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Dealership agreement
Dealership agreement is an agreement providing that one party (the dealer) undertakes to buy the goods from the other party (the supplier), and the dealer is in charge of the sales promotion in the specified territory; In accordance with this agreement the supplier undertakes not to sell the goods in the contractual territory except to the dealer and not to carry out any direct activities in the area reserved to the dealer, as well as is not entitled to conclude with third parties, acting on the contractual territory, the agreements similar to this agreement as well as other contracts provided for the goods to be delivered by the supplier on the contractual territory.
The following issues are necessary to pay attention to, while concluding the dealership agreement:
Products: a dealership contract shall provide for the clear list of products related to which the contract is concluded. If during the effective period of the contract any amendments thereto were made, a contract shall specify whether the contract provisions would cover such new products.
The territory for the promotion of the goods and exclusivity: these provision are to be incorporated into the contract. The contract should specify the territory or territories in which the distributor is to carry out his operations. The distributorship may or may not be exclusive. In principle, exclusivity applies throughout the territory, although it can be limited to only part of it.
Exclusivity: The exclusivity means that the exclusive dealer will be a legal entity empowered by the principal with the sole selling rights for the products manufactured or traded by the principal in a defined territory. Exclusivity implies an undertaking by the supplier not to sell its products in the contractual territory except to the dealer and not to carry out any direct activities in the areas reserved to the distributor. When a contract provides no exclusivity, the supplier has a right to sell all or part of the products specified by the dealership agreement.
Dealer's right to appoint sub-dealers or selling agents: The contract should clearly defines the issues whether the dealer has a right to appoint sub-dealers, selling agents or commercial representatives.
Use of the supplier's trademarks or trade names: the terms on which the distributor may or must use the supplier's trademarks or trade names have to be clearly defined. Provided that it's in a good practice to determine the amount of remuneration for use of trademarks and trade names.
Some of the provisions of a dealership agreement are not specified by the current Russian legislation. That's why it's necessary to detail the rights and obligations of the parties thereto, the procedure of delivery and document control, as well as other provisions of the contract. If a contract and the Civil Code of the Russian Federation do not determine the procedure of the obligations fulfillment, the customary business practices and analogy of law could be applied to such relationship (Article 5, clause 5 of the Article 421 of the Civil Code of the Russian Federation), it can have an influence on the stability of the dealer legal position in case of disputes appearance connected with the performance of a dealership contract.
We hope that this material will help you to clarify the issues related to the conclusion of an exclusive distributorship agreement.
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