To distribute or not to distribute?

Distribution agreements are very useful to have especially if agreed terms are put in writing. However, what happens if there is an orally agreed distribution arrangement? 

If terms have been orally agreed that does not mean that an agreement between the parties does not exist… it does and terms are still binding – which of course is good news! BUT orally agreed terms can become an issue, in particular, when one party says something was agreed and the other party disagrees. It is one party's word against another.

I was involved in a recent distribution agreement dispute where terms were agreed orally. Both respective parties knew of each other for a considerable amount of time and had also enjoyed a working/professional distribution relationship in excess of 20 years. Nevertheless, when things started to go sour the relationship did not take long to breakdown and the 20+ years of working together meant nothing!

In this case there were many complexities, such as there was no written agreement between the parties the agreement had been agreed orally; the parties disputed the oral terms agreed; a variation to the original oral agreement had been agreed recently, but the variation was in writing and appeared to contain many defects; the distributor was based in one jurisdiction and the supplier was based in another jurisdiction which posed jurisdictional hurdles; and issues relating to the quantum of the claim etc.

We managed to successfully settle this case, and the client walked away extremely happy without having to issue proceedings, getting a lump sum payment, saving money on expensive litigation and time. Both the client and I were very pleased with the result.

However, the important point to note from this case is the most obvious which is the importance of written agreements regardless of the type of transaction or business relationship the parties are to enter into. I understand that sometimes when parties are in business with close friends, relatives or business contacts that they have known for a long time, it seems like getting an agreement is overkill. It, also, may be awkward to ask one another to enter into an agreement, but it is for the benefit for all the parties to have a written agreement. My client could have possibly have avoided the costs of even having to settle with the other side had an written agreement existed with all the relevant protection.

Businesses suffer more when disputes arise and there is nothing in place as to how effectively to deal with such issues. I cannot stress the importance and the advantages of written agreements … it is protecting all those involved and provides peace of mind that in the event a relationship did start going sour what to do!

Therefore, do not delay and drop me a message as it is never too late to put a written agreement in place whether this is a distribution agreement; an agency agreement; a shareholder’s agreement; or any other agreement. I can help with drafting, reviewing/advising any agreement already drafted, or any other help you may need.

Alternatively, if you are in a situation where a business relationship has broken down and you want out, but there orally agreed terms and no written agreement, then again drop me a message and together we can explore/discuss your options!

You can drop me a message on LinkedIn or email me on [email protected]

Kleyman & Co Solicitors. The full service law firm. Here to the rescue.