Agency and distribution agreements
The appointment of an agent or a distributor is a complex area of law and should not be overlooked.
Agency and distribution agreements are commonly used to sub-contract out business to take advantage of the agent or distributor’s local knowledge, connections and ultimately to save money. Whilst most clients will use the terms “agents” and “distributors” to mean the same thing, they are separate. The best way of differentiating between the two is to understand that an agent is only an intermediary – the agent will not be a party to any contract between your business and your customer. A distributor will buy goods from your business and sell them on to his customers.
Being commercial solicitors who advise clients regularly on agency agreements and distribution agreements, we are able to provide legal advice which suits the individual circumstances. One of the main areas for any client to consider is the impact of the Commercial Agents (Council Directive) Regulations 1993, which cannot be varied and sets out keys duties of both the agent and the principal.
Under the Commercial Agents Regs, either party has a right to request a signed document setting out the terms of the agency agreement – this right cannot be contracted out of. Here at Ironmonger Curtis, our commercial solicitors will be able to take you through the drafting of an agency agreement and the negotiation of its terms so that before you enter into the agreement you know exactly what your obligations and responsibilities are and the obligations and responsibilities of the other party.
There is also the possibility of an Introduction Agreement where one party appoints another to find third parties who may want to purchase goods or services. They are a quasi-form of agency.
The agreement should cover the following terms:
(a) Duties of the agent or the distributor
(b) Duties of the principal
(c) Is it for the provision of a service? If so, the Commercial Agents Regs do not apply.
(e) Commission – when it is due? When the customer has signed their contract? How is the commission to be paid?
(f) Does the agent have authority to negotiate the terms with a customer and conclude a contract with the customer?
(g) What territory can the agent or distributor work in?
(h) How long is the agreement going to last – will it be for a fixed term, or fixed term with the chance to extend it or will it last indefinitely?
(i) Will the agent/distributor have sole, exclusive or non-exclusive rights?
(j) Termination – if it is an agency agreement, is there to be compensation or an indemnity for the agent?
(k) Will there be any post-termination restrictive covenants?
(l) Are there any issues affecting competition law?
This list is not exhaustive and without having an agreement in place or understanding the agreement that you have been asked to sign, you could be left in a tricky situation.