What should a distribution agreement include?

It should cover roles and responsibilities, territory and exclusivity, pricing and delivery terms, trade mark and marketing conditions, contract duration and notice periods, competition law compliance and a clear dispute resolution clause, for example arbitration.

Distribution agreement

Q: What is a distribution agreement?

A distribution agreement is a contract that sets the terms for how a distributor may sell and market a supplier’s goods or services within a defined territory, including rights, obligations and any exclusivity provisions.

Q: When is a distribution agreement relevant?

It is relevant when a business wants to expand sales through an external party, for example in international expansion or long-term collaborations where territory, exclusivity and responsibilities need to be clearly defined.

A distribution agreement is a contract that governs how a distributor may sell and market a supplier’s products within a defined territory or segment.

Glossary
Distribution agreement

Explained – what is a distribution agreement?

A distribution agreement is a legal arrangement between a supplier and a distributor that sets the terms for distributing goods or services. It defines, among other things, rights and obligations, the geographic territory and any exclusivity provisions. In commercial contract law, distribution agreements are central to regulating the parties’ relationship in a predictable and legally robust manner. This page clarifies the distribution agreement meaning and helps you assess what is a distribution agreement in practice.

When is a distribution agreement relevant?

The question arises when a business wants to expand sales through an external party rather than selling directly to end customers. It is particularly common in international expansion, where a local distributor can manage sales, marketing and logistics. The arrangement is equally relevant for long-term collaborations where the parties need clear parameters for allocation of responsibility and competition constraints, including whether to choose an exclusive distribution agreement or a non exclusive distribution agreement.

Illustration of a distribution agreement in international trade, showing a manufacturer expanding to global distributors on a world map, representing cross-border sales and commercial contract terms.

Key points to consider in a distribution agreement

When drafting or reviewing a distribution agreement, several issues warrant careful attention to avoid disputes and to ensure compliance with applicable law, including distribution agreement competition law considerations.

Define the parties’ roles and areas of responsibility to clarify the supplier distributor relationship.
Set the geographic territory and any exclusivity rights, and explain the exclusive distribution meaning where relevant.
Regulate pricing, delivery terms and payment routines as part of the distribution terms and conditions.
Include conditions for marketing and use of the trade mark.
Ensure the agreement complies with competition law, including exclusivity and competition law rules.
Specify the agreement term clause (contract duration clause) and any notice period clause.
Provide dispute resolution mechanisms (for example, a dispute resolution clause or an arbitration agreement clause), potentially by arbitration.

A clear and properly structured contract reduces the risk of misunderstanding and creates a stable foundation for cooperation.

Why is a distribution agreement important?

It protects both supplier and distributor by setting clear parameters for the collaboration. It ensures the parties understand what applies to sales, delivery and marketing, which is essential to avoid disputes.

For the supplier, it enables control over how products are presented and sold; for the distributor, it provides certainty about rights and obligations. A well-drafted agreement also supports compliance with competition law.

From a business perspective, a distribution agreement creates predictability and long-term stability, strengthening trust between the parties and enabling strategic planning—whether you draft a distribution agreement for a single market or multiple territories.

A distribution agreement typically means the distributor purchases and sells the products in its own name, whereas an agency agreement often means the agent facilitates sales on behalf of the supplier.

You need one when a company wishes to allow an external party to sell and distribute products under agreed terms, especially for long-term collaborations or where exclusivity is granted (for example, an exclusive distribution agreement rather than a non exclusive distribution agreement).

Competition can be addressed through specific clauses restricting the distributor’s right to sell competing products. These clauses must comply with applicable competition law and any relevant block exemptions.

At a minimum:

Roles and responsibilities of the parties
Geographic territory
Pricing and payment terms
Exclusivity provisions
Term, duration and termination (agreement term clause/contract duration clause/notice period clause)
Dispute resolution (for example, a dispute resolution clause or an arbitration agreement clause)

Exclusivity can affect the competitive landscape and the value of the contract. For a supplier, it can enable market control; for a distributor, it can secure market share and support investment—subject always to exclusivity and competition law constraints.

Engage legal expertise. A contract lawyer can ensure the agreement is clearly drafted, complies with Swedish and EU law, and is tailored to sector-specific conditions when you draft a distribution agreement.