Distribution Agreement | UCC Art. 2, Robinson-Patman

A distribution and reseller agreement appoints a buyer for resale. The reseller takes title to the goods, resells them in its own name, at its own risk, for its own margin, and the supplier is paid on the wholesale invoice rather than on what the end customer eventually pays. That structural fact separates this contract from a sales representative agreement, where the rep never owns inventory and earns a commission on orders the supplier books directly. It also explains why the two sides argue about different things. A distributor fights over territory, discount tiers and post-termination stock; a commissioned rep fights over the commission trail.

The document is close to, but not the same as, a supply contract. A vendor agreement built on UCC warranty and remedy rules governs what the supplier ships and what happens when it ships late or short. A distribution agreement does that too, then adds the channel layer: appointment, exclusivity, sales targets, trademark use, end of term inventory. Distributor and reseller are interchangeable across most American industries, though hardware channels reserve "distributor" for the two step wholesaler selling on to dealers and value added reseller for the partner selling to the end user. The template covers both, because the legal architecture is identical.

Sales of goods between merchants sit under Article 2 of the Uniform Commercial Code, adopted in every state, and the default rules bite hard when the contract is silent. UCC §2-201 requires a signed writing above the statutory threshold, §2-306(2) reads a best efforts obligation into every exclusive dealing arrangement in favor of both sides, and §§2-314 and 2-315 imply merchantability and fitness warranties that survive unless §2-316(2) is respected: the disclaimer has to mention merchantability and it has to be conspicuous. UCC §2-719 permits a repair or replacement remedy subject to the failure of essential purpose doctrine, and §2-725 sets a four year limitations period the parties may shorten to one.

Antitrust does the rest of the work. Territorial and customer restraints are judged under the rule of reason since Continental T.V., Inc. v. GTE Sylvania, 433 U.S. 36 (1977), which makes exclusive territories broadly lawful for a supplier without market power. Minimum resale price maintenance left the per se category federally in Leegin Creative Leather Products v. PSKS, 551 U.S. 877 (2007), and the Cornell Legal Information Institute overview of resale price maintenance agreements explains why several states never followed. Federal compliance is not state compliance on price floors. Discount schedules and promotional allowances answer to the Robinson-Patman Act, 15 U.S.C. §13, dormant for two decades and back in active litigation since the FTC action against a national wine and spirits distributor survived a motion to dismiss.

Two regimes catch suppliers by surprise. Licensing your mark without quality control invites a naked licensing defense under the Lanham Act, which is why the template carries the control language you would find in a standalone trademark licence covering royalty, territory and reversion. And a relationship combining a trademark licence, significant control over the reseller's methods and a required payment in the first six months meets the franchise definition in the FTC Franchise Rule, 16 C.F.R. Part 436.

The classic trigger is geographic expansion without headcount. A manufacturer wants shelf space in the Southeast, cannot justify a regional office, and appoints a distributor already calling on those accounts. Second is the inbound case: a foreign brand entering the United States needs a domestic partner to hold inventory, clear customs, handle warranty claims and sit closer to the end customer on product liability. Software vendors reach for the same document when they build a partner channel, since a reseller selling subscriptions needs a defined right to sublicense, a discount schedule and clear rules on who owns the customer at renewal.

The third scenario lands in litigation. Two businesses trade on purchase orders for six years, one starts calling itself the exclusive distributor, and nobody ever signed anything. Papering that relationship late is uncomfortable and far cheaper than arguing implied exclusivity in front of a jury. Brands policing marketplaces are the fourth: minimum advertised price rules and authorized seller lists need a signed contract behind them before anyone can enforce against gray market listings.

Two edge cases deserve attention. Appointing a second distributor inside a territory you already granted can itself be a substantial change in competitive circumstances that triggers statutory notice duties, even where the contract calls the appointment non exclusive. And a reseller carrying competing lines may qualify for the fractional franchise exemption while your products stay a minor share of its revenue, an exemption that evaporates the year your line becomes its main business.

• The appointment and territory clause defines the products in scope, the geographic area and the customer classes reserved to the supplier. It states whether the appointment is exclusive, sole (you sell direct, no other reseller) or non exclusive, because courts will not read exclusivity into silence and distributors routinely argue that they had it.
• The minimum purchase commitment sets annual or quarterly volumes, the measurement period and the consequence of a shortfall. The template offers a graduated response, loss of exclusivity first and termination second, easier to defend than an all or nothing forfeiture.
• Pricing and discount terms are structured with Robinson-Patman in mind. Volume tiers sit at thresholds functionally available to every reseller in the class, promotional allowances are offered on proportionally equal terms, and the notes flag the cost justification and meeting competition defenses in 15 U.S.C. §13.
• The resale pricing clause offers a choice between a unilateral pricing policy, a minimum advertised price program limited to advertising rather than transaction price, and no restriction at all. Each option carries a state warning, since a price floor lawful under federal law can be per se unlawful under a state antitrust statute.
• Orders, delivery and payment cover purchase order mechanics, an order of precedence clause that defeats conflicting terms on the reseller's own forms under UCC §2-207, passage of title and risk of loss, credit limits and an optional security interest in stock.
• Warranties and limitation of liability give the end user warranty the reseller passes through, a conspicuous disclaimer written to UCC §2-316, an exclusive repair or replacement remedy and a cap tied to trailing purchases.
• Trademark, marketing and confidentiality license the marks for resale only, keep ownership and goodwill with the supplier, impose approval of collateral, and protect pricing data on terms aligned with a standalone mutual NDA with DTSA whistleblower notice.
• Term, termination and wind down set the initial term, renewal mechanics, notice periods for cause and for convenience, the cure period, and what happens to stock: sell off rights, repurchase at an agreed formula and removal of trademark use online.

