Distribution Partnerships · B2B sales

When do we need to hire a lawyer?

Cynthia Koenig Founder and CEO, Wello

August 18th, 2015

our company getting a lot of interest from distributors, and we're in the early stages of negotiations with a few. (we sell consumer goods targeted towards rural base of the pyramid consumers)

we're looking for examples of sample distribution agreements to use as a template, but not finding much online

are distribution agreements usually very custom (should we expect to work with a lawyer to develop our own template) or do agreements tend to be boilerplate?

would anyone be willing to share an example we can use as a reference?

thanks!

Glenn Donovan Vice President of Sales (fractional)

August 19th, 2015

Cynthia - First of all, congratulations on building a successful business it must be so exciting to have interest from distributors. Answers to your questions:

1. A distributor agreement is a binding contract between both parties so it's best to have a lawyer review it, but it is not a necessity. In fact, you could do this just via email if you choose to. The question is how well that agreement will stand up in court if there is a dispute, so I'd rather have something like this be well crafted.

2. Are they stocking distributors or are you fulfilling the orders they take? Huge difference in the risk, obviously. If they are not stocking, they are really just sales agents and the agreement will be much simpler. I have a sales agent agreement I could share with you, but it's oriented to repping cloud services so I'm not sure it would fit.

Send me an email at [removed to protect privacy] if you'd like a copy of the sales agent agreement. UPDATE: I'm new here and didn't realize I couldn't leave an email. Send me a message via Founder Dating if you'd like to take a look at the sales agent agreement I mentioned. 

And good luck!

Scott Milburn Entrepreneurial Senior Executive and Attorney

August 18th, 2015

Cynthia, speaking as both a lawyer and an entrepreneurial business person, I'd say it is worth spending the money for a few hours of a lawyer's time to get you a great agreement that you will use with all distributors. Templates are a good start, but they are general and you want something customized for your business. So, find a lawyer (raises hand ;) ) with whom you can find a template you like, make the modifications that make sense to you, and then have the lawyer review it and revise it to make it better and more fitting for your business. It is money well spent to end up with a great contract, in case things don't turn out so well with a distributor down the road.

Carlton Chen Business Lawyer and Business Development Professional Intersecting M&A, Strategic Alliances and Technology Transfer

August 19th, 2015

Scott offers sound, practical advice. A distributor agreement will need to address reps/warranties, a description of the products, pricing (including price adjustments), terms of payment and shipping, confidentiality, breach, indemnification, etc., as well as additional terms that are customary and usual in the trade and/or unique to your deal. So, 2 things: retain the services of a lawyer experienced with these types of transactions at the get-go but, before you do, think about these deal issues and come prepared to discuss with your lawyer how you might want to handle them in the agreement.

Juan Zarco Managing Director, Silicon Valley Ventures Growth Partners llp

August 20th, 2015

Being a lawyer myself within startups or fast growing companies, I always concerned myself with legal costs when employing outside counsel. First, I always have this rule -- if the other side employs an attorney, you must do it undoubtedly.  By nature, lawyers take sides and tend to be adversarial.  They wil try to eke out as many advantages on any deal to show to the client how well they did.  (Look what Tom Brady did with the NFL. It shows that when NFL hired its lawyer, Wells, I knew that the report would side with the NFL.  Wells sided with its client, the NFL. Now that Brady picked his own counsel and a new forum, he can win.  Good strategy.)  Second, hire lawyers like you hire doctors.  Last thing you want is a lawyer learning at your dime. You need a lawyer who knows contracts, distribution agreement in your space.  You have every right to samples of  previous work and representative clients. I have my misgivings if he claims he has done everything.  I have been around the block too long working with lawyers throughout the U.S. and internationally. And I can tell whether that lawyer is qualified.  Again, Brady picked a good lawyer who knew the Second Circuit and NFl labor rules.  That is how he can win.