Where you are selling your goods or services to a purchaser who will not use those products, but will resell them to third parties, you need to ensure that your contract with your customer reflects this.
This can be achieved through your conditions of sale. However, if you are selling to a reseller on a regular basis it is advisable to do this on the basis of a formal signed reseller or distributorship agreement.
A formal agreement can allow you to agree a more detailed trading relationship with your reseller. For example you can agree that the distributor will be your exclusive reseller for a particular geographic territory or customer type. Exclusivity will encourage the reseller to focus its efforts on its area of exclusivity and can allow you to focus your efforts elsewhere. Through a network of such distributors you can quickly grow your business and open new markets using established operators rather than having to employ teams and set up operations from scratch.
Distributors can provide an excellent route to market when exporting. One of the easiest ways to access overseas markets is through a distributor or reseller. The distributor will have the local knowledge necessary to market and sell the products. By selling to an intermediary, you shift the risk of trading with the end-customer onto a third party. You can also allocate much of the risk of selling the products or services overseas to the third party intermediary. You can also use the distributor to provide after-sales service to purchases of your products or services.
Other aspects of the relationship which can be better provided for in a formal agreement are:
- sales targets/minimum purchase requirements
- sales incentives such as volume rebates
- marketing campaigns/special promotions
- reporting of sales
You should be aware that, whilst it is useful to control your distributors, the law can prevent you doing so too tightly. Knowing what is and is not permissible under competition law is vital in order to ensure you do not inadvertently stray from what is permissible. For example, what restrictions on internet reselling are permissible? When can you prevent a distributor selling to particular customers or into particular territories? Our commercial lawyers can make sure that you obtain the agreement you need and stay on the right side of the law.