Contracts with distributors the critical issues

Transcription

1 Contracts with distributors the critical issues Marco Hero Rome, May Folie 1

2 A. Distributorship vs. sales agreement What differences are there between distributorship and simple sales agreement? Distributor Supplier sells products to distributor for resale purposes Customer group of supplier: distributor only, not end customer No direct contractrual relationship between supplier and customer, eventually relationship by law (e.g.product liability) Supplier negotiates and contracts on B2B level only Distributor may agree to a variety of obligations (market exploration, brand communication, non-compete vs. exclusivity, sufficient stock, specific sales and after sales services etc.) Folie 2

3 A. Distributorship vs. sales agreement What differences are there between distributorship/sales agreement? Direct Sales - 2 customer groups: B2B B2C terms of agreements vary due to consumer protection - general terms and conditions may apply vs. negotiated framework agreement: rules on general terms and conditions e.g. in Germany, apply to standard agreements - less or no obligations on customer re. brand or market development - restrictions apply re. e.g. limitation of liability - battle of forms in direct B2B sales Folie 3

4 A. Distributorship v. sales agreement Advantages of Distributorship (from Suppliers perspective) Because the end costumer s contract does not effect the supplier, risk associated with the sale is shifted towards the distributor Limited liability of the supplier for the activities of the distributor No B2C contact in the target market Costs, interest and risks of successful target market development shifted to distributor Clear definition of distributor's responsibility e.g. re. market development, (minimum) sales targets, brand strategy, customer satisfaction, corporate identity and communication, territory, exklusivity etc. No battle of forms Folie 4

5 A. Distributorship v. sales agreement Disadvantages of Distributorship (from Suppliers perspective) An adaquate distributor must be found and the distribution agreement must be negotiated. A distributorship arrangement is likely to be governed EU and/or national legislation on competition, restrictions apply. Distributor has to be financially sound, because the entire risk in respect of sales in the given territory is shifted towards distributor. Limited control over Distributor. Sharing of margin. Folie 5

6 A. Distributorship v. sales agreement Sales Cycle and the Internet: - Supplier's needs to adapt sales strategy to customer behaviour - classic dealmeaking vs. global connectivity and visibility - implementing of online sales strategies needs be mirrored in sales and distribution agreements - classic territorial restrictions vs. freedom of passive sales through the internet - role and effects of online platforms (e.g. Amazon, ebay, Priceline etc.) - role and effects of social media - brand control and control of reputation - compliance: end-customer data in the brand network Folie 6

7 B. Issues to be covered in distributorship contract Standard issues to be covered in a distribution agreement: Precise order and delivery procedures Minimum sales targets and consequences of failure Duration and termination of agreement and consequences of termination (ex.: disposal of stock upon termination) Specific obligation of disributor (ex: after sales services, maintenance service, spare parts to be stocked by distributor) Territory, exlusivity, non-compete Sales channel(s): on- and/or offline Brand presentation on the internet Data protection Folie 7

8 B. Issues to be covered in distributorship contract Payment issues (partial) pre-payment Timeline for (rest-) payments Currency and exchange rate definition Consequences of default/late payment (withholding of further deliveries, set-off, termination, post-termination consequences) Guarantees / letter of credit Retention of title Folie 8

9 Thank you! Folie 9