[] Exclusive Distributorship Agreement – Key Insights for Drafting
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WEON 작성일24-11-11본문
Hello, I’m Attorney Kyusung Lee from Weon Law.
Did you know that many companies prefer exclusive contracts when doing business with Korean partners?
By establishing an Exclusive Distributorship Agreement, you can secure a stable sales channel during the contract period and prevent competitors from intervening in the market. Although such agreements may initially seem advantageous, they are not without potential drawbacks. Due to the "exclusive" nature, a supplier might face unfavorable terms imposed by the other party, putting them in a weaker position during payment negotiations.
International exclusive distributorship agreements, in particular, carry the potential for international disputes. Therefore, careful drafting and preparation for potential conflicts are essential.
An Exclusive Distributorship Agreement grants exclusive rights for the sale and distribution of specific products. The supplier provides products and services exclusively to the distributor, who in turn makes payment.
The primary reason for entering such an agreement is straightforward: suppliers gain stable revenue through a long-term contract, while distributors benefit from maximizing profits with minimal costs.
Tips for Drafting a Cross-border Exclusive Distributorship Agreement
As with any contract, but especially with international exclusive distributorship agreements, it’s crucial to clearly define the rights and obligations of both parties. It’s equally important to consider the laws and customs of each country involved.
When companies from different nations engage in transactions, particular care must be taken to address jurisdiction, dispute resolution, and each country’s legal requirements.
Here are the essential provisions that should be included in an Exclusive Distributorship Agreement:
< Basic Provisions >
Purpose and Term of the Agreement
Specify the agreement's purpose and duration. The contract should define the applicable market and territory and detail how the exclusivity will be exercised during the contract period.
Termination and Cancellation Clauses
Define comprehensive termination and cancellation terms according to both national laws and international regulations, ensuring clarity on these conditions.
Performance Bond
Outline provisions for a performance bond to ensure compliance with the agreement.
Payment Terms
Describe payment methods in detail, including currency type, exchange rate adjustments, and international remittance methods, all crucial aspects of international trade.
Date of Agreement
Include the contract date and the location where the agreement was made.
Signatures of the Parties
The signatures confer legal validity to the document, making this element essential.
< General Provisions >
Product Name and Type
List the names and types of goods and services according to international standards.
Quantity and Supply Method
Specify the quantity and supply method, including logistics, customs, and import-export regulations.
Sales Territory
Define the countries and regions where exclusive distribution will take place.
Penalty for Delays
Set penalties for delays, aligning with national contract laws and international trade regulations.
When in need of notarization, for the case of domestic agreements, both parties typically sign and obtain joint notarization. However, in cases with foreign companies, simultaneous notarization may not be feasible. In such instances, only the domestic company may obtain notarization in a format that enhances contract reliability and enforces the terms, reducing the risk of legal disputes.
An exclusive distributorship agreement can help secure stable transactions and strengthen credibility in international trade. Careful review and detailed drafting of the terms are crucial, making it beneficial to seek legal assistance throughout the process.
Attorney Kyusung Lee at Weon offers comprehensive services for English-language contracts in international transactions, from drafting to review and translation for doing business in Korea or litigation in Korea.
With my assistance, you can prepare essential documentation for global business accurately and efficiently.
Contact
Kyusung Lee, Partner Lawyer
Email: kslee@weonlaw.co.kr
Tel: +82 2 6264 7604