In Avoiding the Top 10 Mistakes with Distributor Agreements, Glen Balzer, management and forensic consultant and expert witness in domestic and international marketing and sales, shares a checklist of ten common mistakes to avoid when drafting your next distributor agreement. Mistake #3 is entitled Annual Termination and Semiautomatic Renewal.
Parties that are inexperienced with distributor agreements sometimes attempt to minimize the opportunity for termination. Calling for annual termination and semiautomatic renewal is a routine procedure among experienced players. In theses cases, there is a provision in the agreement calling for termination of the agreement at the end of the first full calendar year after the agreement is placed in effect, and each year thereafter. Terms and conditions allow either party to submit a Notice of Intention to Not Renew 30 days prior to the end of the calendar year.
When annual termination and semiautomatic renewal is written into the agreement, both parties have the opportunity to exit the agreement, without proving cause, once per year. The partnership is held together, using this methodology, by performance and not with a collection of words in the agreement. Experienced partners always prefer to have performance as the binding force in the partnership.
Glen Balzer, President of New Era Consulting, can be reached at glen@neweraconsulting.com.