The Legal Nature of Supply and Distribution Agreements
Supply and distribution agreements in Georgia are built on the general rules of sale contained in the Civil Code. Under a contract of sale, the seller must transfer to the buyer the ownership of property, hand over the documents related to it and deliver the goods, while the buyer must pay the seller the agreed price and accept the purchased property. A supply agreement is a repeated application of this model: a single document governs multiple obligations to deliver goods over time, while a distribution agreement adds the functions of placement, promotion and market representation. Every core issue that arises in a sale must therefore be regulated precisely in these agreements, because the general sale rules supply the default framework against which the parties' arrangements operate.
Price and the Means of Its Determination
The obligation to pay the price is the centre of the supply relationship. The buyer must pay the seller the agreed price and accept the purchased property. A direct statement of the price in the contract is not always necessary: where the price is not directly indicated, the parties may agree on the means of its determination. In distribution practice this opens the way to price formulas, indexation mechanisms or periodic supply price lists. The determination mechanism must nevertheless be drafted so that no room for dispute remains between the parties: the more precisely the price-setting rule is fixed, the more reliable the payment schedule and the lower the risk of delayed settlement. Where prices change over a long cooperation, the contract should state who communicates changes, by when, and from which delivery they apply.
Partial Deliveries and Refusal of the Contract
The defining feature of a supply agreement is delivery of the goods in parts, and it is precisely here that an important protective norm applies. Under Article 486 of the Civil Code, where sold goods are delivered in parts, if as a result of the non-performance of a single delivery obligation by one party a real danger arises that future delivery obligations will also not be performed, the other party may refuse the contract. This means that a single default does not by itself entitle the buyer to terminate the cooperation, but where the default genuinely shows that the supplier will be unable to perform future deliveries as well, refusal of the whole contract is permitted by law. Before taking such a step, a party should assess carefully whether a real danger exists, because a groundless refusal may itself become a breach of the contract and shift liability onto the refusing party.