Distribution Agreement Template (2026): Territory, Exclusivity, Minimums and Reseller Terms

A brand gives a new distributor a price list and a verbal "the Southwest is yours." A year later the distributor has bought a third of the expected volume, still claims the exclusive territory, and has registered your brand as a local domain name. A written distribution agreement settles those points up front, and drafted carelessly it can also turn a simple resale deal into a franchise that federal and state law regulate.

Quick Answer

• A distribution or reseller agreement should settle six things in writing: territory, exclusivity, minimum purchase, who sets which prices, trademark rights, and how the deal ends.
• A distributor buys your goods and resells them in its own name and at its own risk. A reseller does the same, usually to end customers, often adding installation or support. A sales agent never buys; it earns commission on orders you accept.
• Exclusivity should be earned: tie it to a minimum purchase and say what happens (non-exclusive status, a smaller territory, or termination) if the number is missed.
• Upfront fees plus a trademark licence plus a prescribed way of operating can turn a distribution deal into a franchise under the FTC Franchise Rule, so check before you send the draft.

Distributor, Reseller or Sales Agent: Pick the Right Contract First

The three labels get mixed up, and courts and regulators generally look at the actual terms and conduct rather than the title.

Role	Buys the product?	Sets its own resale price?	Usually paid by	Contract
Distributor	Yes, takes title and holds stock	Yes	Margin between wholesale and resale price	Distribution agreement
Reseller	Yes, often selling to end customers	Yes	Margin, plus fees for setup or support	Reseller agreement (same template, add support terms)
Sales agent	No, you sell to the customer	No, you set the price	Commission	Sales agency agreement

In common usage a distributor sits higher in the chain, buying in bulk and selling on to resellers or retailers, while a reseller sells to end customers. If the partner only introduces buyers and never handles the sale, a referral partner agreement or an affiliate agreement is the lighter fit. If the partner will sell your product under its own brand, use white-label terms instead. And if you are buying goods from a factory rather than selling finished goods, you need a supply and manufacturing agreement.

Territory and Exclusivity

Define the territory by something checkable: states, countries, postal codes, or a named customer list. Then add the channel. "The Northeast" does not say whether the distributor can sell online to a buyer in Texas, or list your product on a third-party marketplace at all.

Use three defined levels, because the words are not standardized:

• Exclusive: only the distributor sells in the territory. You appoint no one else and do not sell there yourself.
• Sole: you appoint no one else, but you keep the right to sell directly, for example on your own website.
• Non-exclusive: you may appoint as many distributors as you like.

The usual failure is exclusivity with no performance duty. Under UCC § 2-306(2), part of the sale-of-goods law adopted in most states, an exclusive-dealing arrangement carries best-efforts obligations on both sides unless the contract says otherwise. That invites a fight over what "best efforts" meant. Write down the actual duties instead: a named account manager, a marketing plan, quarterly reporting. If exclusivity is the main term of your deal, see our exclusivity agreement template.

Minimum Purchase: The Price of Exclusivity

State the minimum in units or dollars per contract year and per quarter, for example "at least 2,000 units a year and no fewer than 300 in any quarter", and state the remedy: switch to non-exclusive, shrink the territory, or terminate. Keep any shortfall payment to a reasonable estimate of the supplier's loss, because courts in many states will not enforce a payment that looks like a penalty.

Distributors should negotiate the mechanics as hard as the number:

• a ramp-up period with lower minimums in the first two quarters;
• relief when the supplier ships late or runs out of stock;
• a reset if the supplier materially changes the price list or product line;
• forecasts and lead times that match: a 2,000-unit minimum is unrealistic if the factory needs 16 weeks to ship and the distributor can forecast only 8.

Pricing, Payment and the Resale-Price Caution

The supplier normally sets what the distributor pays: a price list or a discount off list, payment terms (say net 30), a credit limit, and the notice required for price increases (60 or 90 days is common, with accepted orders keeping the old price). Put these in a schedule so a price change does not need an amendment.

What the distributor charges its own customers is a different question. Since the Supreme Court's 2007 Leegin decision, federal antitrust law judges minimum resale price agreements under the rule of reason rather than as automatically illegal. Some states still treat them as illegal outright, and regulators scrutinize them. Safer drafting:

• Give a suggested retail price and state that the distributor sets its own prices.
• Do not make a minimum resale price, or termination for discounting, a contract term without advice from a lawyer in the distributor's state.
• Territory and customer limits are generally judged more leniently than price terms, but they are not risk-free.
• If you sell across borders, check local competition law first; several jurisdictions are stricter than the US on resale-price and online-sales restrictions.

