Suppliers supply and distributors distribute - a regular blog, October 2019

October 31, 2019

But on what terms?

The terms in question are those of the supplier. All too often a distributorship agreement will:

  1. fail to refer to the supplier’s terms and conditions of sale; or
  2. conflict with the supplier’s terms and conditions of sale; or
  3. highlight that the supplier does not have terms and conditions of sale!

The consequences for the supplier can be all pervasive.

Usually the ideal starting point is for the distributorship agreement to provide that the supplier’s terms and conditions of sale in force from time to time shall apply to all sales by the supplier to the distributor under the distributorship agreement. Even better if a copy of the supplier’s terms and conditions of sale is scheduled to the distributorship agreement and it is made clear that these are the terms and conditions of sale that apply to sales made by the supplier to the distributor.

But if the supplier fails to refer to its terms and conditions of sale in the distributorship agreement, there will then be a question of the supplier seeking to ensure that orders received from the distributor are accepted on the basis that the supplier’s terms and conditions of sale apply. A failure to properly incorporate the supplier’s terms and conditions of sale can impact issues such as:

  • when payment is to be made by the distributor to the supplier;
  • what is to happen if goods are delivered late, defective, or of a quantity which fails to meet the quantity agreed to be supplied;
  • the law to be applied to the dispute (for example, the law of the country in which the supplier carries on business); and
  • how the dispute is to be resolved (for example, through the courts (and, if so, which ones) or arbitration or some other dispute resolution mechanism).

Sometimes the situation arises where the provisions of the distributorship agreement conflict with those of the supplier’s terms and conditions of sale. The quickest way of resolving the issue is to specify that in the event of a conflict between the two X is to prevail. 

Whether X is the distributorship agreement or the supplier’s terms and conditions of sale is a matter of choice for the supplier (as the distributorship agreement is usually prepared by the supplier). What is critical is that whatever the choice, the supplier ends up with the provisions (whether in the distributorship agreement or the terms and conditions of sale) which best suit the supplier.

If, however, the supplier does not have terms and conditions of sale, the choice is narrower. The provisions found in terms and conditions of sale can be built in to the distributorship agreement.

But if they are not and the supplier proceeds nevertheless, the question should be asked – does the supplier have a death wish?


Related pages:

Agency, Distribution and International Trade more

Distributor Law more


For more information

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Stephen Sidkin
Partner
Direct dial: +44 (0)7788 148 537
slsidkin@foxwilliams.com

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