- Commercial Contract Drafting, Review & Negotiation
- Master Service & Service Agreements
- Vendor, Supplier & Procurement Agreements
- Consultancy & Independent Contractor Agreements
- Agency, Distribution & Franchise Agreements
- Non-Disclosure & Confidentiality Agreements
- MoUs, Term Sheets & Letters of Intent
- Corporate Structuring & Governance
- Shareholders' Agreements
- Share Purchase Agreements
- Share Subscription & Investment Agreements
- Joint Venture & Strategic Collaboration Agreements
- Partnership & LLP Agreements
- Founders' Agreements
Agency, Distribution & Franchise Agreements
Agency, distribution and franchise agreements are three ways of selling through someone else. An agent sells on the principal’s behalf and binds it. A distributor buys the goods and resells them on its own account. A franchisee runs its own business under the franchisor’s brand and system, for a fee.
India has no single franchise or distribution statute. Agency is governed by sections 182 to 238 of the Indian Contract Act, 1872. Distribution and franchise agreements rest on general contract law, the Trade Marks Act, 1999 for use of the brand, and the Competition Act, 2002 for restrictions on territory and price.
When you need it
When appointing distributors or dealers
A brand owner expanding into new cities or states needs consistent terms on territory, targets and returns.
When franchising a business
Restaurants, retail, education and service businesses grow through franchisees who must follow the same standards.
When a foreign brand enters India
An Indian distributor or master franchisee is often the first step into the market.
When taking a franchise or distributorship
The investment is made by the franchisee or distributor. The agreement decides how secure that investment is.
When a relationship is ending
Unsold stock, customer data, signage and the right to keep trading are all decided by the exit terms.
How the process works
Five stages. Timings are typical, not promised.
- 1
Choose the model
A call or meetingDecide whether the relationship is agency, distribution or franchise. The choice affects who owns the stock, who contracts with the customer, who bears credit risk and how each side is taxed.
Documents
- The business plan or proposal
- Any existing appointment letter or agreement
- 2
Settle territory and exclusivity
Depends on the partiesDefine the territory, the products and the channels, including online sales, and whether the appointment is exclusive. Exclusivity is usually tied to minimum purchases or sales targets.
- 3
Set the brand and operating terms
Part of the draftSet how the trademarks may be used, the standards to be met, training, marketing contributions, reporting and audit. In a franchise, these sit in an operations manual referred to in the agreement.
- 4
Draft the agreement
Commonly two to three weeksCover fees, royalties or margins, pricing, ordering and payment, stock, intellectual property, confidentiality, term and renewal, grounds for termination and what happens afterwards.
- 5
Sign and record
At and after signingStamp and sign the agreement. Where the brand licence is to be recorded, apply to the Trade Marks Registry to enter the franchisee or distributor as a registered user.
Common questions
An agent arranges sales for the principal, who contracts with the customer and bears the risk; the agent earns a commission. A distributor buys the goods, owns the stock and resells at its own risk for a margin.
No specific one. A franchise is governed by the Indian Contract Act, the Trade Marks Act for the brand licence, the Competition Act, the Consumer Protection Act and, where money crosses borders, the foreign exchange rules. That makes the agreement itself especially important.
Resale price maintenance is listed in section 3(4) of the Competition Act and is unlawful where it causes an appreciable adverse effect on competition. A recommended price, or a maximum price, carries less risk than a fixed or minimum one.
Generally yes. Exclusive distribution and exclusive supply arrangements are also assessed under section 3(4), by their effect on competition. For most businesses without market power they do not raise a concern.
During the term, yes, if the restriction is reasonable. A restriction after the agreement ends faces section 27 of the Indian Contract Act, which makes restraints of trade void, so franchisors rely mainly on confidentiality and brand rights.
A principal can generally revoke an agent’s authority, but under section 205 of the Contract Act, ending a fixed-term agency early without sufficient cause can make the principal liable to compensate the agent. Reasonable notice is required in any case.
The agreement should say: whether the supplier buys back unsold stock and at what price, how long the distributor may sell off the rest, and when use of the brand, signage and customer data must stop.
Related
To discuss a distribution or franchise agreement, write to info@ireniclegal.com or call +91 96547 47331. Written by Adv. Kanika Marwaha Bindal; last updated 7 October 2026.