Distribution Agreements

Appointment, territory, and exclusivity

The appointment clause is the spine of a distribution agreement. It names the products, defines the territory, and sets whether the distributor's rights are exclusive, sole, or non-exclusive, and each of those choices carries consequences. An exclusive appointment shuts the supplier out of its own territory and usually obligates the distributor to actively develop it; a non-exclusive one lets the supplier keep selling alongside or appoint others. We draft the grant to say exactly what is covered: which product lines, which sales channels (online and resale included), and which house accounts or customers the supplier reserves for itself. We also fix whether the arrangement is a true buy-sell distributorship, where the distributor takes title to the goods and resells for its own account, or an agency or sales-representative relationship, where it sells on the supplier's behalf for a commission. The two are taxed differently, allocate product-liability risk differently, and end differently, so the characterization belongs in the contract rather than left to argue about later. Defining territory and exclusivity precisely at signing is what prevents the “I thought I had the whole West Coast” fight a year in.

Pricing, minimums, and order terms

Most distribution relationships are a long series of sales, and the agreement has to govern all of them in advance. Distribution is a sale of goods under Article 2 of the Uniform Commercial Code (RCW 62A.2), so the contract sets the pricing mechanism, payment and credit terms, the ordering and forecasting process, delivery and risk-of-loss allocation, and the warranty and acceptance terms that apply to every shipment. An exclusive-distribution arrangement carries an implied duty of best efforts to supply and to promote under RCW 62A.2-306, and we make that obligation explicit rather than leaving it implied. Minimum-purchase commitments are where suppliers and distributors most often clash: the supplier wants volume to justify the territory, the distributor wants room if the market softens, and the remedy for a miss (loss of exclusivity, conversion to non-exclusive, or termination) has to be spelled out instead of assumed. For international distribution, we address whether the U.N. Convention on Contracts for the International Sale of Goods (CISG) applies or is opted out, and we set the Incoterms 2020 rule so the parties know exactly where delivery, title, and risk pass. The goal is a pricing and ordering structure both sides can administer for years without renegotiating every purchase order.

Trademark, brand use, and IP in the channel

A distributor sells under the supplier's brand, which means the agreement is also a limited trademark license, and it has to be drafted as one. Under the Lanham Act, a trademark owner who lets others use its mark without controlling the quality of the goods or services sold under it can be found to have granted a “naked license” and abandoned the mark entirely (15 U.S.C. §§ 1064, 1127). We build in the brand-usage guidelines, approval rights, and quality standards that keep the mark protected while it is in the distributor's hands, and we set what happens to signage, marketing materials, domain names, and social handles when the relationship ends. The agreement also has to address gray-market and parallel imports, online-marketplace and minimum-advertised-price (MAP) policies, and who owns the customer data and goodwill the distributor builds in the territory. Where the distributor gets access to software, technical specifications, or confidential product information, we add the confidentiality and use restrictions that trade-secret law requires to keep that information protected. Letting a brand into a sales channel without controlling how it is used is how a supplier loses the mark and the customer relationship at the same time.

Term, termination, and post-termination rights

How a distribution relationship ends is the part that gets litigated, so it is the part we draft most carefully. The agreement sets the term, the renewal mechanics, and the grounds for termination: for cause on breach or insolvency, and for convenience on notice. Notice periods matter, because a distributor that has invested in inventory, staff, and territory development can argue it was cut off without a fair chance to recover, and several states impose dealer-protection statutes and good-cause requirements on terminating distributors and dealers in particular industries. Even where no special statute applies, the implied covenant of good faith under the UCC (RCW 62A.1-304) and Washington's Consumer Protection Act (RCW 19.86) shape what a clean termination looks like. We draft the post-termination provisions that decide the real questions: who buys back unsold inventory and at what price, how long the distributor may sell off remaining stock, what happens to pending orders and customer lists, and when the brand and confidential information have to be returned or destroyed. The owner shouldn't have to litigate the tail of a distribution deal to learn what the contract should have said in the first place.

Antitrust and the franchise line

Distribution agreements sit inside two bodies of law that can void a clause or reclassify the whole relationship, and both get checked while we draft. The first is antitrust. Section 1 of the Sherman Act (15 U.S.C. § 1) and Washington's Consumer Protection Act (RCW 19.86) govern the restraints distribution agreements commonly contain: resale-price-maintenance and minimum-pricing terms, exclusive-dealing and requirements clauses, territorial and customer restrictions, and tying arrangements. Since the Supreme Court's decision in Leegin, most vertical restraints are judged under the rule of reason rather than treated as automatically illegal, but judged under the rule of reason is not the same as safe, and an aggressive pricing or exclusivity term can still draw a treble-damages claim. The second is franchise law, the trap most distribution deals don't see coming. When a distribution arrangement bundles a trademark license with a marketing plan or significant operational control and requires the distributor to pay a fee, it can meet the legal definition of a franchise, which triggers the federal FTC Franchise Rule (16 C.F.R. Part 436) and the Washington Franchise Investment Protection Act (RCW 19.100), along with their registration, disclosure, and relationship-law obligations and real penalties for getting it wrong. We structure the appointment, fees, and control terms so the agreement stays a distribution agreement and does not become a franchise by accident, and we keep the restraints inside it defensible.