Sample Format of Dealership Agreement

Narendra Kumar

05 May, 2018

A dealership agreement is a legal document that outlines the terms of the contract between a distributor or a vendor and a dealer.

What is Exclusive Dealership Agreement?

An exclusive dealership agreement in which limiting the parties in their transactions with regard to the goods and services they provide. It binds the parties for a specific time period wherein neither party can make similar deals with each other’s competitors. It can specify a good, service, market, or territory. For example, exclusive dealing between the parties for a particular class of cars in a particular city or Petrol Filling Stations deals with only one petroleum supplier.

What is the Difference between Dealership Agreement and Distributor Agreement?

The primary difference between Dealership Agreement and a Distributor Agreements is the parties involved in the Agreement.

A distributor agreement involves the manufacturer and a distributor, while a dealership agreement is between a distributor or a vendor and a dealer.

The scope of both agreements also varies. Distributors are often assigned territorial rights, which may stretch across one or several states, while dealers typically limit their operations to the city or a local community. The investment involved in Distributorship is considerably more than the Dealership. Both distributors and dealers rely on each other. The structure is such that distributors are wholesalers who buy from manufacturers and provide to dealers, whereas the dealers obtain products from the distributors and sell to the public.

What Constitutes the Dealership Agreements?

A dealership agreement typically include

1. Purpose of the agreement
   • Details of the good involved in the transaction
   • The territory of the dealer’s operation
2. Tenure of the Agreement
   • Maybe an indefinite period
   • If a specific time period then, provision and terms of renewability
3. The obligation of the parties, which may include
   • Duties of the distributor to provide a percentage of capital for staff
   • Duties of the dealer to complete the procedure of initiating the dealership within a specific time period.
   • Dealer to not hold back promotion of goods supplied by the distributor
4. The procedure of supply and return of goods
   • Dates of delivery of goods
   • Return of defective goods
5. Promotion and training
   • Regular training to be provided to an employee of the dealers
   • Material for promotions to be provided to the dealer
   • Discounts and deals to be conveyed with brochures to the dealer
6. Invoices and the mode of payment
   • The time period of the invoices
   • Penalties of any to be levied upon late payment or otherwise
   • Payment period- monthly, quarterly or otherwise
7. Any restrictions upon the parties
   • Restrictions upon transactions with any competitors
   • Prices of goods, it can be altered by the dealer while selling goods to the final customer
   • Territorial restrictions
   • Exclusive dealership or not
   • Assignment, delegation by the dealer if allowed
8. Termination of the dealership
   • Notice period
   • Settlement of accounts upon termination
9. What terms shall survive the terminated agreement
10. The scope of appointment of sub-dealers, agent
11. The manner in which notices to be served to the parties and on what address
12. Waiver clause for any future breach of the terms by either party or failure on part of the dealer
13. Details of warranties provided on the goods by the Manufacturing companies.
14. Confidentiality Clause, dealing with business transactions, the technical data, the customer lists, the sales practices, the operational procedures, and practices etc
15. Clause for modification of the agreement, if any allowed
    • Which terms may be amended
    • Which terms may be removed
    • If any terms may be added
16. Governing laws and Jurisdiction in case of dispute
17. Dispute resolution procedure to be resorted to in case of an altercation between parties

To know more information visit us at Enterslice.