Distribution Agreement in Singapore

As an entrepreneur, whether you are buying or selling, you need to create a distributor agreement – which is a legal document between a supplier and distributor. It grants the distributor the right to resell the provider’s products or services. In today’s digital world these agreements are more common, especially in online stores that sell a range of brands.

In a distributor agreement, it’s important to understand the following essential terms

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• Important to determine if the distributorship is an exclusive one or not (i.e whether the distribution has the sole right to sell the products within a particular territory).
• Tension may arise where other distributors start approaching the supplier with more competitive terms so it will be useful to agree on how such situations will be addressed.

• Even if an exclusive distribution is secured, the supplier and distribution may wish to agree on a strategy to address parallel imports.
• Whilst parallel imports are prima facie not illegal in Singapore, this is a common cause of tension in distributorship agreements.

• The distributor should be given a license to use the IP for a limited period.
• One strategy in addressing parallel imports is to allege IP infringement in respect of non-authorised dealers.

• Instagram, Facebook, and other social media platforms have become popular platforms for influencers to sell their products.
• If this is a channel of distribution, it is important to specify what support will be given when consumers have questions about the product or whether the distributor is an authorised dealer or not.

• Some common points of negotiations around supplier duties are
  1. after-sales support
  2. product liability coverage and
  3. payment terms

• Some common points of negotiations around distributor duties are
  1. minimum purchase obligation
  2. restrictions on the sale of competing products and
  3. budget on marketing campaigns

• Important to define the initial period of the distribution agreement, as well as the process for renewing the distribution agreement.
• Some suppliers tend to ‘jump ship’ or enter the territory directly after the distribution has invested substantial marketing efforts in the products.

• To set a clear process for the termination of the distributor agreement (whether for cause or without cause).

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