This limited risk distributor agreement template is typically used in an intercompany transaction between a principal and distributor. The distributor undertakes the typical sales and marketing functions in relation to the sale of the products produced by the principal, including but not limited to preparation of marketing plans, providing sales forecasts and maintaining relationships with customers.

The distributor will only incur limited risks. It obtains the legal title to the products but most of the commercial risks with respect to the products will remain with the principal. Typical risks that are borne by the principal under this limited risk distributor agreement template are inventory, bad debt and currency risk.

The distributor does not undertake entrepreneurial activities which would result in the development of marketing intangibles. The Appendix to the agreement template also contains an extensive example on the calculation of the at arm’s length margin for the limited risk distributor’s functional and risk profile.

This agreement template is used to state the rights and responsibilities and to substantiate the at arm’s length character of the transaction between a typical principal and limited risk distributor. Common terms in this agreement template inter alia cover the ordering and shipping of the products, price and payment terms, record keeping, intellectual property rights, indemnification and termination.