Product modifications rights
  • Discontinuation procedures
  • Spare parts and accessories
  • Non-compete provisions
• ✓ Pricing and Payment
  • Wholesale purchase prices
  • Volume discount schedules
  • Price adjustment mechanisms
  • Recommended retail prices (RRP)
  • Minimum advertised pricing (MAP)
  • Payment terms (net 30/60/90 days)
  • Currency and exchange rates
  • Late payment interest
  • Early payment discounts
  • Annual rebates (performance-based)
  • Price protection provisions
• ✓ Minimum Commitments
  • Minimum order quantities
  • Annual purchase commitments
  • Sales targets (revenue and units)
  • Quarterly/annual milestones
  • Ramp-up periods (year 1, 2, 3)
  • Consequences of non-performance
  • Force majeure exceptions
• ✓ Ordering and Delivery
  • Order procedures (EDI, email, portal)
  • Minimum order quantities per order
  • Order acceptance/rejection rights
  • Delivery terms (Incoterms)
  • Lead times (standard and expedited)
  • Freight and shipping responsibility
  • Title and risk transfer
  • Inspection and acceptance
  • Defect notification procedures
• ✓ Marketing and Promotion
  • Marketing obligations (active promotion)
  • Minimum marketing spend
  • Advertising requirements
  • Trade show participation
  • Supplier marketing support
  • Co-op advertising funds
  • Marketing materials provision
  • Trademark usage licence
  • Brand guidelines compliance
  • Marketing approval rights
• ✓ Intellectual Property
  • Supplier IP ownership
  • Limited trademark licence
  • Usage restrictions and guidelines
  • Domain name restrictions
  • Goodwill attribution to supplier
  • Patent and copyright protection
  • Post-termination cessation
  • No registration of similar marks
• ✓ Quality and Support
  • Quality standards maintenance
  • Professional staff requirements
  • Customer support obligations
  • Technical support provision
  • Warranty administration
  • Complaint handling procedures
  • Product training (supplier provides)
  • Reputation protection
• ✓ Reporting and Records
  • Monthly/quarterly sales reports
  • Units sold and revenue reporting
  • Inventory level reporting
  • Customer information provision
  • Market intelligence sharing
  • Competitor information
  • Audit rights (supplier can audit)
  • Record retention (6 years)
• ✓ Term and Termination
  • Initial term (1-3 years typical)
  • Automatic renewal provisions
  • Termination notice periods
  • Termination for cause (breach, insolvency)
  • Performance-based termination
  • Post-termination obligations
  • Inventory sell-off periods (90 days)
  • Inventory buyback provisions
  • Trademark cessation (immediate)
  • Customer list transfer
• ✓ Post-Termination
  • Non-compete provisions (12 months)
  • Customer non-solicitation
  • Inventory buyback terms
  • Marketing materials return
  • Confidential information return
  • Final accounting
• ✓ Warranties (product performance, IP non-infringement)
• ✓ Limitation of liability provisions
• ✓ Indemnification (product liability, IP infringement)
• ✓ Insurance requirements
• ✓ Regulatory compliance obligations
• ✓ Data protection (GDPR compliance)
• ✓ Confidentiality provisions
• ✓ Force majeure
• ✓ Dispute resolution (mediation, arbitration)
• ✓ Assignment restrictions
• ✓ Entire agreement clause
• ✓ Severability provisions
• ✓ Notices provisions
• ✓ Governing law (English law)
• ✓ Jurisdiction (English courts)
• ✓ Options for various distribution models:
  • Exclusive distribution (sole distributor in territory)
  • Non-exclusive distribution (multiple distributors permitted)
  • Selective distribution (authorized distributors meeting criteria)
  • Master distributor (appoints sub-distributors)
  • Value-added reseller (VAR with services)
  • OEM distribution (private label arrangements)

Professional, comprehensive distribution agreement protecting supplier brand while incentivizing distributor performance.

Don't Make These Critical Errors:

