A distribution agreement is one of the most common and strategic instruments in commercial relations, ensuring the movement of goods from the manufacturer to the end consumer. In the context of globalization, Georgian companies enter foreign markets or introduce foreign brands to Georgia specifically through this legal mechanism. A distribution agreement is not merely an act of buying and selling products; it is a long-term partnership regulating marketing, logistics, intellectual property, and competition issues. A properly drafted agreement protects parties from financial risks, ensures stable market penetration, and creates a predictable business environment.
Distribution relationships are often complicated because they involve "vertical restraints" (such as exclusivity or price regulation), which are strictly regulated areas of competition law. Improperly drafted clauses can be declared void or lead to heavy fines from regulatory bodies. Furthermore, in international distribution, determining which country's law applies and where disputes will be resolved is crucial. Specialists registered on Legal.ge offer full legal support in preparing and negotiating distribution agreements, ensuring the protection of your commercial interests.
What does the Distribution Agreement service cover?
- Definition of Exclusivity and Territory: Distinguishing between "Exclusive," "Sole," and "Non-exclusive" rights and precisely establishing territorial boundaries.
- Compliance with Competition Law: Reviewing the agreement against the Law of Georgia on Competition to rule out prohibited agreements.
- Intellectual Property Protection: Outlining rights and restrictions regarding the use of trademarks, brand names, and know-how.
- Supply and Payment Terms: Correct selection of Incoterms rules, payment deadlines, credit limits, and allocation of currency risks.
- Product Quality and Warranties: Rules for returning defective products, warranty periods, and limitations of liability.
- Marketing Obligations: The distributor's obligation to advertise and the manufacturer's support with promotional materials.
- Termination and Compensation: Conditions for early termination, stock repurchase, and potential compensation for "goodwill indemnity."
Common scenarios requiring this service
One of the most common scenarios is the entry of a foreign electronics or fashion brand into Georgia. A local company wants to obtain "exclusive distributor" status to protect its investment in marketing. At this time, it is critical to stipulate that the manufacturer cannot simultaneously introduce products through other channels. Another scenario is the export of Georgian wine or agricultural products to the EU. A Georgian producer needs guarantees that the foreign partner will meet a Minimum Sales Target. A third case involves software distribution (Reseller Agreement), where specific licensing conditions must be considered.
Georgian Legal Framework
Distribution relationships are regulated by the Civil Code of Georgia, which establishes general contractual principles, although it does not contain a specific chapter on "Distribution Agreements." Therefore, analogies from service, mandate, and sales norms are used. The Law of Georgia on Competition is paramount, prohibiting certain types of restrictions in vertical agreements (e.g., resale price maintenance). Additionally, for international contracts, the UN Convention on Contracts for the International Sale of Goods (CISG) is often applied unless excluded by the parties. Regarding intellectual property, the Law of Georgia on Trademarks is relevant.
Step-by-step service process
The process begins with an audit of the parties' commercial interests (what is the goal: rapid market penetration or maintaining a premium segment?). Then, a primary draft of the agreement is created, detailing the territory and product list. During negotiations, the lawyer defends the client's positions regarding risk allocation (e.g., currency exchange rate changes, force majeure). Before signing, the contract is checked for compliance with antitrust legislation. The final stage is activating mechanisms for monitoring agreement performance (reporting, audits).
Why choose a specialist on Legal.ge?
A distribution agreement is not a template document; it requires an individual approach and knowledge of business sector specifics. Lawyers featured on Legal.ge possess deep knowledge of international commercial law and logistics. They will help you create a legal framework that not only protects your interests in case of a dispute but also fosters a successful and long-term commercial relationship.
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