Trademark and IP Licence

The distributor needs the right to use your name and logo to sell your product, and no more. Grant a limited, non-exclusive, non-transferable licence for the term, in the territory, for marketing and selling the products. Then add:

• No registrations. The distributor may not register your marks, business names, domain names or social handles. In many countries trademark rights go to the first party to file, so a local distributor that files first can end up owning your brand there.
• Approved materials. Advertising that uses your marks follows your brand guidelines. A trademark owner that licenses its mark without any quality control risks weakening its rights (called naked licensing), so approval rights protect you.
• Goodwill. All goodwill from the distributor's use of the marks belongs to you.
• After termination. The distributor stops using the marks and transfers brand-related domains and accounts.

The Franchise Trap

The FTC Franchise Rule (16 CFR Part 436) treats a relationship as a franchise, whatever it is called, when three things are present:

1. the buyer sells goods or services identified with your trademark;
2. you exert or have authority to exert significant control over, or give significant assistance with, its method of operation; and
3. the buyer makes a required payment to you or an affiliate as a condition of getting or starting the business.

If all three are present, the seller must give a Franchise Disclosure Document at least 14 calendar days before the buyer signs or pays, and many states add their own registration or filing rules. Payments for a reasonable amount of inventory at bona fide wholesale prices for resale do not count as required payments, which is why a plain buy-and-resell distributorship usually falls outside the Rule. Risk appears when you add:

• an upfront "territory," "onboarding" or "licence" fee, or a mandatory marketing-fund contribution;
• an operations manual, mandatory training, or prescribed hours, layout or sales scripts;
• required purchases of demo kits, signage or equipment beyond reasonable inventory.

The Rule has exemptions, including one for small total payments in the first six months (the FTC set that threshold at $735 in its July 2024 adjustment and revisits it periodically). Do not rely on an exemption without counsel: state franchise and business-opportunity laws can define "franchise" more broadly, and writing "this is not a franchise" into the contract does not change the analysis. Product quality standards are normal; controlling how the distributor runs its business is where the risk sits. If you plan to sign several distributors on the same terms, get a franchise lawyer's review first.

Term, Renewal and Termination

Set an initial term long enough for the distributor to recover its startup costs (for example 24 months) and say how renewal works: automatic one-year renewals unless either side gives 90 days' notice, or renewal only if the minimums were met. If a goods contract has no term, UCC § 2-309 generally lets either side end it on reasonable notice, and "reasonable" is what you end up litigating.

Allow termination for cause on material breach not cured within 30 days, non-payment, insolvency, misuse of the marks, or a change of control to a competitor. If you allow termination for convenience, require 90 to 180 days' notice.

Then cover what happens after: a sell-off period (for example 90 days), supplier buy-back of unsold inventory, open orders, return of customer records, warranty support for units already sold, and which clauses survive. Suppose a distributor spends $60,000 on stock, demo units and a local sales hire, and the supplier ends the deal on 30 days' notice. Without a buy-back or sell-off clause the distributor holds stock it cannot sell under the brand. One line ("Supplier will repurchase unsold, unopened Products at the price paid") prevents that. Some states also have dealer-protection laws for specific industries, such as alcohol, farm equipment and motor vehicles, that limit termination and non-renewal whatever the contract says.

Distribution Agreement Template (Copy This)

DISTRIBUTION AGREEMENT

Effective date: [DATE]

1. PARTIES
Supplier: [LEGAL NAME], a [STATE] [ENTITY TYPE], [ADDRESS]
Distributor: [LEGAL NAME], a [STATE] [ENTITY TYPE], [ADDRESS]

2. APPOINTMENT, PRODUCTS AND TERRITORY
Supplier appoints Distributor as its [EXCLUSIVE / SOLE / NON-EXCLUSIVE] distributor of the products in Schedule A (the "Products") in [TERRITORY: STATES / COUNTRIES / CUSTOMER LIST] through [CHANNELS: RETAIL / B2B / ONLINE MARKETPLACES].
Supplier keeps the right to: [SELL DIRECTLY TO NAMED ACCOUNTS / OWN WEBSITE / NOTHING].
Distributor buys as principal and resells in its own name. It is not Supplier's agent and may not bind Supplier.

3. MINIMUM PURCHASE
Distributor will buy at least [NUMBER] units or $[AMOUNT] per contract year, and at least [NUMBER] units per quarter after [RAMP-UP END DATE].
If Distributor misses a minimum, Supplier may, on [NUMBER] days' written notice, (a) make the appointment non-exclusive, (b) reduce the Territory to [AREA], or (c) terminate under Section 9. Minimums are reduced to the extent Supplier fails to deliver on time.

4. PRICES AND PAYMENT
Wholesale prices are in Schedule B. Supplier may change them on [60 / 90] days' written notice; accepted orders keep the old price.
Payment: net [30] days from invoice; credit limit $[AMOUNT]; late interest [RATE]% per month or the legal maximum, if lower.
Distributor sets its own resale prices. Supplier's suggested retail prices are not binding.
Distributor pays Supplier no fee other than the wholesale price of Products it orders. [CONFIRM WITH COUNSEL]

5. ORDERS AND DELIVERY
Orders are placed by purchase order and accepted in writing. Lead time: [NUMBER] days. Delivery terms: [SHIPPING TERMS]. Title and risk of loss pass at [POINT].

