Many manufacturers sign their first European distribution contract after reading the price, the territory and the headline conditions — but not the clauses that decide what happens later.
That is usually where the trouble starts.
Exclusivity Clauses
An exclusive contract can sound like a win: one partner, one market, no competition among resellers. But exclusivity without performance targets can become a trap. The distributor receives a protected territory, while the manufacturer has no clear mechanism if the market is not developed.
A workable exclusivity clause should be connected to measurable performance: minimum annual volume, market activity, reporting, or a 12-month review.
Minimum Purchase Commitments
If there is no annual commitment, there may be no real commitment at all — only an option the distributor can activate when convenient.
The exact number depends on the product category, country and margin structure. But the principle is simple: a serious distribution agreement should define what minimum activity or purchase volume is expected, especially if territory protection is granted.
Termination Terms
This is one of the clauses manufacturers often underestimate.
How long is the notice period? What happens to stock? What happens to open orders? Can the distributor claim compensation? Does the manufacturer have the right to terminate if the distributor does not perform?
In some European jurisdictions, termination can also raise questions about notice periods, goodwill, or compensation — especially where the distributor has built market value over time. This should be understood before the agreement is signed, not after the relationship has failed.
Price Protection
Who carries the cost if the manufacturer changes the price list during the contract period? What happens to existing stock, confirmed orders or long sales cycles?
Without a clear clause, the answer may depend on negotiation power rather than business logic.
"If this distributor does nothing for 12 months, what happens? If the honest answer is 'nothing — the contract just continues,' the agreement needs work before it needs a signature."
This is one of the areas EBDT reviews before a manufacturer enters its first European distribution agreement. We do not replace legal counsel. We help manufacturers identify the commercial traps and practical questions that should be clarified before the lawyer finalizes the contract.
Not sure what your distribution contract is missing?
EBDT reviews distribution agreements for the commercial traps a standard template will not catch — before the lawyer finalizes the contract.