How to Review a Dealership Agreement: A Clause-by-Clause Checklist

How to review a dealership agreement before you sign A dealership agreement decides how much stock risk you carry, whether you control your own pricing, how long the relationship lasts, and what happens to your investment if it ends. The money clauses are supply terms, targets, territory and termination. Read those first, then work outward. The checklist below goes clause by clause. For each one, test it against the two moments that matter most: a slow quarter when you miss a target, and the day the relationship ends with stock in your warehouse. This is general information, not legal advice; for a significant dealership, have a lawyer check the final draft. ## The clause-by-clause checklist ### 1. Dealer or agent?

• Does the agreement say clearly that you buy and resell as principal, on your own account?
• Red flag: language that mixes "dealer" with "agent" or "on behalf of the supplier", which can change your tax and liability position and blur who is responsible to customers. ### 2. Territory and exclusivity
• Is the territory defined, and is it exclusive or non-exclusive? Can the supplier appoint others or sell direct into your area?
• Red flag (dealer): "exclusive" territory that the supplier can still sell into directly or online, hollowing out the exclusivity you paid for. ### 3. Supply and pricing from the supplier
• Are purchase prices, discounts, payment terms and minimum orders clear? When do title and risk pass?
• Red flag: the supplier can change prices or terms at will with no notice, leaving your margin exposed. ### 4. Your resale pricing
• Are you free to set your own resale prices?
• Red flag: a mandated minimum resale price. Resale price maintenance is a risk under section 3(4) of the Competition Act, 2002, and a floor you must not sell below is the classic example. ### 5. Targets and consequences
• Are sales or purchase targets realistic, and is the penalty for a miss proportionate (review or non-renewal rather than instant termination or a fine)?
• Red flag: steep targets tied to automatic termination or loss of exclusivity, set by the supplier alone. ### 6. Term and renewal
• How long does the agreement run, and is renewal automatic, by agreement, or at the supplier's discretion?
• Red flag: a short term with renewal entirely at the supplier's discretion, after you have invested in a showroom, stock and staff. ### 7. Your obligations and investment
• What must you build or maintain: showroom, minimum stock, service capability, trained staff?
• Red flag: heavy, specified investment with no matching security of tenure, so the supplier can walk away once you have built the market. ### 8. Non-compete
• Does the agreement bar you from handling competing products, and if so, is it proportionate and limited to the term?
• Red flag: a broad non-compete that continues after termination, which is likely an unenforceable restraint of trade. ### 9. Intellectual property and brand
• Is your right to use the supplier's trade marks clear, and limited to reselling the products?
• Red flag: vague IP terms that could make you liable for brand misuse, or that survive in a way that traps you. ### 10. Liability and warranties
• Is it clear who handles product defects and warranty claims, and that each party answers for its own acts?
• Red flag: you are made to carry warranty cost or product-liability exposure that belongs with the manufacturer. ### 11. Termination
• Is notice reasonable and symmetrical? What are the grounds for immediate termination?
• Red flag (dealer): the supplier can terminate on short notice for convenience while you are locked in, or on vague "brand reputation" grounds. ### 12. Stock on termination
• What happens to unsold stock you have bought? Is there a buy-back or sell-through right?
• Red flag: no buy-back and no sell-through period, leaving you holding stock you cannot sell once the dealership ends. ### 13. Assignment and change of control
• Can the supplier assign the agreement or does a change of control (a new owner of the supplier) change your terms?
• Red flag (dealer): the supplier can assign freely or a new owner can rewrite terms, so the brand you signed up to distribute can change hands and leave you with a different counterparty. ### 14. Governing law and disputes
• Is the forum fair and convenient, and is arbitration or court specified?
• Red flag: an exclusive forum far from your base that makes disputes uneconomic. ## Read it in this order Do not review a dealership agreement top to bottom. Start with supply terms and your resale pricing (clauses 3 and 4), because they decide your margin. Then read targets, term, renewal and termination together, because they decide your security. Then check stock buy-back and your up-front investment side by side, because that is what you stand to lose on exit. Only then look at the housekeeping of IP, warranties and forum. Reading in that order keeps the clauses that protect your investment at the front of your mind, not buried in a long schedule of obligations. ## A quick note on the law A dealership is principal-to-principal: the dealer buys and resells and the supplier is generally not liable for the dealer's customer dealings, unlike agency under the Indian Contract Act, 1872. Pricing and exclusivity terms can engage the Competition Act, 2002, judged on a rule of reason, with resale price maintenance a specific risk. Rules differ by jurisdiction, so for the UK, Ireland, Singapore, Australia or the US, check local competition and distribution law. This is not legal advice. ## Where a contract workspace helps Reviewing one dealership agreement by hand is manageable. Reviewing many across a network, and then living with them, is where things slip: catching a minimum-price term that risks competition law, tracking targets and renewal windows, and remembering stock buy-back obligations on exit. Drafting, reviewing, tracking and governing dealership agreements can sit in one AI workspace tuned to how your network operates. Adira is one such single-workspace tool.