What does a distribution agreement cost? This is a question that distributors and manufacturers looking to form a business relationship may ask. So let’s explore this question and review some general information about distribution agreements.
How Much Does a Distribution Agreement Cost?
A distribution agreement sometimes referred to as a wholesaler agreement, is a legally binding contract between a supplying company or manufacturers with products to sell and a distributing company that markets and sells the products. In this contract, the distributor agrees to buy a product from the manufacturer and then sells the product to customers.
A distribution agreement lays out the terms and conditions of how these two companies can work together to sell a product. For example, the agreement will include information like how much product must be supplied and purchased, territory information, and exclusivity rights.
Several different distribution agreements can be used, and the kind of agreement chosen will affect the business relationship between the manufacturer and the distributor.
It is common for companies to hire a business lawyer to help determine which type of contract to use and then draft it on their behalf. However, only an experienced business attorney will know what a distribution agreement needs to include to be legally binding and protect the rights of both companies involved.
A business lawyer can also help both parties negotiate the contract terms to make sure each party is happy with the business arrangement.
Based on ContractsCounsel’s marketplace data, the average cost of a project involving a distribution agreement is $612.00.
What’s Typically Included in a Distribution Agreement
Distribution agreements cover several very important terms and conditions between manufacturers and distributors. Although the agreement will vary depending on the products and companies, standard distribution agreements will include the following basic provisions:
- Party information. The business names and addresses which are entering the agreement
- Terms and conditions of sales. The agreement should include what products are being sold, the cost, the amount of product to be supplied, and any additional financial information.
- Fee arrangement. Payment and fee arrangements vary in these agreements. Sometimes they are based on commission, and sometimes there is a set rate.
- Dated. The date the contract goes into effect and the date the contract ends if applicable.
- Exclusivity Clause. Some distribution agreements include an exclusivity clause prohibiting either party from working with other distributors or manufacturers.
- Geographic Boundaries. It is common for the agreement to include geographic boundaries in which the product will be marketed and sold.
- Severance Terms. How the contract can be ended by either party and any penalties suffered for terminating the contract early.
Distribution agreements are easily customized to fit the needs of both parties. A business lawyer can help negotiate these terms and add additional clauses as the companies see fit.
Types of Distribution Agreements
There are four common types of distribution agreements. Each serves a different purpose and has different obligations for the parties.
- Exclusive Distribution Agreement. Under this agreement, both parties agree that the distributor will give the supplier exclusive rights. This means that the distributor will not distribute similar products from other manufacturers.
- Wholesale Distribution Agreement. The wholesale distribution agreement is similar to a regular distribution agreement. However, it involves a manufacturer and distributor. The distributor agrees to sell the manufacturer's products within a particular geographic area and adhere to the terms and conditions laid out in the agreement.
- Distribution Agreement for Commission. Distributors earn compensation from commission for selling the manufacturer’s products. These agreements promote sales and business growth. The terms of commission should be laid out in the agreement.
- Developer Distribution Agreement. This agreement is used for software and application developers. The agreement will lay out specific terms and conditions of how the developers want their intellectual property distributed.
Suppose you are unsure which type of distribution agreement you should use. In that case, a business lawyer familiar with distribution agreements can help.
Examples of Distribution Agreement Projects
Distribution Agreement Drafting Service
It is common for companies involved in manufacturing or distributing products to hire an attorney to draft their distribution agreement. An attorney will know what information must be included in the agreement to protect both parties, avoid disputes, and facilitate a profitable business relationship.
In addition to drafting the agreement, an attorney can also assist a business with the following tasks:
- Negotiating terms of the agreement
- Providing legal advice
- Facilitate communication between parties
- Representation if a dispute arises
Distribution Agreement Review Service
If one party supplies the distribution agreement, the other party may hire their attorney to review the agreement before signing. Having your own lawyer ensures that your interests will be represented.
A company hires a lawyer for contract review. The lawyer will go over the contract to ensure it is fair. They can explain legal terms their client may not understand and represent their client in a dispute. Lawyers can revise the contract and communicate with the other party’s lawyer for negotiations.
Distribution Agreement Drafting Costs
Drafting a distribution agreement will come with legal fees. The party that hires the attorney will be responsible for their own attorney’s fees.
ContractsCounsel’s marketplace data shows the average distribution agreement drafting costs are $724.50 across all states and industries.
Distribution Agreement Review Cost
Review services will also incur legal fees because it takes a licensed attorney's time and legal expertise.
ContractsCounsel’s marketplace data shows the average distribution agreement review costs to be $499.50 across all states and industries.
How Do Distribution Agreement Lawyers Charge?
Hourly Rates for Distribution Agreements
Lawyers across all legal fields commonly use hourly rate fee structures. When a lawyer uses an hourly rate, they bill their client for the number of hours a case or project takes at a set hourly rate. The hourly rate should be communicated to the client before any work is done. The lawyer can also bill for any work done by their employees like paralegals or office staff.
Hourly rate fee structures allow lawyers to ensure that they are compensated for all their time working on a particular project, like a distribution agreement. Sometimes projects take longer than expected and use this fee structure so that the lawyer is covered.
ContractsCounsel’s marketplace data shows the average hourly rate for a business lawyer ranges from $200 - $350 per hour.
Flat Fee Rates for Distribution Agreements
When an attorney is hired for a specific project like drafting or reviewing a distribution agreement, they can charge the client a flat fee rate. The lawyer will estimate how much time the project will take to complete and quote the client a set rate for the entire job.
Clients prefer the flat fee rate billing structure because they know exactly what they will be paying for an attorney’s legal services. However, lawyers should be cautious using this fee structure because they want to be fairly compensated for their time.
ContractsCounsel’s marketplace data shows the average flat fee rate for distribution agreement costs to be $612.00.
Get Help with a Distribution Agreement
Do you need help with a distribution agreement project? If so, post a project in ContractsCounsel’s marketplace to receive flat fee bids from business lawyers to handle your project. All lawyers on the ContractsCounsel’s platform are vetted by our team to make sure you are provided with top tier service.