A distribution agreement is a legally binding agreement between an entity that supplies goods and one that distributes goods. The supplier in this case can be either a manufacturer or another distributor that is reselling another supplier's goods. The distributor is a company that plans to market and sell the products, whether to the public or to other companies.
NECESSITY AND BENEFITS
Suppliers and distributors can always come up with an informal distribution arrangement. In fact, many do, but these verbal agreements often result in misunderstandings that can be very problematic for one or both companies.
By creating and negotiating a contract that spells out all the specific terms of the deal, the companies are able to ensure that they are both clear on all aspects of the arrangement so they both live up to their end of the deal. When one party fails to live up to the agreement terms, a formal contract also provides legal protections and remedies for the wronged party.
It's also important to ensure that these contracts are personalized for each deal. This is not only true because every deal will be subject to different terms but also because the purpose of distribution agreements can vary drastically. Some suppliers seek out distributors to help get their products to their desired markets, while others are focused more on the distributor's marketing expertise. The details of these deals will vary drastically based on the intent of these deals as well as the specifically negotiated terms.