Trade Partner AGREEMENT
“There is no greater thing in life than harmony between words and deeds”
The Upanishads
Preparing for a long lasting relationship…
After having spoken to at least four potential trade partners in the framework of the trade partner selection process, you are now at the point of concluding the business with the company, that you prefer most. Even during this agreement phase, it might prove that both parties can not produce the right amount of business synergy needed to come to an agreement so keep the other options at hand. Only when an official distributor agreement has been signed, it is time to say goodbye to the other prospects in a proper way. Reaching an agreement is a delicate matter since both parties will be tended to stick to the “what is in for me” rule. During open discussions, this tendency to polarise will have to be replaced by the mutual understanding that there is only one way of making the business pleasant and profitable for both partners, which is profitable teamwork. Actually, International Marketing Teamwork means teambuilding at long distances without the regular personal contacts it requires (“emotional remote control”). It therefore should be based on nothing more or less than mutual respect and trust. |
Matter over Mind: The agenda as a starting point
Getting acquainted with one another and, much more difficult, matching two differing social systems with differing backgrounds requires common business sense and personal commitment. It means that business should come first and entertainment later, in the mean time always remembering that business is all about people. As soon as an appointment has been fixed in order to come to a final agreement on the “modus operandus” (operating mode) of the venture, you might suggest the importer that you will send him a proposal for an agenda.
In using the word “proposal” you give him the opportunity to voice his opinion and the liberty to include the items, which he thinks are of importance to him (so right a way you know them too).
Second, by producing the proposal you have the benefit of taking the initiative.
On the benefit of working with an agenda, which has been mutually agreed upon, we can be short: It helps to create a business atmosphere, reduces the risk of forgetting important points of discussion and enables both parties to duly prepare themselves.
In general, the agenda should cover the relevant topics of the future formal distributor agreement, which has the nature of a contract.
Contents of the agenda
Why make it difficult when everything can be covered by the basic questions of:
WHAT are we aiming to do together;
WHY the co-operation between the two companies;
HOW to formalise and operate the relationship;
WHO will be involved in which function and
WHEN shall we start?
In structuring the meeting in this way, we not only inform the importer about our intentions and expectations, but he also informs us about his. Simply using the What, Why, How, Who and When as topics of the agenda might be perceived as a little blunt, so let us translate these questions into a professional lay-out of the agenda.
AGENDA FOR A DISTRIBUTION AGREEMENT
Date & Location:
Attendants: For the Exporter Messrs. ABC
For the Importer Messrs. XYZ
Topics of discussion:
- Introduction of the participants of the meeting.
- Agreement on the aim of the business co-operation (=”what” ).
- Agreeing on the reasons for working together, highlighting topics such as strategy, style, skills, staff, structures and systems (“why”).
- Introducing and, after agreement, appointing the team members who will be in charge of the venture (“who”).
- Agreement on how to organise and operate the co-operation on both sides, for example the two-way account management. Final agreement on all terms & conditions (“how”).
- Agreeing upon a timetable on, for example, market research, product adaptation, first order and order frequency and follow-up meetings (“when”).
The letter of confirmation
An important meeting like this takes a long time and many details have to be discussed and agreed upon. While you are together with your tradepartner´s team, try to reach an agreement on as many details a possible: It will only accelerate the proceedings, thus the start of the actual business. The golden rule, applicable to this important agreement phase is “do not delay, but stay”. Most probably, the importer will suggest that one of his staff members will write the minutes of the meeting. This might be of convenience to you, but never forget that it will make you dependable of the professionality (i.e. objectivity versus personal interests and point of view), accurateness and efficiency of this secretary and his/her boss. So always keep your own minutes, whilst sticking to the topics on the agenda. Tell your trade partner that you (also) will write a letter of confirmation: It will help you to keep the initiative and a finger on the relevant details. Also in this letter of confirmation you should follow the sequence of the meeting, highlighting exactly the same topics of discussion. In case an order has been agreed upon, as often happens during the trade partner agreement, the details of this order should be duly described. The best thing to do is to refer to the order in the letter of confirmation and to confirm the order in a separate order confirmation or sales contract, describing:
- Producer & buyer
- Date and location
- (branded) product(s) and product specifications like contents, size, colour, unit weight/volume
- Packaging details
- Unit price, order volume and order size, clearly stating the currency in which the amounts are quoted
- Payment terms
- Delivery conditions (according to the incoterms)
- Delivery time
- Warranties & waivers (the famous “subject to …”)
- Stamps and authorised signatures.
NB. The sales contract will be discussed in detail during the presentation on “Offers & Contracts”.
Pre-cooking the formal distributor´s contract
The contract should be nothing more or less than a legal interpretation of the letter of confirmation, once that letter has been agreed upon as accurate and correct. With legal, we mean the Civil Code. Actually, it covers again all elements of the 4 W´s and 1 H. and is enhanced by all the bilateral obligations and terms of termination. The distributor´s contract will be discussed in detail during the presentation on “Offers & Contracts”. Hereunder a Checklist for issues that needs to be agreed upon in a contract, of which some already should be “pre-cooked” in the agreement meetings.
1. VENTURE DEFINITION
Description of the parties involved
Intention of both parties to co-operate
Market/exclusivity definition
Specification of product(s)
Contributions of importer
Requirements of importer
Abstract quality requirements & quality control systems
Changes of the venture
Documentation
2. VENTURE ORGANISATION
Responsibilities
Monitoring team
Venture meetings & minutes
Documentation of venture progress
Export/import team members
Subcontracting
Conciliation & arbitration
Venture locations
3. COURSE OF VENTURE
Time planning
Milestones
Customer doubts
Survey & acceptance procedures
Warranties
Support & (maintenance/recall) service
4. PAYMENTS
Basic rule: terms of payment
Contract calculations
Billings & dates of payment
5. MISCELLANEOUS
Liability
Limitation of confidentiality
Non competition (parallel imports)
Cancellation
General Terms & Conditions
Applicable Law KDB 09-1998 |
