MEDP 299.XX Hunter College at the City University of New YorkPosts RSS Comments RSS

Beverage Distribution Agreement

Too often, however, brewers accept a distributor`s “standard” agreement and, when the relationship breaks down, the supplier finds that they remain stuck without a viable possibility of termination. The best practice is to hire an experienced lawyer to negotiate the terms of the distribution contract. While even the best lawyer cannot evade the laws of the state franchise (which generally prohibit a trader from waiving his rights), there are ways in which a lawyer can help balance the relationship between suppliers and distributors. The main terms of negotiation include termination, territory, brand range and exclusivity. While rights cannot be shared by the brand under a distribution agreement (as in the case of the Maryland Beer Franchise Act), some states may still allow a supplier to enter into contracts with more than one distributor within the same territory. If this is allowed in its state, a brewery should ideally conclude all its distribution agreements for a given territory at the same time and inform each distributor. The brewer should at least ensure that the first agreement is explicitly characterized as non-exclusive. Otherwise, the distributor may consider the agreement as an exclusive right in the territory and sue the brewery for reducing the distributor`s activity if it hired a second distributor in the territory. Relationships between manufacturers and distributors of craft beverages begin and develop over time. They`re growing up.

They`re maturing. Sometimes they degrade. They ended up perishing. External factors regularly increase the pressure on the distributor and manufacturer of craft beverages who request a change to the dealer agreement after a 30-day period. If the agreement allows for changes later this year, there are few problems. However, if the agreement allows for changes only once a year, one or both partners must face undue pressure until the agreement can take such an annual change into account. The best distribution agreements allow for changes during the year. Slapstick now knows that a distribution contract must clearly state the responsibilities and obligations of both parties during the term of the contract, in the event of termination and after the formal termination of the contract. The distribution agreement defines the responsibilities of both parties during and after the duration of the agreement. Distributors have argued for exclusive territory, as without them, the distributor is not encouraged to provide adequate resources for distribution development for the producer. Distributor franchises can be exclusive and there is no other distributor that takes franchises in the territory; or not exclusively, where the new distributor could be one of several distributors that are franchised in the territory. Although this seemed reasonable from the outset, Slapstick learned that the allocation of an exclusive distribution in a region constituted an unnecessary leap of faith, without a proven balance sheet justifying such a monopoly.

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