How To Draft A Distribution Agreement In Australia

If you’re ready to expand your sales without building an in-house sales team in every location, working with a distributor can be a smart move.

But before you start shipping stock (or handing over access to your product and brand), you’ll want a clear distribution agreement in place. This document is what keeps your commercial relationship running smoothly - and it’s often what protects you when things don’t go to plan.

In this practical guide, we’ll walk you through what a distribution agreement is, when you’ll typically want one, and the key clauses Australian small businesses should think about before signing.

What Is A Distribution Agreement (And Do You Really Need One)?

A distribution agreement is a contract between a supplier (often you - the brand owner, manufacturer, or wholesaler) and a distributor (the business that buys and resells your products, usually to retailers or customers).

In plain terms, it sets out:

• what products the distributor can sell
• where and how they can sell them
• the pricing and ordering rules
• the responsibilities each side has
• what happens if someone breaches the deal (or wants to end it)

You’ll usually want a distribution agreement any time you’re relying on a distributor to represent your products in the market - especially where the relationship involves:

• repeated orders (not a one-off purchase)
• ongoing marketing and promotion of your products
• exclusive territories (e.g. “you’re our only distributor in NSW”)
• use of your branding (logos, product images, marketing materials)
• commercial risk (returns, warranty issues, chargebacks, product recalls)

Without a written agreement, your relationship is still likely to be governed by general contract principles - but you lose the clarity (and leverage) that comes with having the “rules of the game” documented from day one.

Distribution Agreement Vs Agency Agreement: What’s The Difference?

This is one of the most common points of confusion.

• Distributor: generally buys stock from you (often at wholesale prices) and resells it at their own margin. They are usually selling “on their own account”.
• Agent: generally sells on your behalf and earns a commission. The agent doesn’t typically buy the stock - they facilitate sales between you and customers.

Why does this matter? Because the legal risk, payment flows, and control you have are different. The contract should match the commercial reality - and the words you use (“distributor”, “agent”, “reseller”) should be consistent throughout the document.

Before You Draft: Key Commercial Decisions To Make First

A strong distribution agreement is built on clear business decisions. If you try to draft the contract before you’ve agreed on the commercial fundamentals, you’ll either end up renegotiating mid-draft or signing something that doesn’t actually reflect what you intended.

Before you start drafting, ask yourself (and your distributor) these questions.

Is The Arrangement Exclusive Or Non-Exclusive?

Exclusive distribution means you won’t appoint another distributor in the same territory/channel, and it may also limit your own direct sales into that territory/channel unless you specifically carve that out (for example, direct online sales through your own website, or supply to existing key accounts).

Non-exclusive distribution gives you flexibility to sell through multiple distributors or direct-to-consumer.

Exclusivity can be attractive for growth (a distributor may invest more if they have exclusivity), but it needs guardrails. If you give someone exclusivity and they underperform, you can end up stuck.

What Territory And Sales Channels Are Covered?

“Territory” isn’t just geography. It can also cover sales channels like:

• online marketplaces
• pharmacies/health stores
• corporate/bulk supply
• speciality retail

If you don’t define this carefully, you can end up with channel conflict - for example, your distributor selling online at discounted prices while you’re trying to protect premium retail partners.

Who Handles Marketing, Branding And Customer Support?

Many distribution disputes start with mismatched expectations:

• You expect the distributor to actively market the product.
• The distributor expects the product to “sell itself”.

Decide what marketing activity is required (if any), whether the distributor can create their own materials, and what brand guidelines they must follow.

How Will You Manage Forecasting And Stock Availability?

Distribution deals can break down when stock planning isn’t aligned. You’ll want to consider:

• minimum order quantities (MOQs)
• lead times
• forecasting obligations (e.g. monthly forecasts)
• what happens during supply shortages

Even if you’re a small business, putting a simple, workable process in your agreement can save you a lot of time later.

Key Clauses To Include In A Distribution Agreement

There’s no “one size fits all” distribution agreement in Australia, but there are core clauses that most small businesses should think about. Below are the main ones, with practical guidance on what they do and why they matter.

1. Products (And Product Changes)

This section should clearly identify what products are covered (SKUs, ranges, product categories) and whether you can add or remove products over time.

