How to review a distribution agreement

A distribution agreement appoints a distributor to buy products from a supplier and resell them in a territory. Unlike a sales rep, the distributor takes title and sets its own resale prices, which brings in sale of goods law, antitrust law and, sometimes, franchise and dealer protection statutes. This checklist covers the clauses to check and how to review the agreement in Word with LexDraft.

Last checked: 17 October 2026. The law changes; check the current position before relying on this page.

Clause checklist

• Appointment and exclusivity. Exclusive, sole or non-exclusive. Can the supplier sell directly or online into the territory, and are national accounts reserved?
• Territory, customers and products. Define each precisely and say whether the supplier can change them.
• Minimum purchase commitments. Volumes, measurement periods, and the consequence of a shortfall: loss of exclusivity, termination, or payment.
• Ordering and supply. Forecasts, purchase orders, lead times, allocation in a shortage, and which terms apply to each order. UCC Article 2 governs the sales between the parties in most states.
• Pricing and resale prices. The supplier sets its prices to the distributor. Minimum resale price agreements are judged under the rule of reason under federal law since Leegin (2007), but some states take a stricter approach; Maryland, for example, prohibits minimum resale price agreements by statute. Price discrimination between competing distributors can raise Robinson-Patman Act issues.
• Franchise law risk. A distribution deal can be treated as a franchise under the FTC Franchise Rule or state franchise laws if the distributor uses the supplier's trademark, the supplier provides significant control or assistance, and the distributor makes a required payment above the threshold. Check fees for training, inventory and marketing.
• Dealer protection statutes. Some states, such as Wisconsin under its Fair Dealership Law, restrict termination of dealers without good cause and notice. Some industries (for example, beer, cars and farm equipment) have their own statutes. These may apply whatever the choice of law clause says.
• Trademarks and marketing. A limited trademark license, brand guidelines, approval of marketing materials, and what happens to the marks on termination.
• Warranties and product liability. Pass-through of supplier warranties, recall procedures, product liability indemnities and insurance.
• Termination. Notice, termination for cause, and buy-back of inventory. For an indefinite arrangement, UCC section 2-309(3) requires reasonable notification of termination unless the contract validly dispenses with it.
• Compliance. Anti-corruption (including the FCPA for foreign distributors), export controls and sanctions.
• Non-compete. Restrictions on carrying competing products during and after the term.

A distribution agreement review workflow in Word

LexDraft is a Word add-in from Microsoft AppSource. It opens as a side panel in Word 365 (Windows and Mac), Word 2021 and Word on the web, so the agreement never leaves the tool you already draft in.

1. Open the agreement in Word and open LexDraft in the side panel.
2. Pick the governing law. Select the state named in the governing law clause so LexDraft looks for state-specific red flags.
3. Run the review. LexDraft has four built-in playbooks (NDA, SaaS MSA, DPA and services agreement) and no dedicated distribution agreement playbook, so this runs as a general review against the governing law you chose. Use the checklist on this page to direct your own read.
4. Triage by severity. Findings are graded Critical, High, Medium or Low, and LexDraft flags standard terms that are missing.
5. Run the quick checks. The defined-term and cross-reference checks are rule-based and run without AI.
6. Accept or reject each redline. Accepted changes land as native Word tracked changes.
7. Verify and sign off. You check every output before it goes to the client or the other side.

What LexDraft does not do

LexDraft does not give legal advice or decide whether an arrangement is a franchise. Nothing changes in your contract until you accept a redline.

This guide is general information, not legal advice. LexDraft does not give legal advice; qualified counsel must review every draft. Spotted something out of date? Email support@lexdraft.ai and we will fix it.