A distribution agreement determines how your product reaches market — and who profits from each link in the chain. Whether you’re the supplier appointing a distributor, or the distributor taking on a product line, the contract sets the terms of a relationship that often runs 3–5 years and millions of dollars in throughput.
Get the wrong clauses and you’ll be locked into an underperforming distributor you can’t replace, or stuck moving product for a supplier who undercuts you direct-to-consumer.
The clauses that matter most
- Exclusivity and territory. Is this exclusive (only this distributor can sell in the territory), non-exclusive, or sole (no other appointments but supplier can still sell direct)? Define the territory precisely — by state, postcode range, or channel (retail vs online).
- Minimum performance obligations. Volume targets, revenue thresholds, market-development commitments. Tie failure to specific consequences — loss of exclusivity, conversion to non-exclusive, termination.
- Pricing and margins. Is the distributor free to set retail pricing, or are there RRP requirements? Resale price maintenance is illegal under the Competition and Consumer Act 2010 (Part IV) — the supplier cannot mandate minimum resale prices. Recommended pricing is fine; mandated minimum is not.
- Stock and ordering. Minimum order quantities, lead times, take-or-pay obligations, returns policy on slow-moving stock, end-of-life inventory handling.
- Marketing and brand controls. Approval rights over distributor marketing, use of supplier trade marks, co-op marketing contributions, social media restrictions.
- IP and confidentiality. Who owns customer lists generated through distribution? Who owns product feedback and improvements? Confidentiality during and after the term.
- Term and termination. Initial term, renewal mechanics, termination for convenience (with notice period), termination for cause (insolvency, breach, change of control).
- Post-termination. Run-off rights for stock on hand, customer relationships, restraint of trade post-termination, transition cooperation.
Common red flags
- One-sided termination rights — supplier can terminate on 30 days notice, distributor needs 12 months and breach
- Online sales carve-outs letting the supplier compete direct via their own website
- Excessive minimum purchase commitments with no market-conditions safety valve
- Unilateral price changes by the supplier mid-term
- Ambiguous “best efforts” obligations instead of measurable KPIs — leads to disputes
- Restraint clauses preventing the distributor from carrying competing products even after termination
What Claim Done’s contract review delivers
Upload the distribution agreement. The AI returns a 15-minute A4 PDF flagging exclusivity gaps, RPM risks, performance obligation enforceability, termination asymmetry, and post-term restrictions. Specific suggested redrafts for the highest-risk provisions. Flat $79, 24/7.
When to take it to a lawyer
For multi-territory deals, agreements involving intellectual property licensing alongside distribution, deals with ACCC notification implications (e.g. exclusive dealing), or contracts over $1M annual throughput — engage a commercial lawyer with competition law experience.
Why distribution disputes are expensive
Once a distribution deal is in market, unwinding it is painful — customers have been onboarded, stock is in warehouses, marketing has been spent, and termination notice periods often run 6-12 months. The cost of fixing a poorly-drafted distribution agreement is usually 10-20x the cost of reviewing it before signing. The most common pattern: a deal hand-drafted by one party’s lawyer, signed under time pressure by the other party with minimal review, and then producing structural disputes 18-30 months in. The pre-signing review is the cheapest insurance available.
Resale price maintenance — the hidden trap
Section 48 of the Competition and Consumer Act 2010 prohibits resale price maintenance — a supplier dictating the minimum price at which a distributor can resell. The prohibition applies even where the parties believe they’re agreeing on “RRP” — if there’s any element of compulsion, threats of supply withdrawal, or coordinated retaliation against discounting distributors, the conduct is illegal. Penalties are substantial (corporate fines up to the greater of $10M, 3x benefit, or 10% of turnover). The fix: the agreement should explicitly state pricing is at the distributor’s discretion, with any “recommended” pricing genuinely recommendatory. This protects both parties from ACCC enforcement action.