If your products change (new packaging, discontinued lines, updated formulations), your agreement should deal with:

• how you notify the distributor
• sell-through of old packaging
• who pays for obsolete stock

2. Ordering, Delivery And Risk

You’ll usually want to cover:

• how orders are placed (email, portal, purchase orders)
• when an order becomes binding
• delivery terms (including lead times)
• who bears the risk of loss/damage in transit
• what happens if delivery is delayed

Clarity here reduces disputes like “we never confirmed that order” or “the courier damaged the shipment, so we’re not paying”.

3. Pricing, Payment Terms And Late Payments

Distribution relationships are ongoing - and cashflow is often the pressure point.

Your distribution agreement should set out:

• wholesale pricing (or how pricing is calculated)
• how and when you can change prices
• payment terms (e.g. 7 days, 14 days, 30 days from invoice)
• whether interest or fees apply to overdue invoices

If you offer rebates, promotional pricing, or volume discounts, it’s worth documenting the rules clearly so the distributor can’t claim entitlements that were never agreed.

4. Distributor Obligations (What You Expect Them To Actually Do)

This is where you set performance and conduct expectations.

Common distributor obligations include:

• actively promoting the products
• maintaining appropriate storage conditions (especially for regulated or perishable goods)
• not doing anything that damages your brand reputation
• maintaining licences/permits relevant to the product category
• providing periodic sales reports

If you’re granting exclusivity, it’s common to include minimum performance requirements (e.g. minimum purchase volumes, minimum sales targets, or minimum active accounts).

5. Brand Use And Intellectual Property

Your distributor will often need to use your logo, product photos, brand name, and marketing copy to sell your products. That’s fine - but it should be controlled.

This part of the distribution agreement typically covers:

• a limited licence to use your brand for the purpose of selling the products
• rules about how the brand can be displayed
• approval requirements for marketing materials
• what happens to brand use when the agreement ends

If you haven’t already, it’s also worth thinking about how your brand is legally protected (for example, trade marks). The agreement can’t “create” IP rights that don’t exist, but it can help you enforce your position commercially.

6. Marketing, Advertising And Pricing Controls (Including Resale Pricing Risks)

You might want your distributor to maintain a premium positioning, avoid deep discounting, or follow suggested retail pricing (RRP). But in Australia, certain types of price control can raise competition law issues.

While it’s common to include suggested pricing and brand guidelines, you should be careful about any clause that effectively forces the distributor to sell at or above a minimum price (sometimes referred to as resale price maintenance).

If pricing control matters to your brand, it’s worth getting the clause drafted carefully so it protects your commercial goals without creating compliance issues.

7. Warranties, Returns And Australian Consumer Law (ACL)

If your products are ultimately sold to consumers, Australian Consumer Law (ACL) will often affect how refunds, replacements and warranties need to be handled - and in many cases those consumer guarantee obligations can’t be excluded or limited by contract.

A distribution agreement should clearly allocate responsibilities for things like:

• consumer refunds and replacements
• faulty product handling
• return processes and return shipping costs
• product recalls
• customer complaints and escalation pathways

This is a practical risk-management step. You don’t want a distributor promising customers outcomes that don’t align with your policies - and you also don’t want to be left funding every return scenario by default.

8. Compliance And Product Standards

Depending on what you sell, you may have extra regulatory compliance considerations (for example, labelling rules, safety standards, import requirements, or industry-specific regulations).

Your agreement can require the distributor to comply with relevant laws and cooperate with you on compliance steps - including providing documentation, tracking batches/lot numbers, and reporting issues.

9. Confidentiality

Distributors often gain access to sensitive information like:

• supplier pricing and margins
• customer lists
• sales data
• product roadmaps and launch plans

Your distribution agreement should include confidentiality obligations (and ideally specify what is confidential and what isn’t), plus how long confidentiality obligations last after termination.

10. Term, Renewal And Termination

This is one of the most important parts of any distribution agreement because it affects your ability to pivot if the relationship isn’t working.

Common points to cover are:

• initial term: e.g. 12 months, 24 months, or ongoing
• renewal: automatic renewal vs renewal by agreement
• termination for convenience: can either party terminate without breach, with notice?
• termination for cause: what breaches allow immediate termination?
• cure periods: does the distributor get time to fix a breach?

If you’re granting exclusivity, your termination rights (and performance triggers) matter even more.

