A selective distribution agreement is an agreement provided by a supplier limiting the number of dealers who are allowed to sell the same products in the same geographical areas.
A selective distribution agreement is designed to limit the amount of authorised dealers. Suppliers do this to maintain control over the products they sell, which helps control the prices of goods. They also use these agreements to prohibit sales to nonauthorized dealers. Certain products can only be purchased at selective retailers. Companies must be authorised dealers of a specific product to sell the goods.
These agreements are used for final products only. They are not used when manufacturing companies purchase raw goods for production purposes.
A selective distribution agreement contains the terms and conditions of the agreement. This agreement outlines purchasing rules and the scope of the contract. It contains information regarding minimum purchase requirements, prices and rules of reselling the products. It also contains the legal obligations of both parties along with early termination of contract consequences.
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