A distribution or dealership agreement governs the relationship between a principal (manufacturer or supplier) and a distributor who buys and resells goods in a defined territory. It settles pricing, supply obligations, territory rights, and the terms on which the arrangement can end.
The principal usually drafts the agreement, and the standard form tends to favour the principal's commercial interests. A distributor should read it closely because the fine print often limits the distributor's remedies, concentrates risk on the distributor, and gives the principal wide discretion to terminate or alter terms.
Who it usually favours: The standard form usually favours the principal; the distributor should push back on one-sided termination, unlimited liability, and vague supply obligations.
What each one settles in a distribution / dealership agreement, and the wording that shifts the risk.
Why it matters. This clause defines where the distributor may sell and whether the principal can appoint other distributors or sell directly in the same area.
Watch for. A grant that is non-exclusive or allows the principal to make direct sales without compensation may undermine the distributor's investment in building the market.
Why it matters. This sets the sales volume the distributor must achieve, often with consequences for missing targets.
Watch for. Targets that are set unilaterally by the principal or are unrealistically high can lead to automatic termination or loss of exclusivity, shifting demand risk entirely to the distributor.
Why it matters. This decides how long the agreement lasts and the grounds on which either party can end it before the term expires.
Watch for. A clause allowing the principal to terminate without cause on short notice, or for minor breaches without a cure period, can leave the distributor with unsold stock and no recourse.
Why it matters. This caps or excludes the principal's financial responsibility for losses the distributor may suffer.
Watch for. A blanket exclusion of liability for supply delays, defective goods, or recall costs may leave the distributor bearing the full cost of problems it did not cause.
Why it matters. This allocates responsibility for third-party claims, such as product liability or intellectual property infringement.
Watch for. A one-way indemnity requiring the distributor to cover claims against the principal, without a reciprocal indemnity for defective products supplied by the principal, creates a significant financial exposure.
Why it matters. This determines the transfer price, how and when the distributor must pay, and whether prices can change.
Watch for. A clause reserving the right to change prices without notice or requiring payment before delivery of goods can strain the distributor's working capital and margins.
Why it matters. This governs what happens to unsold stock, marketing materials, and confidential information after the agreement ends.
Watch for. An obligation to return or destroy all stock at the distributor's cost, with no buy-back provision, can result in a significant financial write-off.
Why it matters. This clause specifies how disagreements will be resolved, including the venue and method.
Watch for. A clause naming a venue in the principal's home city and requiring arbitration under rules that are costly for the distributor can make pursuing a claim practically difficult.
No. A distributor buys goods from the principal and resells them in its own name, assuming the commercial risk. An agent does not buy goods but arranges sales on behalf of the principal, usually for a commission. The legal obligations and protections differ significantly.
Yes, unless the agreement contains an automatic renewal clause or a promise to renew. Without such a clause, the principal may allow the agreement to expire. A distributor who has invested heavily in the territory may want to negotiate a renewal right or compensation for non-renewal.
You can upload the agreement and the tool will detect the document type, parties, and governing law. It checks each clause against central Indian Acts, flagging points for an advocate to confirm, and assesses which party each clause favours. The output is a plain-English summary with ranked findings, a balance assessment, and suggested changes, which can be downloaded as a PDF. It is assistive review, not legal advice, and every finding is a starting point for a human advocate.
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