• Vague territory definitions: "Distributor appointed for Europe" - which countries? All EU? UK included post-Brexit? EEA? Creates overlap disputes costing £100,000-£500,000 when multiple "European" distributors clash. Specify EXACTLY: "United Kingdom (England, Scotland, Wales, Northern Ireland)" or "European Union member states as of [date] excluding [X, Y, Z]" or "Postal codes beginning with [list]." Precision prevents £200,000-£1,000,000 channel conflicts from territorial ambiguity.
• No minimum purchase commitments: Granting exclusive territory with zero purchase minimums creates inactive distributors. Distributor does nothing - no marketing, £50,000 annual orders when market potential £2,000,000. Supplier cannot appoint better distributor (exclusive), cannot sell direct (exclusive), loses £1,950,000 annual potential revenue. Include: "Minimum annual purchases: Year 1 £500,000, Year 2 £1,000,000, Year 3 £1,500,000. Failure triggers conversion to non-exclusive or termination." Forces distributor activity or releases territory.
• Competition law violations: Absolute territorial protection illegal under Competition Act 1998 Chapter I and EU Article 101. "Distributor prohibited from selling outside territory" + "Customers outside territory prohibited from purchasing from Distributor" = hardcore restriction, agreement VOID, potential £100,000-£500,000 CMA fines. Permitted: exclusive appointment with passive sales allowed ("Distributor may not actively solicit customers outside territory, but may fulfill unsolicited orders"). Prohibited: absolute territorial isolation. Consult competition lawyer for high-value exclusive agreements.
• Resale price maintenance: "Distributor must sell Products at £500 RRP" = illegal resale price maintenance (Competition Act 1998, EU Article 101). Vertical price fixing prohibited, fines up to 10% global turnover. Permitted: "Supplier recommends RRP £500" or "Maximum resale price £550" (in certain circumstances). Prohibited: minimum or fixed resale prices. Use Minimum Advertised Price (MAP) policies instead: "Distributor may not advertise Products below £450" - controls advertising not actual selling price, generally compliant if reasonable.
• Missing quality standards: Without quality/customer service standards, distributors damage brands worth £5,000,000-£50,000,000. Distributor provides terrible support, makes false claims, sells defective products - customers blame supplier. Include: "Distributor must maintain qualified staff, provide technical support within 24 hours, honor warranties, maintain professional facilities meeting Supplier standards." With termination rights for brand damage. Protects £1,000,000-£10,000,000 brand equity.
• Inadequate IP protections: "Distributor can use Supplier's trademarks" without restrictions enables: registering trademarks in distributor's name (£50,000-£200,000 litigation cancelling), using marks for competing products, continuing use post-termination (£100,000+ damages). Include: "Limited licence to use Marks for distribution purposes only, no modifications, no registration of similar marks, immediate cessation upon termination, all goodwill to Supplier." Prevents £100,000-£1,000,000 IP abuse.
• No reporting requirements: Suppliers blind to distributor performance - selling zero products but demanding exclusivity. Include: "Monthly reports showing: units sold, revenue, customers acquired, inventory levels, marketing activities. Quarterly reports: market intelligence, competitor activities, customer feedback." Enables performance monitoring and market insights worth £100,000-£500,000 annually. Audit rights ensure accuracy.
• Weak termination provisions: "Agreement terminates on 30 days' notice" after supplier invested £200,000 training distributor, distributor built £2,000,000 customer base. Distributor terminates, switches to competitor, takes all customers. Supplier loses entire investment. Include: 12-24 months' notice for termination without cause (longer for exclusive), post-termination non-compete (12 months), customer list transfer, inventory buyback. Protects £500,000-£5,000,000 channel investment.
• Missing inventory buyback terms: Supplier terminates distributor holding £300,000 inventory. Disputes over buyback price: distributor demands full wholesale cost (£300,000), supplier offers 30% (£90,000), litigation costs £50,000. Specify: "Upon termination, Supplier repurchases saleable inventory at 80% of original wholesale price, or Distributor has 90 days to sell inventory with continued trademark use." Prevents £100,000-£500,000 disputes.
• No customer ownership provisions: Distributor builds £3,000,000 customer base using supplier's products, marketing funds, training. Termination occurs, distributor retains all customers, supplier has zero customer access. Lost: £3,000,000 revenue stream built with your investment. Include: "Distributor provides customer list quarterly showing contact details, purchase history. Upon termination, Distributor assigns customer contracts to Supplier and provides full customer database." Ensures supplier retains customers after channel changes.
• Forgetting online sales restrictions: Distributor sells products at 40% discount on Amazon, eBay destroying other distributors' pricing. Or uses Google Ads targeting other distributors' territories. Without e-commerce provisions: "Distributor may sell via own website but prohibited from third-party marketplaces without approval. Online advertising must not target customers outside territory. MAP policies apply to online pricing." Controls internet undermining traditional distribution.
• Missing parallel import prevention: EU distributor pays €70 wholesale, UK distributor pays £100 wholesale (€120), EU distributor exports to UK at £85 undercutting UK distributor. Result: UK distributor loses sales, quits, UK market collapses. While absolute import bans illegal, mitigation possible: different product specifications per territory, supply limitations to prevent excess for resale, contractual restrictions on active sales outside territory, selective distribution with quality criteria. Prevents gray market destroying 30-50% margins.
• No force majeure clause: COVID-19 disrupts supply chains, distributor cannot fulfill minimum purchase commitments, supplier terminates for non-performance, £200,000 dispute. Include: "Either party excused from performance during Force Majeure Events (pandemic, natural disasters, government orders, strikes) provided notice given and reasonable efforts to mitigate." Prevents terminating relationships during events beyond control while preserving long-term rights.
• Inadequate payment terms: "Payment due on receipt" unrealistic for £500,000 orders - distributors need time to sell products before paying. But "Payment due when convenient" enables £200,000 defaults. Specify: "Net 60 days from invoice. Late payments incur 8% annual interest. Supplier may suspend shipments if payments 30+ days overdue. Letters of credit required until £1,000,000 purchases demonstrate creditworthiness." Balances commercial reality with payment security.
• Missing product liability provisions: Distributor sells defective products causing £500,000 customer injuries. Customer sues both supplier and distributor. Without indemnification clauses allocating liability and insurance requirements, supplier pays full £500,000 despite distributor's improper handling causing defect. Include: "Each party maintains £5,000,000 product liability insurance. Distributor indemnifies Supplier for claims arising from Distributor's negligence, modifications, or improper handling. Supplier indemnifies Distributor for manufacturing defects." Allocates risk appropriately.
• No warranty limitations: Supplier offers 12-month manufacturer warranty, distributor tells customers "lifetime warranty" creating £200,000 unsupportable warranty claims. Include: "Distributor may not extend or modify Supplier warranties. Distributor responsible for claims exceeding Supplier warranty terms." Prevents distributor creating unlimited supplier obligations for sales advantage.

Our template prevents these errors with balanced provisions protecting both supplier interests and distributor commercial viability.