Limit liability limitation: in most jurisdictions, the manufacturer is responsible for the damage caused by the use of the products. Some agreements try to transfer that responsibility to the distributor, but if they are tested by the courts, they probably will not hold. Therefore, the right way to resolve the liability risk is to formulate an effective compensation mechanism that limits the extent of your liability. Such a mechanism should limit your liability in terms of both amount and time and be supported by appropriate insurance coverage. Think about territorial coverage: the territorial scope of your distribution agreement is not just a matter of geography. For example, if exclusive rights are granted for the marketing of a particular product on the east coast of the United States, it should be noted that those rights are not infringed if the same product can enter the territory through an OEM partner incorporated into another product. You should specify exactly all kinds of channels through which the product can enter the market and thus protect against future conflicts with your distributor. Choose an effective distributor: Choosing the right entity as the distributor of your products or services is the most important point. You can name a distributor you stumbled upon by chance, or it sounds impressive. However, you should keep in mind that you have made an appointment for your products to be distributed and sold.
The concern is that the distributor will not act after the appointment, and the agreement you have signed will remain “on the shelf.” These situations become complicated when the trader enjoys long-term exclusivity in a territory. In this case, it`s not just that the distributor won`t do anything, but you won`t be able to name another better distributor for the same area. List distributed products: A distributor may be excellent for distributing a particular product, but cannot distribute other products. Therefore, it is advisable to carefully define the purpose of the agreement and to give explicit reference to issues such as updated or updated products. For example, if you refer some software to products for sale under the agreement, you might consider that recent versions of the software are covered by the distributor`s exclusive rights, and another may consider them to be outside the scope of exclusivity (and there is no doubt about who is one and who is the other). Beware of exclusivity: exclusivity can be one-sided, i.e. the distributor is your only distribution channel on the market, but it can sell competing products. Similarly, you can deliver your product to other people, but the distributor is not allowed to sell the products of its competitors. In reality, these unilateral agreements generally do not work, so it is more desirable to conclude bilateral agreements.