Author's Note
The Limited Risk Distribution Agreement (intra-group) is a Swiss-law governed standard agreement for the appointment of a limited risk distributor on an intra-group basis. A limited risk distributor is a buy-sell distributor who distributes products in its own name and for its own account for a principal company, under an agreement in which most risks are borne by the principal and only limited risks are borne by the distributor. The distributor is appointed to distribute the products to customers in a specified territory. The appointment may be exclusive or non-exclusive. This template is specifically designed for the distribution of physical/ tangible products, rather than electronic products (including software). The agreement sets out the terms of supply as between the principal and the distributor, as well as provisions relating to delivery and product warranties. The principal bears full liability for product liability and indemnifies the...
Read moreThe Limited Risk Distribution Agreement (intra-group) is a Swiss-law governed standard agreement for the appointment of a limited risk distributor on an intra-group basis.
A limited risk distributor is a buy-sell distributor who distributes products in its own name and for its own account for a principal company, under an agreement in which most risks are borne by the principal and only limited risks are borne by the distributor.
The distributor is appointed to distribute the products to customers in a specified territory. The appointment may be exclusive or non-exclusive. This template is specifically designed for the distribution of physical/ tangible products, rather than electronic products (including software).
The agreement sets out the terms of supply as between the principal and the distributor, as well as provisions relating to delivery and product warranties. The principal bears full liability for product liability and indemnifies the distributor against any losses or claims arising out of defective products.
Under the agreement, local marketing is the responsibility of the distributor while the principal bears the cost for global/ regional marketing activities.
The template includes, as standard, an allocation of risks between the parties that is consistent with that found in a typical limited risk distribution agreement. The distributor is remunerated in a way which allows it to achieve an operating margin similar to that of comparable independent entities, in accordance with the arm’s length principle.
Terms which are configurable to the user’s needs include:
- Purpose and background;
- Term and termination;
- The products to be distributed;
- Territory and exclusivity;
- Warranty and delivery terms;
- Licensing of product-related intellectual property;
- Payment terms;
- Sub-contracting and assignment rights;
- Provisions relating to notices;
- Dispute resolution, jurisdiction and arbitration; and
- Other boiler-plate provisions (e.g. confidentiality, force majeure).
Circumstances of Use
This document is intended to be used to document the creation of a limited risk distribution arrangement between group companies, for transfer pricing purposes.
The Limited Risk Distribution Agreement (intra-group) may be used for cross-border transactions where the parties have agreed to use Swiss law.
Terms of Use
The purchase of this Product is subject to PartnerVine Terms.
You (the registered user through whose account the purchase is made) may:
- Access the document-generation interview for 90 days from date of purchase;
- Export and download an unlimited number of copies of the document(s) in Word or pdf format;
- Share and use the document copies in connection with the circumstances described in this Author’s Note and only for the ordinary business purposes of the group of companies to which you belong.
Exclusions and Limitations
The Limited Risk Distribution Agreement (intra-group) assumes that the allocation of risk between the parties is aligned with that in a typical limited risk distribution relationship, and that the distributor is compensated accordingly.
Other Comments
No warranty or representation is given or made that the allocation of functions and risk and the related transfer pricing arrangements provided for in this document are appropriate in the specific circumstances of any given group of companies. No legal or tax advice is provided and nothing in this template or the related user interview shall be deemed to constitute the provision of legal or tax advice in relation to any fact or matter. Where necessary, specialist legal and tax advice should be sought together with input from group accounting functions prior to executing this agreement.
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Frequently asked questions
If the distribution has already commenced, the agreement will have retrospective effect.
Sales of the products to distributor are made on the principal's standard conditions of sale. A copy of these must be provided to the distributor.
The Incoterms rules are standard sets of trading terms and conditions designed to assist traders when goods are sold and transported. Each Incoterms rule specifies: (a) the obligations of each party (e.g. who is responsible for services such as transport; import and export clearance etc.) and (b) the point in the journey where risk transfers from the seller to the buyer.
In general, they are either DAP (Delivery at place) or DDP (Delivered duty paid). However, other Incoterms may apply.
The products can be delivered to (a) the Distributor's premises, (b) a warehouse or (c) any place specified in the order, namely also the Customer's premises.
If time is of the essence, principal will be liable for all claims by customers resulting from late delivery.
If time of delivery is not of the essence, principal’s liability will be limited to delivering the products as close as possible to the original date.
Warranty might include a (1) standard limited warranty or (2) detailed warranties.
In the first warranty agreement, the Principal provides a standard warranty against defects. Liability for breach of warranty is limited to repair or replacement of defective product. Length varies from 90 days to 1 year or other specified durations.
In the second warranty agreement, the Principal gives a broad ongoing warranty as to the quality of the products and compliance with any requirements or specifications agreed in the order. Notification must be either promptly or as soon as possible.
Exclusivity can be regulated through an agreement for distribution in specific territories. Moreover, the right may be reserved for the Principal to appoint other distributors in the territory as well as the right to choose between supplying products in the territory generally or only to its own customers.
Yes, the price may be amended from time to time. It can be annually, quarterly or periodically.
The principal cannot require the distributor to comply with a discounting framework, but may require notice of discounts given in excess of the guidelines.
The Distributor may be obliged to (a) maintain sales force, (b) provide sales support or (c) minimise out of stock issues. Other obligations may be defined, too.
Yes. The Distributor must provide reports on its activities, in a format determined by the principal on a monthly or quarterly basis.
IP can relate (1) only to the distribution of the products (e.g. trade marks) or (2) to the distribution and creation of the products (e.g. trade marks, patents, copyrights)
The Principal and the Distributor can agree that (a) each party pays its own costs, (b) the Distributor pays all costs or (c) the Principal pays all costs
Typically in a distribution agreement the principal will indemnify the distributor against any losses arising from the distribution of the products. It is optional to carve out losses arising from the distributor's wilful default or gross negligence.