Distribution agreement: a guide to dealer agreements (2026)

What is a distribution agreement?

A distribution agreement (forhandleraftale), also called a dealer agreement, is a legal agreement between a manufacturer or supplier (the principal) and an independent dealer (the distributor) who sells the principal's products or services to end customers.

The distributor acts in their own name and for their own account. This distinguishes the distributor from a commercial agent, who acts on the principal's behalf and does not bear the sales risk themselves.

Distribution agreements are central in:

• Retail and wholesale: brand suppliers and retail chains
• Software and IT: resellers and distributors of software and hardware
• Medical and pharma: distribution of medical products
• Food and drink: distribution of brands to restaurants and supermarkets
• Machinery and industrial equipment: sales via regional dealers

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Distribution agreement vs. agency agreement

A classic question: what is the difference?

Aspect	Distributor	Commercial agent
Acts in	Own name	Principal's name
Bears sales risk	Yes	No
Buys goods from the principal	Yes	No
Remuneration	Margin	Commission on sales
Legal basis	Contracts Act, Sale of Goods Act, etc.	Commercial Agents Act
Termination indemnity	Not statutory (but can be agreed)	Yes, statutory in many cases

Important: A commercial agent is protected by the Commercial Agents Act and in many cases has a right to an indemnity on termination of the agreement. A distributor as a rule has no statutory claim to an indemnity unless it is agreed. Make sure the agreement clearly establishes the parties' role to avoid uncertainty.

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What must a distribution agreement contain?

1. The parties

• The principal's full name, CVR number and address
• The distributor's full name, CVR number and address
• Contact persons for the agreement relationship

2. The subject of the agreement

State precisely which products or product categories the distribution agreement covers:

• A product catalogue with specified item numbers or categories
• Are future products automatically included, or is a supplementary agreement required?
• Which versions, models or brands are included?

The more precisely you define the product scope, the fewer disputes about the extent of the agreement.

3. Geographic territory

State the distributor's geographic coverage area:

• Country, region, postcode area or specific municipalities
• Does the agreement also cover online sales? (and to which geographies?)
• Is there an obligation to actively work the territory?

The definition of the territory is decisive for whether the distributor has exclusivity or not.

4. Exclusivity, exclusive or not?

This is one of the most important points in any distribution agreement.

Exclusive distribution agreement:

• The principal does not sell directly in the territory
• The principal does not give other distributors the right to sell in the territory
• The distributor is typically obliged to a minimum volume or intensive sales work
• The principal can require the exclusivity revoked if the minimum sales requirements are not met

Non-exclusive agreement:

• The principal can have several distributors in the same territory
• The principal can sell directly to customers in the territory

Selective distribution:

• The principal chooses distributors based on objective criteria (for example service level, training, location)
• Often used for luxury products and technically complex products

Competition-law attention: Exclusivity clauses can be problematic under EU competition law (TFEU art. 101 and the Commission's vertical guidelines). If your market shares are significant (over 30%), you should consult a lawyer.

5. Purchase prices and payment terms

• List price or cost price plus a margin basis
• Discount structure: volume discounts, campaign discounts
• Payment deadline: 30, 60 or 90 days?
• Payment terms: net cash or with a cash discount?
• Currency risk: who bears the risk of currency fluctuations?
• Delivery terms: Incoterms (Ex Works, DDP, CIF, etc.)

6. Minimum sales obligation

For exclusive agreements, a minimum sales volume (MSV) is important:

• State the minimum turnover or number of units per quarter/year
• What happens if the minimum sales are not met? (The option to make the exclusivity non-exclusive, termination, etc.)
• When is the MSV revised (typically annually)?

7. Marketing and branding

• Who pays for marketing activities in the territory?
• What branding requirements apply? (logo use, product exposure, display requirements)
• Is the distributor allowed to use the principal's trademarks, logos and product photos?
• Is there a co-marketing budget?
• Who approves marketing material?

Trademark licence: Use of the principal's trademarks is technically a licence. Make sure the agreement or an appendix governs this clearly.

8. Product knowledge, training and service

• Is the distributor obliged to undertake product training?
• Who pays for training and certification?
• What are the requirements for the distributor's service capacity?
• Does the distributor provide warranty service? On what terms?

