Appointing a Distributor? Here’s What Your Agreement Needs to Cover

You have built a product that works.

Now you want to get it into more hands, more markets, more regions — without building the logistics, the sales team, and the local presence from scratch.

The solution is a distributor: a business that buys your product and resells it to their own customers.

Distribution agreements unlock market reach.

But they also create relationships where your product, your brand, and your pricing are in someone else’s hands.

Getting the agreement right is not optional.

What Is a Distribution Agreement?

A Distribution Agreement is a contract between a supplier (the business that manufactures or supplies the product) and a distributor (the business that buys and resells it in their own name, at their own risk).

Unlike an agent, who sells on your behalf and earns commission, a distributor takes ownership of the product and sells it independently.

This means the distributor carries the stock, the client relationship risk, and the resale pricing decisions — within the boundaries your agreement sets.

What Does a Distribution Agreement Cover?

A properly drafted Distribution Agreement addresses all the key commercial and legal terms:

Products — exactly what products the distributor is authorised to sell

Territory — the geographic region, market segment, or channel the distributor operates in

Exclusivity — whether the distributor is your only channel in that territory, or whether you can appoint others

Pricing and margins — the price at which you supply to the distributor

Resale price maintenance — caution: fixing the price at which distributors can sell to their customers is restricted under South African competition law; your agreement should address pricing in a compliant way

Minimum purchase obligations — volume commitments that justify exclusivity

Marketing and brand obligations — how the distributor may (and may not) use your brand

Intellectual property — protecting your trade marks, packaging, and product IP

Returns and warranties — how defective product is handled

Confidentiality — protecting pricing structures, client lists, and trade secrets

POPIA — if the distributor shares customer data with you, appropriate data-sharing provisions are required

Term and termination — how long the agreement runs and what happens on exit, including to existing stock

Why a Competitor Clause Matters

Distribution agreements must be careful around competition law.

Under the Competition Act, provisions that fix resale prices or divide markets in ways that harm competition can expose both parties to significant liability.

A legally sound distribution agreement draws the line between legitimate brand control and unlawful price fixing.

Who Needs a Distribution Agreement?

Any business that sells its products through third-party distributors needs a signed agreement before stock changes hands.

This is equally true whether you are a manufacturer appointing a regional distributor, a software company licensing through a channel partner, or a brand appointing a wholesale distributor.

Learn More

Learn more about the Distribution Agreement on the Contracts4Biz website.

Drafted by SchoemanLaw Inc. — covering all essential commercial provisions, South African competition law requirements, and POPIA data-sharing obligations in plain, practical language.

Protect your product, your brand, and your distribution channel from day one.