How To Negotiate A Distribution Agreement

There has never been a relationship between a supplier and a distributor that has survived forever. However, with attention to detail when negotiating your next distribution contract, you can reduce the likelihood of a premature termination of the relationship or costly litigation in the event of termination. Here are five rules you`ll need to focus on when negotiating your next deal. Recent court proceedings have ruled that a manufacturer can impose a compromise clause in a distribution contract, even though the distributor`s basic right includes federal cartel laws. To some extent, this is a departure from previous legislation, which stipulated that requests for federal agreements were not deviating. In the past, it was thought that because antitrust laws are part of our public policy, the distributor must have the right to have such an application challenged in a federal court and that the courts must enforce those laws, regardless of the existence of an arbitration agreement. The law seems to be that as long as the merchant`s claim to cartels and abuse of dominance (usually based on a theory of resale price maintenance) does not permeate the whole dispute or thus overshadow all the controversy that it is unreasonable, the compromise clause can be applied in the contract. In other words, the manufacturer may insist that the distributor settle disputes between them. In general, the compromise clause will favor the manufacturer, because it will remove the largest club from the distributor, it is the cartel request in which the distributor, if it succeeds, can recover damages and legal fees. Indeed, recent comments from lawyers in training programs have shown that they are now almost everywhere in favour of the inclusion of arbitration clauses in distribution agreements. From the merchant`s point of view, it is probably not particularly advantageous to have such a clause in the contract, but it may not be that bad either.

If the distributor believes that it only wants fair treatment from the manufacturer and not a “pound of meat” on the basis of three damages and legal fees, arbitration can be a means of obtaining this type of “gross justice” if the manufacturer does not voluntarily offer it.