6. TRADEMARK LICENCE
Supplier grants Distributor a limited, non-exclusive, non-transferable licence, for the Term and in the Territory, to use the marks in Schedule C solely to market and sell the Products, following Supplier's brand guidelines. Materials using the marks need Supplier's prior written approval, not unreasonably withheld.
Distributor will not register or use any Supplier mark, trade name, domain name or social-media handle, or any confusingly similar one. All goodwill belongs to Supplier.

7. WARRANTY, INSURANCE AND LIABILITY
Warranty: [TERMS]. Warranty service is handled by [PARTY]. Returns follow Supplier's return process within [NUMBER] days.
Each party carries product liability insurance of at least $[AMOUNT]. Neither party is liable for indirect or consequential loss; each party's total liability is capped at [AMOUNT], except [EXCLUSIONS].

8. REPORTING
Distributor sends [MONTHLY / QUARTERLY] sales and inventory reports and complies with [EXPORT / ANTI-BRIBERY / LABELING LAWS].

9. TERM AND TERMINATION
Initial term: [NUMBER] months from the Effective date. Renewal: [AUTOMATIC ONE-YEAR RENEWALS UNLESS EITHER PARTY GIVES 90 DAYS' NOTICE / ONLY BY WRITTEN AGREEMENT].
Either party may terminate (a) for material breach not cured within [30] days of written notice, (b) immediately if the other becomes insolvent, or (c) [OPTIONAL: FOR CONVENIENCE ON [90-180] DAYS' NOTICE].
On termination: Distributor stops using the marks within [NUMBER] days and transfers brand-related domains and accounts; may sell remaining inventory for [90] days; Supplier will [REPURCHASE UNSOLD, UNOPENED PRODUCTS AT THE PRICE PAID LESS [X]% / NOT REPURCHASE]; open orders are [FILLED / CANCELLED]. Sections [LIST] survive.

10. GENERAL
The parties are independent contractors. Governing law: [STATE]. Disputes: [COURT / ARBITRATION IN CITY]. Assignment, including by change of control, needs written consent. Entire agreement; amendments in writing.

SIGNATURES
Supplier: [NAME, TITLE, DATE]
Distributor: [NAME, TITLE, DATE]
Schedules: A (Products), B (Prices), C (Marks and brand guidelines)

For a reseller agreement template, keep the same structure and add customer-facing support duties, data-protection terms if the reseller handles customer data, and a rule on who keeps the customer relationship after termination.

Common Mistakes

• Exclusivity without a minimum. The distributor holds the territory and sells nothing.
• A territory with no channel rule. Online sales into another distributor's area start disputes within months.
• Mandating a minimum resale price instead of suggesting one.
• Upfront fees, training and an operations manual with no franchise check.
• Letting the distributor register your brand, domain or marketplace listing in its own name.
• No term, no notice period, no buy-back. Either side can end the deal at a bad time, and the distributor is left with stock.
• Using one template for an agent and a distributor. Agents do not take title; distributors do not earn commission.

Draft and Sign It With AiDocX

AiDocX's AI contract generator can draft a distribution or reseller agreement from a plain-language description of the parties, products, territory, exclusivity, minimum purchase, payment terms and term. You then send it out with AI e-signature, which keeps an audit trail and lets you track who has signed. Review the generated clauses against the pricing and franchise points above before you send it. It is free to start at app.aidocx.ai.

FAQ

What is the difference between a distribution agreement and a reseller agreement?

A distribution agreement usually covers a party that buys product in volume and sells it on across a territory, often to resellers or retailers. A reseller agreement usually covers sales to end customers and often adds setup, support or customer-data terms. The same structure works for both if you adjust those terms, and the clauses, not the label, decide the legal relationship.

Can I require a distributor to sell at a minimum price?

You can suggest resale prices freely. Requiring a minimum resale price carries legal risk: federal law applies the rule of reason to it, but some states treat it as illegal outright and regulators can still challenge it. Get advice in the distributor's state before putting a minimum-price term in writing.

When does a distribution agreement become a franchise?

When the distributor sells under your trademark, you control or significantly assist how it operates, and it pays you something beyond wholesale inventory to start or continue, the FTC Franchise Rule may apply. That means a disclosure document at least 14 calendar days before signing or payment. Keep payments to wholesale prices for inventory and get a franchise lawyer's opinion if you are unsure.

Is an e-signed distribution agreement valid?

Generally yes. For transactions in or affecting interstate or foreign commerce, the federal ESIGN Act (15 U.S.C. § 7001(a)) provides that a signature or contract may not be denied legal effect, validity or enforceability solely because it is in electronic form. Keep the signed copy and the audit trail.

Ready to put your distributor terms in writing? Generate the agreement free at AiDocX and send it for e-signature.

This guide is general information, not legal advice, and distribution, antitrust and franchise rules vary by state and country, so have a lawyer review the agreement before you sign.