Israeli Distributor

Distributors in Israel

In the legal sense, a distributor trades independently and separately from the manufacturer. The distributor purchases the manufacturer’s products from the manufacturer and sells them in his own name. The distributor’s profits arise from the difference between the product’s purchase price (including discounts, plus expences) and the sale price. Under these circumstances, where product ownership passes to the distributor, he takes on all the financial risks involved in distribution.

In exclusive distributor relations, the distributor purchases the right to solely distribute the manufacturer’s products in a defined geographical area.

Distribution Legal frame

Distributors are independent contractors who buy and sell in their own name and for their own account, but who generally maintain a long-term business relationship with the manufacturer and thus become a part of the manufacturer’s distribution system.
A distributor may represent one or more suppliers under an exclusive distribution agreement. The rights and duties of the distributor depend on the distribution agreement. The distributor is generally required to carry out advertising and other promotional activities. He may be obliged, inter alia, to train sales personnel in accordance with the directives of the supplier (the foreign entity), purchase minimum quantities and maintain sufficient stock of products, obtain insurance, and ensure that products are distributed according to domestic laws. He must respect the supplier’s/manufacturer’s intellectual property rights and may be obliged to ensure that they are not violated by domestic competitors.

Israel has no specific laws dealing with “commercial agents” and distributors, unlike many European countries which have developed specific statutory regulations on the subject. However, aspects such as the form of contract, rights and duties of each of the parties,  termination and compensation procedures, frequently show similarities to European countries.

To sum up, there is no distribution law in Israel and the courts will refer to the particular contract between the manufacturer and his distributor. The courts tend to consider each case on its merits and in practice and adjust the rights of the parties according to the individual circumstances of the case.

Therefore particular care should be addressed in the early stages of the negotiations and in the phrasing of the distribution contract.