Please, draft and explain a termination provision in a product distribution agreement. This will require you to think about the different reasons for which your client might wish to terminate the agreement. The reasons may relate to problems with the distributor's performancesuch as the failure to meet sales targetsor breaches of important provisions of the contract. Your client may also want to have the right to terminate the agreement without liability for reasons unrelated to the distributor's performance. When drafting this provision, consider how the sample distribution agreements included in this week's online resources address similar issues. Also, don't overlook the requirement to write a cover note as described.

Instructions

Dear Contract Drafter:

Our client, Ellis-Elan Jewelry Design, LLC, is entering into a distribution agreement with a Latin American fashion distributor, Piedras Preciosas S.C.R.L., of Lima, Peru. Piedras Preciosas is planning to open kiosk stores in various Latin American locations over the next few years. Ellis-Elan Jewelry Design would like to introduce its jewelry into Latin America and grow that market. Our client believes Piedras Preciosas has a good reputation and thinks it will do a good job promoting the product in Latin America. Ellis-Elan is planning to give Piedras Preciosas a three-year exclusive distributorship in the Latin American region.

Ellis-Elan wants to get this deal done quickly, but, for several reasons, I'm concerned. First, Ellis-Elan has not had a long-term relationship with Piedras Preciosas, and so it lacks a "track record" of success with the Peruvian company. Also, we have learned that the president of Piedras Preciosas, Alonso Aguliar, is a very close friend of a local politician who was just indicted for cocaine trafficking. There's no indication that Aguilar is under investigation (yet), and the client doesn't see Aguilar's mere friendship with the politician as an obstacle to doing a deal with Piedras Preciosas. However, if Aguilar also is indicted, that could taint Ellis-Elan by association. I want to make sure we cover what happens if the deal goes wrong or if anything negative and unexpected happens. Please(1)draft a termination provision that you think will protect Ellis-Elan. Please also(2)write a cover note that includes your observations about the transaction and whether you think we need any more information.