California protects covered relationships through the California Franchise Relations Act, Bus. & Prof. Code §20000 et seq. Termination requires good cause, at least 60 days of advance notice and a cure period of no less than 60 days under §20020, while nonrenewal takes 180 days written notice under §20025. The franchise definition in Corporations Code §31005 turns on a prescribed marketing plan, use of the supplier's mark and a fee, so a tightly controlled distribution program can fall inside it. On pricing, the Cartwright Act line running from Mailand v. Burckle still treats vertical price fixing as per se unlawful.

New York has the broadest franchise definition in the country. Under the New York Franchise Sales Act, General Business Law art. 33, a relationship qualifies where there is a fee plus either a prescribed marketing plan or association with the supplier's trademark, a disjunctive test that captures arrangements the federal rule would not. Registration with the Department of Law precedes any offer in the state. New York courts also treat minimum resale price agreements as unenforceable restraints under the Donnelly Act, GBL §340.

Texas has no franchise relationship statute, so your negotiated termination clause governs, and that freedom is exactly why the drafting has to be precise. What Texas does impose is a filing: the Business Opportunity Act, Tex. Bus. & Com. Code ch. 51 excludes FTC compliant franchises from registration under §51.003(b)(8), but only if the supplier files an exemption notice with the Secretary of State before the first offer. Suppliers usually discover that one time filing after a dispute has already started.

Florida regulates the sale of the relationship rather than its ending. Fla. Stat. §817.416 applies expressly to franchises and distributorships, makes intentional misrepresentation of prospects, required investment or market saturation a criminal offense, and gives the distributor a civil claim for everything invested plus fees and costs. Overselling territory potential in a pitch deck creates exposure that no integration clause repairs. Chapter 686 adds inventory repurchase duties for agricultural, outdoor power and heavy equipment dealers.

Wisconsin surprises more suppliers than any other state. The Wisconsin Fair Dealership Law, Wis. Stat. ch. 135 covers dealerships built on a community of interest, with no fee requirement, and §135.04 demands 90 days written notice stating every reason for termination plus 60 days to cure, dropping to 10 days for nonpayment. Adding a rival distributor triggers the same notice. New Jersey works similarly through the Franchise Practices Act, N.J.S.A. 56:10-1 et seq., which reaches licensed relationships with a community of interest and a New Jersey place of business.

You start by naming the supplier and the reseller with their exact registered entity names and states of organization, because an agreement signed under a trade name is the first thing opposing counsel attacks. The form then asks whether the appointment is exclusive, sole or non exclusive and adjusts the reserved account language to match. Territory comes next, defined by states, counties, ZIP ranges or named accounts rather than loose regional labels nobody can map once the argument starts.

From there the questionnaire moves through commercial terms: product schedule, discount tiers, minimum volumes, payment terms and whether you want a security interest in the inventory. Answering the state question loads the right compliance layer, so a Wisconsin or New Jersey appointment produces longer notice and cure periods, while a Texas appointment leaves your negotiated period intact. Warranty pass through, liability cap and dispute resolution close the file. The contract downloads in editable Word and signed PDF, alongside the rest of the business contracts and incorporation documents you will need around it.

The most expensive mistake is drafting termination as if only the contract mattered. A supplier reads its own 30 day convenience clause, sends the letter, appoints a replacement, then learns the dealer sits in a protected state where the statutory notice was 90 days with a cure right that cannot be waived. The second is silent exclusivity: nobody wrote the word, the supplier sold to nobody else in the territory for four years, and the distributor now argues an implied exclusive appointment reinforced by UCC §2-306(2). The third is the copied discount grid whose top tier was reverse engineered so a single favored account could reach it, close to the fact pattern the FTC pleaded in its recent price discrimination case.

Warranty drafting fails quietly. Suppliers cap their own liability to the reseller, say nothing about the warranty the reseller gives end users, and leave the distributor promising more than it can claim back upstream. Trademark control gets neglected the same way, with no approval right over collateral and no duty to stop using the marks after termination. Do not bolt a post-term ban on competing lines onto the agreement without checking enforceability where the reseller operates, a question closer to the analysis behind a non-compete and non-solicitation agreement across the 50 states than most suppliers expect.