Merchandise Distribution Agreement

What is a Merchandise Distribution Agreement?

A merchandise distribution agreement, sometimes also called a distributor agreement, is a document between two parties, a supplier and a distributor. The supplier (or manufacturer) is the party that supplies or sells the goods to the distributor. The distributor is the party that distributes or resells (at retail or through other distributors) the goods that the supplier provides. The distributor may transfer the goods to retailer so they can sell it to the end-user.

What must a Merchandise Distribution Agreement contain?

The most important details of the relationship between the parties will be set out in a distribution agreement, including a description of the goods sold, how and when the distributor is expected to pay, whether the agreement is exclusive, the penalties for early termination. A contract for the distribution of goods also covers what happens in the event of a problem, such as dispute resolution.

Dispute resolution is a mechanism used by the parties to avoid having to go through the expensive court system using alternative means such as mediation or arbitration.

What is the difference between a Merchandise Distribution Agreement and a Sale of Goods Agreement?

The primary difference between a Merchandise Distribution Agreement and a Sale of Goods Agreement is that in a Merchandise Distribution Agreement, the distirbutor is an intermediary between a supplier and end customer or retailer. On the other hand, in a Sale of Goods Agreement, the seller directly sells to the purchaser who receives ownership to the goods. In a Merchandise Distribution Agreement, ownership may still rest with the supplier until such goods are sold to the end-user.

Who can enter into a Merchandise Distribution Agreement?

The distributor and supplier signing the agreement may be:

• Individuals: a group of individuals may sign the agreement.
• Corporations: corporations can sign a merchandise distribution agreement. The agreement can also be mixed with an individual and corporation as the signers.
• Other: other entities may sign, such as a trust or a franchise.

The signers to the contract must be at least majority age and not under a disability. The ages of majority are as follows:

• Alberta, Manitoba, Ontario, Prince Edward Island, Quebec, Saskatchewan: 18 years old.
• British Columbia, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Yukon: 19 years old.

What is the duration of a Merchandise Distribution Agreement?

The duration of a merchandise distribution agreement may vary. The duration can be open-ended with the parties agreeing on when to terminate or cancel their agreement. The agreement can also be for a fixed-term such as 5 years or until a certain event has been satisfied. The duration of the contract is flexible and is based on the parties' needs.

What has to be done after a Merchandise Distribution Agreement is ready?

After a merchandise distribution agreement is ready, the parties will need to sign it either electronically or physically. Each party will need to keep a copy of the signed agreement for their records. They should upload the signed agreement to a personal computer. Once the parties start implementing the agreement, the distributor may need to establish distribution channels and organize inventory with systems of protection in place. All transactions should be properly accounted for and recorded.

Which laws are applicable to a Merchandise Distribution Agreement?

Merchandise distribution agreements are governed by specific statutes including consumer protection law, antitrust law, and potentially intellectual property and franchise law. Some pieces of legislation on consumer protection include the following:

• Ontario: Consumer Protection Act, 2002, S.O. 2002, c. 30, Sched. A and the Sale of Goods Act, R.S.O. 1990, c. S.1
• Alberta: Consumer Protection Act, RSA 2000, c C-26.3 and the Sale of Goods Act, RSA 2000, c S-2
• British Columbia: Business Practices and Consumer Protection Act, SBC 2004, c 2 and the Sale of Goods Act, RSBC 1996, c 410
• Manitoba: Consumer Protection Act, CCSM c C200 and The Sale of Goods Act, CCSM c S10
• Saskatchewan: The Consumer Protection and Business Practices Act, SS 2013, c C-30.2 and The Sale of Goods Act, RSS 1978, c S-1
• Quebec: Consumer Protection Act, CQLR c P-40.1
• New Brunswick: Consumer Product Warranty and Liability Act, SNB 1978, c C-18.1 and the Sale of Goods Act, RSNB 2016, c 110
• Nova Scotia: Consumer Protection Act, RSNS 1989, c 92 and the Sale of Goods Act, RSNS 1989, c 408
• Prince Edward Island: Consumer Protection Act, RSPEI 1988, c C-19 and the Sale of Goods Act, RSPEI 1988, c S-1
• Yukon: Consumers Protection Act, RSY 2002, c 40 and the Sale of Goods Act, RSY 2002, c 198
• Nunavut: Consumer Protection Act, RSNWT (Nu) 1988, c C-17 and the Sale of Goods Act, RSNWT (Nu) 1988, c S-2
• Northwest Territories: Consumer Protection Act, RSNWT 1988, c C-17 and the Sale of Goods Act, RSNWT 1988, c S-2
• Newfoundland and Labrador: Consumer Protection and Business Practices Act, SNL 2009, c C-31.1 and the Sale of Goods Act, RSNL 1990, c S-6

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