Distribution agreements play an important role in both domestic and international trade. It allows for manufacturers to deliver their goods to broad markets through the collaboration of a distributor for the marketing and distribution of its goods to a market that it would only be able to reach at a greater cost. Some trace the origins of this contract to Germany, to beer distribution agreements between brewers and wholesalers, and from wholesalers to retailers. To this date, distribution agreements are not governed by any specific statute in Mexican Law, therefore fall within what would be categorized as an “atypical” contract. There however, some scant provisions in various bodies of law (tax, consumer protection, labor, intellectual property, competition) that impact these agreements, but nothing that is substantial in nature.
General Description of the Agreement’s Contents
Under a distribution agreement, a manufacturer of goods appoints a distributor to distribute his goods within an assigned territory. The economic purpose of this contract is to allow the manufacturer to sell his goods in a territory, without incurring in substantial expenses on his behalf. The manufacture relies on the distributor, who has (or should have) knowledge of the local market, contacts with local commercial networks, and resources, such as warehousing, and means of transportation.
This contract is distinguishable from an agency agreement. In an agency agreement, the agent acts on behalf of the principal to obtain purchase orders from buyers in the territory in which he is acting. Though not an employee, the agent acts on his principals behalf and there is a closer relationship between the two. In a Distribution agreement, the manufacturer and the distributor are separate entities. A distributor will purchases goods from the manufacturer and resell them at an agreed upon margin, and on his own behalf. The Distribution agreement may be either exclusive or non-exclusive.
Clauses Typically Found in Distribution Agreements
The typical contents of a Distribution agreement are:
Other matters that are worth considering are local standardization laws, in Mexico, Norma Oficial Mexicana, or that they may be subject to prior approval before the which are official government standards to which goods and services must adhere to for the safety of the consumer, which may include, inter alia, that the label information be in Spanish, among and that they meet certain requirements, which are good-specific to ensure that the goods are saleable in the local market, and that their introduction does not imply the violation of any laws where the goods are to be distributed.
These notes are not intended to be a substitute to legal consultation. If you have any comments or suggestions, do not hesitate to contact me.
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