Distribution in Lithuania

The essence of a distribution agreement and the parties’ obligations

Under a distribution agreement, one party – the distributor – undertakes, for a fixed term or indefinitely, in its own name and at its own expense, to purchase goods (or services) from the other party – the manufacturer (supplier) – and to sell them to end consumers or to other distributors, as well as to perform other tasks related to the resale of such goods (or services). The manufacturer (supplier), in turn, undertakes to sell goods (or services) to the distributor and to perform other tasks related to the distribution of goods (or services).
Distribution agreements may be concluded only between companies (entrepreneurs).

A distribution agreement may be concluded for a fixed term or for an indefinite term. Such an agreement must be in written form, and failure to comply with this requirement renders the agreement invalid.

A distributor is an independent company (entrepreneur) that, in its own name and at its own expense, purchases goods from the manufacturer or another distributor and resells them to end consumers or other distributors.

Types of distribution agreements:

Exclusive distribution – the manufacturer (supplier) undertakes to sell specific goods intended for resale exclusively to one distributor within a specific territory assigned exclusively to that distributor or to a specifically designated group of customers.

Selective distribution – the manufacturer (supplier) undertakes to sell goods intended for resale only to those distributors who meet the technical, qualification, or other criteria set by the manufacturer (supplier).

Obligations of the distributor, unless otherwise provided by the agreement or by competition law requirements:

1. Sell goods only within the territory specified in the agreement or only to the persons identified in the agreement;
2. Ensure the efficient distribution of goods;
3. Organize advertising and promotional campaigns for the manufacturer’s (supplier’s) goods;
4. Ensure the proper qualification of its employees and continuous improvement of their skills;
5. Ensure proper storage and warehousing of goods, regular replenishment of stock, and the establishment and maintenance of a network of commercial warehouses;
6. Sell goods under the manufacturer’s (supplier’s) trademark or goods specifically packaged or otherwise labeled by the manufacturer (supplier);
7. Refrain from establishing branches or representative offices in territories other than those specified in the agreement;
8. Purchase goods in specific lots or in the minimum quantities specified in the agreement within the agreed timeframe;
9. Sell goods within the timeframe specified in the agreement;
10. Provide technical maintenance of goods after their sale or offer other warranty or servicing support to the buyers of those goods;
11. Provide the manufacturer (supplier) with information on market conditions, changes in the market, and conduct market research;
12. Refrain from producing goods that compete with those specified in the agreement;
13. Refrain from disclosing the manufacturer’s (supplier’s) trade secrets or other confidential information;
14. Upon termination of the agreement, return to the manufacturer (supplier) all documents, materials, product samples, and other items received.

Obligations of the manufacturer (supplier), unless otherwise provided by the agreement:

1. Sell goods of proper quality, guarantee their quality, and sell them within the timeframes and quantities specified in the agreement;
2. Sell the agreed goods only to the distributor and not directly to end consumers;
3. Train the distributor’s employees;
4. Provide the distributor with advertising materials;
5. Pay the distributor the remuneration specified in the agreement for additional services provided by the distributor.