# Vendor, Supply & Distribution Agreements

> Supply and vendor agreements fix price, quality standards, delivery, risk transfer, payment terms and remedies for defects; distribution and reseller agreements add territory, exclusivity, targets and brand use. When buying from micro or small enterprises, payment terms beyond 45 days breach the MSMED Act and make the expense non-deductible until paid under Section 43B(h).

Practice: Legal Documents & Agreements — https://www.industax.com/services/legal-documents/

Distribution relationships end badly when exclusivity, minimum targets and termination aren't clear, or when the agreement unintentionally creates an agency. We also check competition-law limits on resale price restrictions.

For buyers, we build MSME payment compliance into the contract; for suppliers, we secure payment with clear invoicing, interest and credit terms.

## Key facts

| Item | Detail |
| --- | --- |
| MSME payments | Within 45 days if agreed (15 days if not) |
| Tax effect | Unpaid MSE dues beyond limit disallowed under Section 43B(h) |
| Distribution | Territory, exclusivity, targets, termination |
| Competition law | Avoid resale price maintenance |

## Who needs this

- Manufacturers and brands appointing distributors
- Businesses buying from MSME vendors
- Suppliers to large companies

## What's included

- Agreement drafting
- MSME and 43B(h) review
- GST and invoicing terms
- Revision round

## Documents

- Commercial terms
- Product and quality specs
- Party details

## Process

1. **Terms** — Commercial arrangement captured.
2. **Draft** — Agreement prepared.
3. **Sign** — Executed and stamped.

## FAQs

### What is the 45-day MSME payment rule?

Buyers must pay micro and small enterprises within the agreed period, which can't exceed 45 days (or 15 days if there is no agreement). Late payment attracts compound interest, and Section 43B(h) disallows the expense until it is paid.

### Is a distributor the same as an agent?

No. A distributor buys and resells on its own account; an agent acts on your behalf and can bind you. The agreement should make the relationship clear.

### Can I fix the price at which distributors resell?

Resale price maintenance can breach the Competition Act if it harms competition. Suggested retail prices are generally acceptable.

## Official sources

- India Code — central Acts: https://www.indiacode.nic.in/

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Canonical page: https://www.industax.com/services/legal-documents/vendor-supply-agreement
Publisher: Indus Tax — CA-led tax and compliance firm (https://www.industax.com). Contact: info@industax.com, 9059139258.
This is general information, not advice for your specific facts.