Contract guide
Distribution and Supply Agreement (Durable Goods) — What to Include
A distribution and supply agreement sets terms for selling durable goods through a distributor. Learn what to include for orders, delivery, warranties, and exit.
Written and reviewed by Talking Tree's legal team · Last reviewed September 2026
A manufacturer forecasts production while a distributor promises delivery dates to customers. If their agreement leaves order commitments, defective products, or unsold inventory unresolved, both businesses can be exposed. A Distribution and Supply Agreement connects the commercial relationship to the practical movement of goods.
What Is a Distribution and Supply Agreement (Durable Goods)?
A Distribution and Supply Agreement governs the supply of products to a distributor and the distributor's right to market and resell them. Durable goods include equipment, appliances, furniture, and other products intended for repeated use. The agreement should distinguish a distributor buying for resale from an agent authorized to negotiate on the supplier's behalf.
When Do You Need One?
- You sell physical products through regional or industry distributors
- You are taking on an ongoing supply commitment
- The relationship includes territory rights or minimum purchases
- Products require installation, warranty service, replacement parts, or recall coordination
What Should a Distribution and Supply Agreement (Durable Goods) Include?
1. Products and Appointment
Identify covered products, specifications, territory, customer segments, and sales channels. State whether the appointment is exclusive and whether the distributor can appoint subdistributors.
2. Forecasts and Purchase Orders
Distinguish nonbinding forecasts from firm orders. Define acceptance, lead times, minimum quantities, cancellations, and which terms control if a purchase order conflicts with the agreement.
3. Pricing and Payment
Set wholesale prices, discounts, taxes, currency, credit terms, and price-change notice. Explain when revised pricing applies to accepted orders and allocate freight or tariff changes explicitly.
4. Delivery, Title, and Risk
Name delivery locations, shipping responsibilities, and when risk of loss and title transfer. If using Incoterms, specify the rule, version, and named place; separately address ownership and payment terms.
5. Inspection and Nonconforming Goods
Set inspection periods, rejection procedures, evidence requirements, and return authorization. Address hidden defects and remedies without assuming an initial inspection resolves every later issue.
6. Warranties and Service
Define product warranties, exclusions, repair or replacement procedures, and who supports end customers. Specify installation responsibilities, spare-parts availability, and handling of discontinued products.
7. Branding and Sales Practices
Grant the limited rights needed to use approved names and materials. Address product claims, marketing approvals, compliance, and competition-law review of exclusivity or resale restrictions.
8. Safety, Recalls, and Insurance
Require prompt sharing of safety complaints and traceability records. Assign recall coordination, regulatory communications, costs, insurance, and responsibility for third-party product claims.
9. Performance and Exit
Set measurable purchase or service targets, review periods, and cure rights. Explain treatment of open orders, remaining inventory, customer warranties, and brand use after termination.
Common Mistakes Founders Make
Granting exclusivity without performance conditions. Define the territory and targets, then provide a practical remedy if the distributor does not perform.
Treating forecasts as firm orders. Production planning and purchase obligations need separate language.
Ignoring post-termination inventory. Decide whether there is a buyback, sell-off period, or return right before either party needs to exit.
Why This Matters for Founders
For durable goods, the relationship continues after delivery through warranties, spare parts, and customer support. A strong agreement accounts for that full lifecycle and helps keep a channel dispute from becoming a customer-service failure.
For a broader collaboration beyond product resale, see the Strategic Partnership Agreement.
Frequently Asked Questions
What does a distribution and supply agreement cover?
The supply and resale of products, including appointment rights, orders, pricing, delivery, quality, warranties, and termination.
Should forecasts be binding?
The agreement should explicitly say whether forecasts are estimates or commitments and when an order becomes binding.
What happens to inventory after termination?
That depends on the agreed buyback, return, or sell-off provisions, which should also address continuing warranty obligations.
Legal and Practical Context
Exclusive arrangements can raise competition concerns depending on market conditions and their effects. Review broad restrictions before committing a sales channel. FTC guidance on exclusive supply or purchase agreements.
This guide focuses on common U.S. business considerations. Requirements and enforceability depend on the jurisdiction and the facts of the arrangement.
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This page is for informational purposes only and does not constitute legal advice. For advice specific to your situation, consult a licensed attorney.