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The distribution agreement is a contractual document between a supplier and the distributor that defines the requirements and terms of marketing an item or a product. This type of document works best for companies with limited sales forces because it eliminates the need to hire additional employees. Once a company enters into a distribution agreement, and depending upon the terms of the agreement as they vary by industry, the distributor assumes the risk for selling the product to retailers or to final endusers. Typically, distributors bound to nonexclusive distributor agreements can carry products from competing companies. Nonexclusive agreements tend to be preferred by companies and opposed by distributors because companies want to evaluate distributor performance before committing to exclusivity. Distributors counter with the claim that territory development is too costly without an exclusive agreement. The agreement frequently stipulates that the distributor will not handle products of the company's competitors as well. Exclusive agreements are typically found in hightech industries that involve sophisticated products requiring considerable product knowledge, expertise and extensive market development costs, such as costly medical equipment. Exclusive agreements are also common in luxury products, such as highend automobiles. The inexperienced person might be unaware of mistakes written into the agreement until it is too late. The best and easiest way to avoid costly mistakes is to obtain a copy of a distribution agreement commonly used within the industry. A good source for an industryspecific standard agreement is the industry trade association or the industry distributor association. The standard agreement should serve as a point of departure to adjust and modify according to the company's and the distributor's or both parties' requirements.

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