US Distribution Agreement template

Overview

A distribution agreement governs a supplier's sale of goods to a distributor who resells them, typically within a defined territory, buying and reselling the goods for its own account (unlike a sales representative, who solicits orders on the supplier's behalf without taking title to the goods). Because a distributor takes title and resells, its purchases from the supplier are governed by Article 2 of the Uniform Commercial Code, adopted (with local variations) in every US state, which supplies default rules on delivery, risk of loss, warranties, and remedies for breach unless the contract displaces them. Two US-specific legal issues deserve particular attention. First, pricing: the federal Robinson-Patman Act restricts a supplier from charging different distributors different prices for goods of like grade and quality where the effect may be to injure competition — a supplier with multiple distributors in overlapping or competing territories should structure pricing carefully to avoid Robinson-Patman exposure, particularly if volume discounts aren't offered on proportionally equal terms. Second, franchise characterization: if the distribution relationship involves the distributor paying a fee for the right to distribute, operating under the supplier's trademark, and receiving significant operational control or assistance from the supplier, it may be deemed a "franchise" under the FTC Franchise Rule (and parallel state franchise statutes, several of which are stricter, like California, New York, and Illinois), triggering mandatory pre-sale disclosure document requirements and, in some states, registration and termination-restriction obligations that do not apply to an ordinary distribution relationship. A number of states also have dealer or distributor termination statutes for specific industries (notably motor vehicle, farm equipment, and beer/alcohol distribution), which impose good-cause and notice requirements on termination that override contrary contract language — these are industry-specific and should be checked if the distributed goods fall into a regulated category. When to use it: for a supplier appointing an independent distributor to purchase and resell goods in a defined territory. Key clauses: appointment and territory; exclusivity (if any) and any territorial or customer restrictions, drafted to avoid antitrust exposure; pricing and payment terms, including a note on Robinson-Patman compliance if multiple distributors exist; minimum purchase or performance requirements; ordering and delivery, incorporating UCC Article 2 defaults where not displaced; warranties and disclaimers; trademark and branding usage; franchise-avoidance language (confirming the distributor does not pay a franchise fee and is not granted the level of control that would trigger FTC Franchise Rule coverage, or flagging that it does); term and termination, including notice periods and any state-specific dealer termination statute that may apply; and governing law. Pitfalls to avoid: setting different net prices for competing distributors without a defensible cost or volume justification, risking Robinson-Patman exposure; structuring the relationship with franchise-like features (initial fee, significant operational control, trademark licensing) without recognizing that FTC Franchise Rule disclosure obligations may apply; and terminating a distributor in a regulated industry (vehicles, farm equipment, alcohol) without checking whether a state dealer-termination statute requires good cause or a specific notice period regardless of what the contract says.

Information to customize

• Supplier's legal name

• Supplier's address

• Distributor's legal name

• Distributor's address

• Territory and products covered

• Exclusive or non-exclusive distributorship?

• Pricing and payment terms

• Minimum purchase or performance requirements, if any

• Does the relationship include an initial fee, trademark license, or significant operational control?

• Is the product in a state-regulated dealer/distributor industry (vehicles, farm equipment, alcohol)?

• Initial term and renewal

• Termination notice period

• Governing state law

• Date of signature

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Frequently asked questions

Is a distribution agreement the same as a sales representative agreement in the US?

No. A distributor buys the goods and resells them for its own account, taking title and bearing resale risk; a sales representative solicits orders on the supplier's behalf without taking title. The two relationships are governed differently — distributor purchases fall under UCC Article 2, while sales representative relationships may fall under state sales representative statutes.

Can we charge different distributors different prices?

With caution. The federal Robinson-Patman Act restricts price discrimination between competing purchasers of goods of like grade and quality where it may injure competition. Price differences should be justified by legitimate cost differences or proportionally available volume discounts.

Could our distribution agreement accidentally be a franchise?

Yes, if the distributor pays an initial or ongoing fee, operates under the supplier's trademark in a way that identifies its business, and receives significant operational control or assistance from the supplier. If those features are present, the FTC Franchise Rule (and stricter state franchise statutes in states like California, New York, and Illinois) may require pre-sale disclosure documents regardless of how the agreement is labeled.

Can we terminate a distributor at will?

Generally, subject to the contract's own notice provisions — but some states have dealer or distributor termination statutes for specific industries (motor vehicles, farm equipment, alcohol/beer) that require good cause and a minimum notice period regardless of contract language. Check whether the distributed product falls into a regulated category.

Does UCC Article 2 apply to our distribution agreement?

Yes, to the purchase-and-sale transactions between supplier and distributor, since the distributor is buying goods for resale. Article 2's default rules on delivery, risk of loss, and warranties apply unless the contract displaces them.

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