Tag Archives: agents and distributors

Agency and Distribution Agreements

Check the local laws

Before entering into an agreement with an agent or distributor overseas, you need to do some research on the law in the territory where he or she is based. In some countries, for example, there are rules that require agency agreements to be registered with a Government department or that stipulate only nationals of the country can become an agent of a foreign supplier.

So, before signing anything, get some local legal advice early on to cover:

  • Who is entitled to act as an Agent? – is this confined to a national or company owned by nationals of the State or can a foreigner act as your agent?
  • What are the basic legal rights of the Agent and the Principal?
  • What are the rules concerning termination of the Agency?
  • Are there any registration procedures?
  • Does the law distinguish between agents and distributors? In Europe, the rules only apply to agents but in some countries of the Middle East, the distinction is blurred and a distributor might have the same termination rights as an agent.

You might think that the issues mentioned above can be avoided if you say English law will govern the agreement with your agent. Unfortunately, it is not so simple and the local courts or even the legislation may take a different view.

Remember this…

Be sure to spell out all the key requirements in your agreement – territory, products, commission, initial period, targets, termination rights and much more. Don’t ever omit any important matters in the hope they will sort themselves out later.

Contract Templates

Included in Exporting Made Easy – the book are some template agreements, which you can also order individually for download from ContractStore.com:

The Difference between Agents and Distributors

You may already know whether you require a commission agent, or prefer a distributor who can stock products locally in the market. As the export of services from the UK has expanded rapidly in recent years and there is no tangible product to stock, so an agent is often all that is required.

However, it is worthwhile to examine the role and types of agents and distributors, as these terms are often used loosely. A distributor may refer to himself as an agent and vice versa, so it can be confusing.

The Agent

  • An agent does not have to buy the product or service from the supplier (or principal) and does not have title to (or own) the goods or service.
  • The role of the agent is to find customers for their principal in return for a commission payment on any sales they arrange.
  • Once the agent has effected an introduction, the supplier/principal will then sell the goods/services direct to the consumer.
  • An Agent does not accept financial liability.

The Distributor (or The Re-Seller)

  • Purchases products from a UK exporter/supplier and therefore has “title” to the goods purchased.
  • The distributor then sells the goods on to the final customers having added his profit to the price.
  • The selling prices and terms of sale are determined by the distributor.*
  • Buys/sells on own account in defined region

*Fixing the resale price is illegal in the UK and many other parts of the world. The most you can safely do is to have a recommended retail price (RRP).