How to Review a Distribution Agreement (2026 Checklist)

How to review a distribution agreement A distribution agreement lets a distributor buy a supplier's products and resell them in a territory. Unlike an agent, a distributor takes title to the goods and resells on its own account, taking the margin and the stock risk. Reviewing the agreement means checking the commercial terms, the balance of obligations, and the exit, whichever side you are on. This checklist goes clause by clause. It is general information, not legal advice; distribution touches competition law, so get specialist advice for anything significant. Know which role you are. A supplier wants reach, control, and the ability to switch distributors. A distributor wants a protected territory, time to build the market, and fair treatment on exit. Read every clause from your side. ## The review checklist ### 1. Products and territory - Exactly which products are covered, and can the supplier add or withdraw products?

• The territory, and whether it is defined by geography, channel, or customer type.
• Can the supplier sell directly into the territory, or reserve certain customers? ### 2. Exclusivity - Is the distributor exclusive (only it may sell there), sole (supplier may also sell but not appoint others), or non-exclusive?
• Does exclusivity cover online sales, and can the distributor sell outside its territory passively? Exclusivity is the most valuable term to a distributor and the one most likely to raise competition-law issues. ### 3. Appointment and resale - Can the distributor appoint sub-distributors or dealers?
• Any restriction on which customers it can serve.
• Whether the distributor can carry competing products. ### 4. Pricing and payment - How the distributor buys: price list, discounts, and how prices can change.
• Can the supplier set or cap the distributor's resale prices? Fixing resale prices is restricted or illegal in many markets, so watch this closely.
• Payment terms, currency, credit limits, and security over stock. ### 5. Minimum purchase targets - Are there minimum purchase or sales targets?
• What happens if the distributor misses them: loss of exclusivity, or termination? This is a common trap for distributors. ### 6. Obligations - Supplier: supply, lead times, product support, warranty, and marketing support.
• Distributor: promotion, stock levels, service, reporting, and after-sales. ### 7. Intellectual property and branding - The licence to use the supplier's trademarks, and the limits on it.
• Who owns goodwill and any local registrations or domain names the distributor creates.
• Rules on marketing materials and brand standards. ### 8. Product liability and warranty - Who is responsible if a product is defective or causes harm.
• The warranty passed to customers and who bears its cost.
• Indemnities and required insurance. ### 9. Term and termination - The term and renewal.
• Termination grounds and notice periods.
• Post-termination: run-off sales, stock buy-back, and return of materials. ### 10. Termination compensation - In some jurisdictions a distributor (and especially an agent) may be entitled to compensation or an indemnity on termination by law, even if the contract is silent or says otherwise. Check this carefully; it can be a large, unexpected liability for a supplier. ### 11. Governing law and disputes - Governing law and forum, which matter a lot in cross-border distribution, and whether mandatory local rules override the chosen law. ## Red flags to stop on - Fixed resale prices or absolute bans on passive cross-border sales, which can breach competition law.
• Minimum targets with automatic termination and no cure.
• A supplier right to sell directly into an exclusive territory, quietly undercutting the distributor.
• Silence on termination compensation where local law grants it.
• Unclear ownership of goodwill and local brand registrations.
• A short term that does not let a distributor recover its market-building investment. ## Jurisdiction points to check - Competition law. Vertical agreements are regulated. In the EU, the Vertical Block Exemption Regulation shapes what territory and pricing restrictions are allowed; resale price maintenance and bans on passive sales are generally prohibited. Many countries have similar rules.
• Mandatory termination protections. Some civil-law and Middle East jurisdictions give distributors statutory compensation on termination that cannot be contracted out of. India has no such general statute, so the contract governs, but confirm.
• Trademark and registration. Branding use should be controlled, and local trademark registration in the distributor's name should be prevented. Mark anything uncertain as "to verify with local counsel". ## Reviewing a distribution agreement in one place Reading each clause from your side, marking the one-sided terms, checking the pricing and exclusivity against competition law, and tracking what the other side agreed to change are all manual tasks. They can live in one AI contract workspace. A tool like Adira opens a document and flags positions clause by clause as favourable, neutral, or unfavourable to you, surfaces risky terms such as resale-price restrictions or a missing termination plan, lets you ask for changes in plain English, and keeps a timeline of every version. The point is simply that reading, marking, and tracking a distribution agreement do not have to be three separate jobs. This article is general information, not legal advice.