A House Account Sits Inside Your Territory. Clause Nine Decided That Years Ago.

Most distributor territory agreements are read carefully once, at signing, and then never again until the week they matter.

The week they matter has a shape. A large account inside the geography places an order through another channel, the manufacturer books it, and the local distributor finds out from the installer. Everything that happens next was decided years earlier, in language nobody argued about at the time.

What follows walks one dispute end to end: the signing that set it up, the week it broke, and the renewal that followed. This is trade commentary rather than legal advice, and any specific agreement deserves counsel who has read it.

Distributor territory agreements are read once and litigated twice

The asymmetry is structural. A manufacturer’s legal team drafts the template and sees it operate across dozens of markets. A regional distributor sees one copy, at the moment they most want the line.

That imbalance is not bad faith and it is not unusual in any dealer network. It simply means the distributor has to bring the questions, because nobody in the room is incentivized to raise them unprompted.

Before: the clauses that look like boilerplate at signing

Four definitions carry almost all the weight in distributor territory agreements, and none of them announce themselves. The first is what a territory actually is: a list of counties, a set of zip codes, a radius, or a vaguer phrase like primary area of responsibility.

The second is what protection means. Exclusive, non-exclusive and area of primary responsibility are three different commitments, and only one stops the manufacturer selling into your geography directly.

The third is the house account carve-out, which is the clause that produced this dispute. The fourth is what happens on termination, including whether inventory is repurchased and at what price.

Before: what a manufacturer is allowed to impose

Vertical restraints of this kind are common and generally permitted. The FTC’s guidance on exclusive dealing and requirements contracts describes such arrangements as generally lawful and judged under a rule of reason standard that balances procompetitive and anticompetitive effects, noting that most exclusive dealing contracts are beneficial because they encourage marketing support for the manufacturer’s brand.

The same guidance flags where concerns arise, including where a manufacturer with market power uses exclusivity to deny a competitor access to distributors without which the competitor cannot make sufficient sales. For a distributor at the table, the practical reading is that manufacturers hold wide latitude over distributor territory agreements, so the leverage sits in what you ask for rather than in what you can later dispute.

During: the day a protected account orders somewhere else

The dispute rarely starts with a decision. It starts with a purchase order routed through a national account team, a buying group, or a general contractor on a build-out, and nobody involved thinks of it as a territory question.

The distributor’s first instinct is usually to call and object. The better first move is to establish, on paper and before the call, which clause is engaged, because registration, protection and house account language each produce a different answer under distributor territory agreements.

During: the evidence that settles a split-credit claim

Credit disputes are won with records that existed before the dispute. Account registration dates, quote history, site survey documents, demonstration logs and service tickets on installed units all carry weight.

None of them can be assembled retroactively with any credibility. Distributors who register accounts as a routine habit have a file. Distributors who register opportunistically have an argument.

This is where the internal compensation plan quietly shapes behavior, because a rep paid only on booked orders has no reason to file paperwork on an account that has not bought yet.

During: the conversation that must never happen

There is one move a frustrated distributor must not make, and it is tempting precisely when a territory feels violated: calling a competing distributor to agree who will cover which accounts.

The FTC’s guidance on market division and customer allocation states that plain agreements among competitors to divide sales territories or assign customers are almost always illegal, and notes that knowing participants face investigation by the FBI and federal law enforcement. Restrictions imposed downward through distributor territory agreements and an agreement made sideways between competitors are legally different things, and the distinction is not a technicality.

After: renegotiating distributor territory agreements from the weaker seat

Renewal is the only moment distributor territory agreements are genuinely open, and most distributors arrive with no list. Build the list from the year’s friction rather than from a template.

Three asks tend to be winnable even without leverage. A defined registration process with a stated protection period, a service fee schedule for units the manufacturer sells directly into your area, and written notice periods on territory changes are administrative rather than economic concessions, which is why they get granted.

A distributor with several lines has more room than one with a single brand, and that is part of the calculus behind adding a second line to the card.

A clause scorecard for distributor territory agreements

Read the current agreement against this before the next renewal window opens. The right-hand column is the dispute the wording exists to prevent.

Auditing the agreement before the next dispute arrives

An audit takes an afternoon and is best done in a quarter when nothing is wrong, because distributor territory agreements read very differently when you are angry.

1. Pull every executed copy, including amendments. Side letters and emailed confirmations often carry terms the master agreement does not. Assemble them in one file before reading any of them.
2. Map the four definitions. Write out, in your own words, what the territory is, what protection you hold, which accounts are carved out, and what happens on termination.
3. Test the definitions against last year’s orders. Find every order shipped into your area that you did not write, and label which clause governs it. Patterns appear fast.
4. Price the unpaid work. Total the service hours spent on units you did not sell. That number is the strongest argument at renewal because it is yours and it is verifiable.
5. Decide what you would trade. Manufacturers grant process concessions more readily than economic ones, so know in advance which ask you will drop to keep the registration period.

Questions distributors ask about territory and house accounts

Can a manufacturer sell directly into an exclusive territory

It depends entirely on what the agreement says, which is why the protection level matters more than the word exclusive. Many arrangements described as exclusive reserve direct sales to named national accounts, government buyers or corporate parents. Read the carve-out list before relying on the headline term.

What counts as a registered account

Whatever the agreement defines, and if it defines nothing then effectively nothing counts. Ask for a written process with a submission method, an acknowledgment and a protection period measured in days. An unacknowledged registration is not evidence, it is a sent email.

Should we service units the manufacturer sold direct

Usually yes, at a published rate agreed in advance. Refusing damages the end customer relationship you still want, and working free trains everyone to route sales around you. Most distributor territory agreements leave this silent, so the rate schedule is the whole negotiation.

Does private label work around a territory restriction

Sometimes, and it introduces a different set of obligations rather than removing them. Ownership of the specification, warranty liability and parts supply all move to you, which is the trade examined in the four gates a private label line has to pass.

The clause that pays for itself

Of everything on the scorecard, account registration with a stated protection period returns the most for the least. It costs a manufacturer nothing to grant, it converts a relationship into a record, and it turns the worst week of the year into a filing exercise. Distributors rarely lose these disputes on the merits. They lose because the only contemporaneous document anyone can produce belongs to somebody else, a discipline that spec-driven public tenders reward just as consistently.