Ten Golden Tips For Distribution Agreements

A distribution agreement is a legally binding agreement between an entity supplying goods and an agreement that markets goods. In this case, the supplier may be either a manufacturer or another distributor, who resells the products of another supplier. The distributor is a company that plans to market and sell the products, either to the public or to other companies. Distributor franchises may be exclusive, where there will be no other franchised distributor in the territory; or not exclusively if the new distributor could be one of the distributors of several franchisees in the territory. Distributors sometimes use exclusive territory to argue that, without an exclusive area, the distributor is not encouraged to provide adequate resources to the producer to develop sales. As soon as a vendor accepts an exclusive domain, it loses the ability to franchise an additional distributor for a certain period of time. The allocation of an exclusive distribution in an area is an unnecessary leap of confidence on the part of the supplier. An alternative to the allocation of exclusive territory is to design the distribution agreement so that the distributor is not exclusive, but is only a distributor. An oral agreement would indicate that if a supplier`s objectives were met, no additional distributors would be allowed into the non-exclusive territory.

Such an agreement encourages the distributor to promote it without restricting the manufacturer`s options. Foreign and domestic companies often negotiate and terminate these contracts and often find themselves in dispute, which has a negative impact on the client`s activity due to the considerable cost of terminating such agreements. In our experience, we should see that the termination of trade agency and distribution agreements is a frequent source of controversy in Colombia. Colombia enjoys economic and political stability that, combined with sustained economic growth, has attracted foreign investment to our country. Among the consequences of this investment-friendly climate, Colombia has ratified several free trade agreements (`FTA`) with countries such as Canada and Mexico, and more recently, the free trade agreement between the United States and Colombia (`FTA`) was approved by the U.S. Congress and signed by the President on October 21, 2011.

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