Manufacturing Agreements

A manufacturing agreement is an agreement between a manufacturer and a company to develop and/or produce a company’s product. Manufacturing agreements memorialize the material terms between the parties and may include, where the product will be manufactured, the method of manufacturing the product, the type of raw material which will be used to manufacture the product, industry standards that will be used in the manufacturing, quantity, price, apportionment of liability between the manufacturer and your company, intellectual property rights of the product (licensing information), ordering processes and procedures between the manufacturer and your company and mode of delivery of the product.

Distribution Agreements

A distribution agreement is an agreement between the supplier of a good, which can also be the manufacturer and the distributor of the good or product. Many of the terms found in a manufacturing agreement are also found in a distribution agreement and vice versa. A distribution agreement contains terms such as: who is responsible for the shipping cost of the product from the manufacturer or company to the distributor or directly to the customer, return cost, indemnification provisions between the parties, licensing rights to market the product, distributor’s cost of the product and risk/loss provisions as to when the risk of loss passes to the company, manufacturer and the distributor.

Often you will also find provisions in a distribution agreement that limits the distributor’s marketing, packaging, and presentation of the product, along with sales performance provisions, whether the distribution rights are exclusive or non-exclusive, and the geographic definition of territory in which the distributor can distribute.

License Agreements

License agreements or licensing agreements are agreements between two parties, the Licensor (owner of the product to be licensed) and the Licensee (the party who wants to use the Licensor’s product). A license agreement defines the parties’ relationship as it relates to the use of the Licensor or owner’s product. For instance, a license agreement may grant the Licensee a right to replicate the Licensor or owner’s product and resale it indefinitely or for a set period of time. The Licensor may also grant the Licensee the right to use the logo which relates to the product for marketing purposes or even add it to an existing product. The Licensee in turn pays the Licensor for the right to use or replicate the owner’s product. There are three types of licensing agreements:

• Exclusive – Licensee has exclusive rights to use/sell the product which can be restricted by geographic location or time
• Non-Exclusive – Licensor can license the product to multiple Licensees without restriction
• Sole Licensing – Only the Licensor itself holds all rights to the product and likely manufactures the product as well

Any of these kinds of agreements must also contain well-drafted provisions protecting your business from improper use of your product or information learned during the process (such as soliciting or diverting clients or vendors) and disclosure of your company’s commercially sensitive information and trade secrets.

Manufacturing, Distribution, and License Agreements require an attorney who is experienced in complex business and international legal matters and preferably an attorney who understands the nature of business and has a strong financial background. At TCLG, we have extensive experience in drafting M&D and licensing agreements, including agreements that deal with cross-border transactions and jurisdictional issues that need to be taken into consideration when entering an agreement with an international manufacturer or distributor. For assistance with any of these kinds of agreements or discuss your business’ contractual needs: