Reading task.2. Read the extract from a distribution agreement and answer these questions: 1) What are the seven key areas of agreement this extract covers? What is a quick way of finding out information like this? 2) Words starting with a capital letter indicate they are specifically defined somewhere in the contract, usually in the Definitions Clause (not shown in this extract). Which such words can you identify in Clause 1?
DISTRIBUTION AGREEMENT
This Agreement is made on [date] by and between [Company A] (the Manufacturer), a company incorporated in [country] and having its registered office at [address], and [Company B\ (the Distributor), having its registered office at [address]. The parties hereto agree as follows: 1) APPOINTMENT AS DISTRIBUTOR The Manufacturer appoints the Distributor as its exclusive distributor for [product range] (the Products), more specifically described in the Schedule for the Term of this Agreement and all renewals thereof, and grants to the Distributor the right to perform all those services in [country or region] (the Territory) with respect to the Products as are normally performed by a manufacturer’s stockist, distributor and exclusive sales representative. 2) TERM This Agreement shall commence on [date] and shall be for THREE (3) years (the Initial Term). Thereafter, the Agreement shall be renewed annually and automatically, unless written notice of termination is provided by either party at least SIX (6) months prior to the end of the then current contract year. 3) DISTRIBUTION RIGHTS AND DUTIES a) The Distributor shall have exclusive distribution in the Territory for the Products. The Manufacturer shall refer all orders from the Territory to the Distributor and such orders shall be fulfilled by the Distributor. b) The Distributor shall provide warehousing services for all the Products, and shall promote their sale, process orders, collect payment and ship to customers. 4) SHIPMENT OF PRODUCTS a) Risk of loss of or damage to any consignment of the Products shall pass to the Distributor from the time the Products are delivered to the Distributor’s shipping agent. b) The Manufacturer shall bear the cost of delivery of the Products to the Distributor’s shipping agent. Upon receipt of the Products, the Distributor shall arrange and bear the cost (including insurance cost) for the Products to be unloaded, stored and shipped to the Distributor’s own warehouse, c) The Manufacturer shall ensure that the packing of the Products meets industry standards or such other specifications as may be agreed in writing by the parties and that the Products arrive in good condition at the Distributor’s shipping agent. In the event of any defective Products being received, the Manufacturer is obliged to accept their return for replacement or repayment at the invoiced price. 5) ADVERTISING, PROMOTION AND PRODUCT INFORMATION a) The Distributor shall include each Product distributed by it in accordance with this Agreement in all its appropriate catalogues, brochures, advertisements and exhibitions for which the Distributor shall deem such Products appropriate. b) The Distributor shall also at its sole discretion use its own mailing lists to promote the Products. 6) PAYMENT Products supplied by the Manufacturer shall be handled under the following terms: a) The Distributor agrees to purchase its stock from the Manufacturer at x% discount off the Manufacturer’s domestic list price. b) The Manufacturer shall invoice the Distributor in US dollars on 180 days’ credit terms and all payment shall be made by the Distributor in US dollars. 7) RETURNS The Manufacturer agrees at its sole discretion to accept returns of up to 10% of unsold Products based on the annual turnover of the Distributor with the Manufacturer. Any unsold Products mustbe in saleable condition to be acceptedby the Manufacturer. The Distributor has to bear all the related expenses incurred in returning the Products to the Manufacturer’s warehouse.
3. Read the extract again and say whether these statements are true (T) or false (F). Correct the false ones. 1) Both manufacturer and distributor must state what their official registered business address is. 2) The country or region where the distributor has rights to sell the manufacturer’s products is referred to as the Territory. 3) The heading to Clause 2, Term, has the same meaning as in terms and conditions. 4) Rights for distribution of the products in the agreed territory can also be given to other distributors. 5) The distributor must pay for the products to be delivered from the manufacturer to the distributor’s shipping agent. 6) If the manufacturer delivers faulty products, then the manufacturer must replace them or repay the price stated on the invoice. 7) The manufacturer will tell the distributor where to advertise and promote the products. 8) The manufacturer must take back any products not sold by the distributor.
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