Our company has several regular clients in Germany, but the order quantity of everyone is not large. Since last year, the business of a new client has grown fast. Recently he asked us to grant him the qualification of a distributor. We also feel that there is no problem. However, this client proposes to sign an exclusive distribution agreement with us for the exclusive distribution of our products in Europe. Should we agree with it?
Before signing exclusive sales or exclusive agency agreement, you must understand the impact of these agreements. If you give a company exclusive distribution rights, all your goods sold to Europe must pass through it. Then you cannot supply the goods directly to your regular client. For domestic manufacturers, signing an agreement means exclusive distribution protection. This client may be more active in operating these products, perhaps making the market bigger. But there is another possibility. After signing the agreement, although you have given him a lot of support, his business has not improved much. The price is also low, but you can only sell through him. In this case, you may miss some development opportunities.
When signing the agreement, the responsibilities and rights of both parties should be clearly defined. If you grant them exclusive distribution rights, he should also give you equal preferential terms. This means that they can’t make inquiries with others. Unless you can’t offer these products, they can only be supplied by you.
The exclusive distribution agreement should agree on the number of sales per year or the growth rate of the business. clients cannot enjoy rights without fulfilling obligations. As for the validity of the agreement, you should not agree on a long validity period when signing for the first time. You can stipulate that if the cooperation goes well, the agreement can be (automatically) extended to the next year after confirmation by both parties.
Relatively, German clients are more rigorous. Once they sign the agreement, they will be seriously implemented. But you should be careful when signing this agreement with the Indo-Pakistani people. You should beware of the pitfalls of asking for a price cut after signing the contract.
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