11. Post-Termination: What Happens To Stock, Customers And Branding?

When distribution relationships end, it can get messy quickly - especially if the distributor has stock, customers, or marketing campaigns mid-flight.

Your agreement should deal with:

• sell-off periods (can they keep selling existing stock for a limited time?)
• buy-back options (will you repurchase stock, and on what terms?)
• removal of branding and marketing materials
• return or destruction of confidential information

This is also where you can protect against situations like a former distributor continuing to present themselves as “authorised” after the relationship ends.

12. Dispute Resolution

No one signs a distribution agreement expecting a dispute - but it’s wise to plan for it.

Many agreements include a stepped process, such as:

• good faith negotiation
• senior escalation
• mediation
• court proceedings as a last resort

Having a process can reduce legal costs and keep commercial relationships intact where possible.

Common Mistakes Small Businesses Make With Distribution Agreements

Even if you’ve worked with distributors before, it’s easy to fall into “template thinking” or focus only on price and territory.

Here are some common pitfalls we see for Australian small businesses.

Giving Exclusivity Without Performance Measures

Exclusivity can motivate distributors, but without targets or minimums, it can also lead to stagnation.

If exclusivity is important to the deal, tie it to clear performance obligations and give yourself a pathway to remove exclusivity (or terminate) if the distributor underperforms.

Not Defining Who Owns Customer Relationships

Distributors often have the direct relationship with retailers or end customers.

Your agreement should clarify what data you receive (e.g. sales reports, customer details), and what happens if the relationship ends (for example, whether you can contact those customers directly).

Being Vague About Returns, Defects And Recalls

When something goes wrong with products, everyone wants a quick answer to: “Who pays?”

Put a clear process in writing, including timelines, evidence requirements, and cost allocation. This is especially important if the distributor is handling storage and logistics.

Using The Wrong Legal Document

Sometimes businesses use a generic “supplier agreement” or “terms of sale” when the relationship is actually a long-term distribution arrangement. That can leave big gaps around territory, brand use, marketing, and termination.

Other times, the relationship is closer to an agency model - and the contract doesn’t reflect that, which creates risk (particularly around representations to customers and control of sales).

Related Legal Documents You Might Need Alongside A Distribution Agreement

A distribution agreement is often one part of a larger legal setup - especially if you’re scaling.

Depending on your business model, you might also consider:

• Terms of trade: if you are supplying goods on credit or want consistent payment and delivery terms for wholesale buyers, Terms of Trade can help set expectations.
• General terms for selling goods: if you’re also selling directly (B2B or B2C), Sale of Goods Terms can cover ordering, delivery, and risk for those transactions.
• Online store terms: if you sell direct-to-consumer online, Online Shop Terms and Conditions can help align your checkout rules, delivery policies, and customer expectations.
• Privacy compliance documents: if you collect customer data (even via email lists or website analytics), a Privacy Policy is commonly needed.
• Website rules: if you host product info, downloadable materials, or portals for distributors, Website Terms and Conditions can help set the rules for using your site.
• If you have co-founders or investors: clarifying decision-making and ownership early via a Shareholders Agreement can reduce internal disputes as you scale your distribution network.

Not every business will need all of these. The key is to make sure your documents work together - so you don’t have, for example, customer-facing refund rules that conflict with what your distributor is promising the market.

Key Takeaways

• A distribution agreement sets the rules for how your distributor can buy, market, and resell your products, and it’s one of the best ways to prevent costly misunderstandings as you grow.
• Before drafting, get clear on the commercial basics: exclusivity vs non-exclusivity, territory and channels, pricing and payment terms, and who handles marketing and customer support.
• Strong distribution agreements usually cover product scope, ordering and delivery, risk and title, pricing, brand use, compliance, confidentiality, and clear termination rights.
• Exclusivity should be tied to performance requirements, so you’re not locked into a distributor who isn’t actively growing your market.
• Returns, defects, and ACL-related issues should be addressed upfront, including who handles customer complaints and who pays for what.
• A distribution agreement often sits alongside other documents like Terms of Trade, Sale of Goods Terms, Online Shop Terms and Conditions, Website Terms and Conditions, and a Privacy Policy.

If you’d like help drafting or reviewing a distribution agreement for your small business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.