9. Non-compete clause

Many distribution agreements contain:

• A non-compete during the agreement: the distributor may not sell competing products
• A non-compete after the agreement: the distributor may not sell competing products for a period after the agreement ends

Important limitation: Under the EU vertical block exemption, a non-compete after the agreement is as a rule only covered by the exemption if it does not exceed 1 year (and is limited to what is necessary). A non-compete during the agreement of more than 5 years is also not covered by the block exemption.

10. Complaints and returns

• What is the complaint deadline for the distributor's claims against the principal?
• Can the distributor return goods? Under what conditions?
• Who bears the freight on returns?
• What happens to obsolete stock at the end of the agreement?

11. Duration and termination

• Duration: fixed-term (1 to 3 years) or open-ended?
• Notice period: typically 3 to 12 months with reasonable notice
• Grounds for termination: Can the agreement be terminated immediately on bankruptcy, breach or a change of ownership?
• What happens to the order book? Can the distributor keep ongoing orders?
• What happens to the stock? Is the principal obliged to buy it back?

12. Choice of law and dispute resolution

• State that Danish law applies
• State the venue (typically the court at the principal's home, or the Maritime and Commercial Court)
• Consider arbitration for international agreements

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Exclusivity in practice: what may the principal do?

With an exclusive distribution agreement, the principal is typically prevented from:

• Selling directly to customers in the territory
• Appointing other distributors in the territory

But be aware that certain sales are typically not covered by the distributor's exclusivity:

• Sales to public institutions (state and municipal tenders)
• Sales via the principal's global key-account structure
• Online sales via the principal's own website (depends on the agreement)

These exceptions should be described explicitly in the agreement to avoid disputes.

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Distribution agreements and EU competition rules

Distribution agreements with exclusivity and non-compete clauses are subject to EU vertical competition rules. The Commission's block exemption regulation for vertical agreements (Regulation (EU) 2022/720) exempts agreements when:

• The principal's market share does not exceed 30%
• The distributor's market share does not exceed 30%
• Non-compete obligations during the agreement do not exceed 5 years
• There is no resale price maintenance (RPM)

If the market shares exceed 30%, an individual assessment is required. Contact a competition-law adviser.

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Distribution agreement vs. agency agreement: when which?

Choose a distribution agreement when:

• The distributor invests in stock and bears the sales risk
• You want arm's length to the end customer
• The distributor has strong local market knowledge and existing customer relationships
• The product is standardised and does not require a close principal-to-customer relationship

Choose an agency agreement when:

• The principal wants control over the end customers
• The sale requires the principal's direct involvement (offers, contracts)
• You want one clear price and contract structure towards all customers
• You plan to build a network of agents rather than distributors

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Typical mistakes in distribution agreements

1. An unclear product scope What happens when the principal launches new products? Are they automatically covered by the agreement? State it explicitly.

2. A lack of minimum sales requirements An exclusive distribution agreement without an MSV gives the distributor exclusivity without an obligation. That is rarely what the principal wants.

3. Online/offline conflict What applies to online sales? Can the distributor sell via its webshop? Can other distributors sell online in the territory? State it clearly.

4. An unclear procedure for stock on termination What happens to the distributor's stock on termination? Is the principal obliged to buy it back? At what price?

5. A missing trademark licence The distributor uses the principal's logo and product photos, but there is no licence in the agreement. This creates potential IP problems.

6. A post-term non-compete of more than 1 year A non-compete of 2 to 3 years after the agreement ends is very likely outside the block exemption and thus problematic under competition law.

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Create your distribution agreement with LegalDock

With LegalDock you create a legally correct distribution agreement, adapted to Danish law and EU competition rules, without spending days on legal research.

Our template covers all the central elements:

• Territory definition and exclusivity
• Minimum sales obligation
• Price terms and payment terms
• Non-compete clauses
• Termination and exit terms

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Legal disclaimer: This article is for information purposes and does not constitute legal advice. Distribution agreements are complex and touch on competition law, trademark law and contract law. Contact a lawyer specialising in commercial law before you enter into a distribution agreement, especially if your business has a significant market share or operates across borders.