What is a distributor?
A distributor is a person who buys goods on his own account from a supplier (typically from a manufacturer, another supplier or exporter) and resells them to customers.
Distributors are, essentially, independent contractors. Unlike agents, they enter into contracts on their own behalf directly with the customer. They do not act as a conduit between their supplier on the one hand and their customer on the other hand. They do not usually have authority to create a contract between their supplier and the customer.
What is a distribution agreement?
A distribution agreement is the document which sets out the terms and conditions of the arrangement between a supplier of goods and a distributor.
In a typical distribution arrangement, a supplier of goods sells its goods to a distributor at a discount. The supplier may be a manufacturer or may itself be a distributor reselling another supplier’s goods. The distributor will then sell the goods to customers at a profit. There may be limits as to what, how, when and where the distributor may sell the goods. A distributor may have exclusive, sole or non-exclusive rights to sell the supplier’s products in the relevant market.
In some countries, certain categories of distributors are protected from abusive business tactics by law and have rights which may be considered similar to those of an agent.
Distribution agreements are typically used as a comparatively low risk means of expanding a business into new markets or territories.