Dealer agreement: basic concepts

In the modern market there are various dealers: official, exclusive and others. The functions they perform are sometimes so different that it is difficult to determine what a dealership is. By definition, the dealer is a legal (physical) person who performs intermediary functions in the implementation of transactions for sale. At the same time, a dealer agreement is concluded, and the person acts on his own behalf.

Thus, the dealer acts as an intermediary between the manufacturer and the buyer in wholesale trade. His actions are committed on the basis of concluded contracts, which provide for the transfer of ownership of the product from the supplier to the dealer, and then to the buyer. At its heart, the dealership agreement has an agreement on buying or selling or bartering. In fact, the dealer is a simple intermediary, a reseller of goods. However, today there are a lot of companies on the market who call themselves dealers, but in reality they are actual attorneys or commission agents.

A classical dealer from the definition of the Western economy is the initial link in the intermediary chain and finds its place in direct relations with the producer (supplier). A dealer agreement is an agreement that is concluded between the dealer and the manufacturer, it defines their duties and rights. Still, the relations of the parties are not limited to simply supplying products. As the world experience shows, certain principles and differences of classical dealership from ordinary wholesale trade have been worked out. In addition to the duties of the payer and buyer, the dealer bears additional obligations to the manufacturer and has certain rights.

Firstly, these are special dealer discounts. Since the dealer is an exclusive buyer, then the goods are sold to him at the lowest price. This condition is indicated by the dealership agreement. Due to the fact that the dealer usually buys large wholesale lots of goods, the manufacturer, with an actual low profitability due to high turnover, receives additional income

The second condition of dealership is the representation of trade interests and the sale of the producer's products among a certain range of consumers in a certain territory. Most often, these are exclusive rights that allow you to build your business, knowing that no one will sell this product among a certain number of buyers or in this territory.

Having concluded the dealer agreement, the sample of which is prepared by the manufacturer, the regional representative gets the right to use the trademark and be called the official dealer of the supplier's company, besides this, it is possible to choose a certain type of product according to consumer properties, quality and other parameters.

However, in addition to rights, the dealer also lays down a large number of duties, which are typical for this relationship.

There is a duty to purchase the set number of goods with a certain periodicity. And if in the same period a smaller volume is acquired, the difference is transferred to the next period, and the dealer must sell it. Also, the representative is obliged to observe the territory on which the sale will be made. The purpose of the dealership is to expand the sales market and its reasonable legal monopolization. Usually, the dealership contract extends to a territory that coincides with the administrative division.

The dealer's responsibility is to conduct advertising campaigns and companies, the costs for which the manufacturer does not compensate. Also, the representative must produce after-sales service and trade only with the product of one manufacturer.