Manufacturers, particularly those who trade internationally, will appoint distributors and have different distribution agreements in place for different countries, or ‘territories’. A large supplier, will often appoint a distributor in a particular region, country or continent, and restrict that distributor from selling their products elsewhere in the world.

You may want to limit your distributor to a defined territory for a variety of reasons. A distributor might have expertise in that territory, speak the language or know the market well. Maybe the distributor holds a good reputation in that territory or has key contacts which would assist with raising the profile of your products.

It is important when drafting your distribution agreement, to clearly define the territory, so no confusion can arise leading to a breach of the agreement. It also may be advisable, depending on the nature of your business, to reserve the right to change that territory should circumstances change in the future.

As a manufacturer, you may enter a distribution agreement with distributor Y Limited to sell your products in China, and enter a separate distribution agreement with Z Limited, to distribute your products in America. Each of these distributors would be chosen for their local knowledge and contacts and would be able to build a market for the products quicker than you would and this knowledge of the local market is key to success.

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Robert Capper
Partner, Head of Commercial Team and Advanced Manufacturing
Direct Dial: +44 (0)1905 744814
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Email: rcapper@hcrlaw.com