Distribution Agreement
For Informational Purposes Only
A supplier-drafted distribution and reseller agreement covering product appointment, territory and channel controls, performance targets, ordering mechanics, warranty pass-through, trademark licensing, data governance, compliance, and detailed exit provisions for inventory, de-branding, and customer transition.
What This Document Does
A distribution agreement establishes the terms under which a distributor purchases products from a supplier and resells them to end customers. This template is drafted from the supplier’s perspective, appointing the distributor to buy and resell products within defined territories, channels, and customer classes. The distributor is an independent reseller — it buys goods at a wholesale price, takes title, assumes inventory risk, and resells at its own price to its own customers.
The agreement covers the full lifecycle of the distribution relationship: appointment and exclusivity conditions, performance targets, ordering and fulfillment mechanics, warranty pass-through, trademark licensing, data and privacy responsibilities, regulatory compliance, and a detailed exit framework that addresses what happens to unsold inventory, customer relationships, branding, and ongoing warranty obligations when the agreement ends.
Why Startups Need This
Startups that sell physical products — consumer electronics, food and beverage, health and beauty, hardware, industrial equipment — often reach customers through distributors, resellers, and channel partners rather than selling direct. A distributor provides market access, logistics, customer relationships, and local support that a startup cannot build quickly on its own. But the distributor also controls the customer experience, sets resale prices, makes product claims, and handles warranty issues — all under the startup’s brand.
Without a written agreement, the supplier has limited ability to enforce product positioning, prevent unauthorized modifications, control marketing claims, require minimum inventory levels, or manage the termination process. The most common and expensive problem is termination — a distributor with unsold inventory, an established customer base, and no written exit terms has significant leverage and, depending on the jurisdiction, potential statutory protections under dealer or franchise laws.
Key Provisions Explained
Performance-Conditioned Exclusivity
Rather than granting blanket exclusivity, this template conditions any exclusive appointment on the distributor meeting measurable targets for purchases, inventory levels, market coverage, service capability, and reporting. If targets are missed, the supplier can convert the appointment to nonexclusive on defined notice, giving the distributor a cure opportunity. This approach protects the supplier from a distributor that secures exclusivity and then underperforms, while giving the distributor meaningful protection when it invests in building the market.
Warranty Pass-Through and Recall
The supplier provides a limited warranty in Exhibit D. The distributor must pass through this warranty to customers without expansion — it cannot make broader warranty promises, unauthorized performance claims, or guarantees that the supplier has not approved. Product complaints, adverse events, and traceability are coordinated through defined procedures. Recall decisions and customer communications are controlled by the supplier, with costs allocated by cause. This prevents a distributor from making unauthorized warranty commitments that the supplier must then honor.
Trademark License and Brand Control
The supplier grants a revocable license to use its trademarks solely to market products within the defined scope. The distributor must follow brand guidelines, obtain approval for marketing materials, and comply with quality controls. Goodwill generated from mark use inures to the supplier. The distributor cannot register marks, domains, social handles, or business names incorporating the supplier’s marks — and must stop all use on termination. These provisions protect the supplier’s brand while giving the distributor the tools it needs to sell effectively.
Exit Framework
Exhibit G defines the complete exit process: treatment of open orders, buyback or sell-off of merchantable inventory (with pricing and timeframes), customer support and warranty obligations during transition, records transfer, de-branding of materials and digital properties, and the timeline for each step. This is often the most important exhibit in the agreement because termination disputes — over inventory, customer ownership, and ongoing obligations — are where distribution relationships generate the most litigation.
Emerging Provisions (2025–2026)
Dealer and Franchise Law Compliance
Many jurisdictions have dealer-protection statutes that limit a supplier’s ability to terminate distribution relationships, impose mandatory cure periods, require inventory buyback, or provide damages for termination without good cause. Some distribution arrangements can also trigger franchise disclosure obligations if they involve a trademark license, significant operational assistance, and required payments. This template includes express disclaimers of franchise and agency relationships, but counsel must evaluate whether the substantive arrangement — the degree of operational control, the required investment, and the brand dependency — crosses the regulatory threshold in each relevant jurisdiction.
Data Governance and Customer Privacy
Distribution relationships generate customer data that both parties may want to use — the supplier for product development and direct marketing, the distributor for customer retention and cross-selling. Exhibit E assigns privacy and security roles by activity, defines permitted lead and customer data use, establishes security requirements, and addresses incident notification, rights requests, marketing consent, retention, and deletion. Under evolving privacy regulations, both parties need clarity on who is the controller, what processing is permitted, and how individual rights requests are handled when the data was collected by the distributor but relates to the supplier’s products.
Antitrust and Resale Price Controls
Following the withdrawal of the DOJ/FTC Competitor Collaboration Guidelines in December 2024, companies must analyze distribution arrangements under current antitrust statutes and case law without the prior safe-harbor framework. The template expressly states that the supplier may recommend prices only within applicable law and that the distributor controls resale prices unless a lawful exception applies. Territorial and customer restrictions, competitive-product limitations, and online-sales controls all require antitrust review — the analysis varies by jurisdiction and market structure.
How to Use This Template
1. Define the product and channel scope. Exhibit A must specify exactly which products, territories, channels, and customer classes are covered. Reserved accounts (direct, government, online, house accounts) should be listed explicitly to avoid channel conflict.
2. Set measurable targets. If exclusivity is granted, Exhibit B should define specific, measurable purchase minimums, inventory requirements, coverage targets, and service-level expectations — with consequences for missing them.
3. Build the warranty and recall framework. Exhibit D should define the warranty the distributor is authorized to pass through, the claims procedure, adverse-event reporting, and recall cost allocation. Do not allow the distributor to make expanded warranties without approval.
4. Review dealer-protection laws. Before signing, have counsel review the dealer, franchise, and commercial-agent laws in every jurisdiction where the distributor will operate. These laws can override contractual termination provisions and impose mandatory obligations that the agreement cannot waive.
5. Negotiate the exit before you need it. Exhibit G is easiest to negotiate at the beginning of the relationship. Define inventory buyback terms, sell-off periods, de-branding timelines, and customer transition procedures while both parties are still cooperating.
Related Forms
This template is provided by Montague Law for informational and educational purposes. It does not constitute legal advice and does not create an attorney-client relationship. Distribution relationships involve dealer-protection statutes, franchise disclosure obligations, antitrust law, product liability, import/export controls, and consumer-protection regulations that vary significantly by jurisdiction and industry. Consult qualified legal counsel before using this template. Montague Law is a Florida-based law firm focused on corporate, M&A, venture capital, and technology transactions.