Thanks to the constructive engagement of both sides, negotiations on first articles of the contract have been finalised without major problems.Nevertheless, as I could suppose, the Distributor asked for exclusive distribution rights and the right to appoint sub-distributors. I opposed to this desire all arguments which were available, among them of course the competition aspect and direct control over the market. As a result, agreement has been reached on the sole distribution rights and no sub-distributors allowed. Although, in order to compensatethis “loss” for the Distributor, I was obliged to modify Article 3 which focuses on the promotion outside territory. I am aware that extending sales to other European Union countries is a little bit a risky. In this moment, we are not able to say how we will approach other countries in the future and what is more, it is some kind of obligation for us to make some supplementary enquiries withincertain territory. Unfortunately, it is never possible to gain all advantageous aspects.
As far as the advertisement and promotion are concerned, we didn’t introduced any changes to article. It is obvious that the Distributor should incur all these costs as he will be making direct profits from the sale of our products. That is why I tried to explain that I do not see any reason to shareadvertising and promotion expenses.
The next significant point of our negotiations concerned Incoterms as they are key elements of international contracts of sale. It is our interest and intention to choose the best and most satisfactory terms of trade possible in order to avoid assuming risks and paying transport and insurance charges. That it is why I strongly insisted on keeping Ex-works terms. We aresupposed to reduce our responsibility to minimum. The Distributor wanted to choose FOB terms and he was arguing that with Ex-works terms his level of involvement would be too high. After a pretty long discussion, we finally came up with an agreement: Ex-works terms have been maintained but packaging costs remain at our expense.
After a brief discussion, both sides have agreed on aspects coveringminimum purchase requirements and determination of quota. I have seen no objections to introduce changes to Article 9. As a matter of a fact, in order to monitor the evolution of the Distributor, one quota period and only one Fiscal Year forecast were introduced in the contract.
We could not avoid discussing the next important aspect regarding obsolete products. We tried to choose the mostsuitable solution for both parts. At the beginning, for me it was quite logical to refuse taking back any unsold and obsolete products. Generally speaking, if the Distributor was unable to sell some of the products, it cannot be our fault. However, he convinced me with a simple argument: if we develop new lines of products that he will not be able to sell, in this case, obviously, he wants to have aguarantee from our part. As a consequence, I agreed to take back 20% of unsold obsolete products.
As far as a discount is concerned, the Distributor strongly insisted on increasing the amount from 10% to 18%. From my personal point of view, the discount we offer is already quite generous. Furthermore, if we offer 18% discounts to each company, we would never make any profits. Finally, I agreedon 11% discount on condition that there won’t be any administrative problems. I believe that this concession shows our good faith and will enhance a mutually beneficial relationship.
Then, we discussed terms of payment. In this case, I could not imagine solution other than maintaining payment at 60 days of date of shipment. Surprisingly, the Distributor requested payment at 90 days. I...