Suppliers supply and distributors distribute - a regular blog

August 31, 2018

Use it or lose it

Many of us can reflect with hindsight on the opportunities lost. The position in respect of distributorship agreements is no different.

When a written distributorship agreement is prepared, it invariably contains a number of duties to be undertaken by supplier and distributor alike. The contractual provisions which set out these duties are there for a purpose – to ensure the best performance by each party in what is, for obvious reasons, a relational arrangement. The better the distributor does, the better the supplier does and vice versa.

All too often, however, the duties are not performed. There can be good reasons. For example, what was envisaged as necessary at the outset of the relationship proves not to be the case as the agreement progresses. It can also be the case that seeking the performance of a specific provision is less of a priority than others.

However, where such a situation arises it can morph into one where the conduct of supplier and distributor changes the agreement between them. 

This has implications.

First, what was not a priority today, may be a priority tomorrow.

Second, if the agreement between the parties has been varied on this issue, are their other issues which have also been varied?

The danger with the second point is one of demonstrating that there have been no other changes. In short, a claim that a distributorship agreement has or has not been varied can so easily give rise to a dispute between supplier and distributor.

What then is to be done?

The textbook tells us that the parties should not allow this type of situation to develop. In other words, the supplier and distributor should each ensure full performance of the distributorship agreement by the other party. 

The textbook is not very practical! 

Back on planet earth, following a couple of approaches can reduce the possibility of lack of performance and dispute. 

First, for a supplier to accept the pressure of prioritisation and focus on those provisions which are important. Second, for the distributor to determine if the requests of the supplier change what is contractually required and when.

In a perfect world, each party would then keep a record of their varied distributorship agreement. But, it is not a perfect world, and instead, email traffic may be the best alternative eventually available to lawyers!

But in any event, for suppliers and distributors to remind themselves of the maxim “use it or lose it”, may be the best incentive to avoiding disputes.

Let Steve know your own views on this blog article by contacting him here. You can also find Steve on Twitter, here.


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Stephen Sidkin
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