If your company is considering entering into an international distribution agreement, it is important that you consult professionally. The first question that a manufacturer and distributor must answer when entering into a distribution agreement is whether a written distribution agreement should be concluded. From the manufacturer`s point of view, it would be almost reckless not to have such an agreement. However, on the side of the distributor of the table, the problems are much less obvious. If you do not sign a written agreement, your contract is based on the insurance and behavior of each party. If there are no explanations or oral behaviors and a dispute arises, the courts will simply apply the implied theory of the contract. This essentially means that the courts will enter into their own contract. Often, this approach is more favorable to the distributor than to the manufacturer. It may also be more advantageous for the distributor than an agreement, in particular an agreement designed by the manufacturer, in which the distributor had little or no say in its content. Another provision useful to the manufacturer would be a provision that would set out specific grounds for termination. Many state laws allow termination as long as the manufacturer has a “reasonable reason” to do so.
Some conditions that may be part of a distribution agreement to justify its termination are as follows: This clause should be carefully designed to reflect the understanding of the parties. This clause defines the period during which the rights are granted. It could be forever, normally “eternal” or for a certain period of time. There could be a termination provision that ends the duration of a particular event or if sales do not reach a certain amount. This clause should still be carefully developed to reflect the understanding of the parties. A question often asked is whether a distribution agreement – with a termination clause – is a complete and integrated agreement or whether the parol evidence can explain what it means. The usual facts are that the distribution agreement contains a rather enigmatic termination clause – perhaps something like: “The manufacturer reserves the right to terminate the distribution at any time with notice.” The manufacturer exercises this right. The dealer then responds to a dispute by saying that the parties understood during the negotiations and during the relationship that, while the agreement states that the manufacturer may terminate them at any time for any reason, the parties have actually considered a long-term relationship that the manufacturer would not terminate, except for important reasons. The legal question that often needs to be resolved is whether this evidence is admissible. If the court considers that the distribution contract is a complete and integrated writing and that the termination clause is clear, it should apply the rule of parsol evidence to exclude oral instruction.
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