Specialists In Agency Agreements

An agent is an intermediary involved in making a contract between its principal and the principal’s customer, as opposed to a distributor who purchases goods from a supplier or manufacturer and then sells them on (as an independent trader) to its own customers.

There are many different types of agency agreement, including:

• introduction or referral agreements, where the agent introduces clients or customers to the principal business owner and the agent is paid commission by the principal;
• cross-border sales agreements, where the agent is authorised to carry out business on the principal’s behalf in specific territories (usually on an exclusive basis);
• sales of goods or services, where a sales agent sells the principal’s good or services on its behalf; and
• marketing agency, where the agent is engaged by the principal to advertise or market the principal’s products or services.

An agent acts as an intermediary for the principal and often has authority (the “agency”) delegated to it to negotiate and enter into contracts or sales on behalf of the principal. However, a distributor purchases goods from a supplier or manufacturer and then sells them on (as an independent trader) to its own customers (often on an exclusive basis in the territory). 

With an agency agreement there is only one contract for the sale and purchase of the goods or services – between the supplier/principal and the end consumer. The agent is merely an intermediary. Whereas, with a distribution agreement, the distributor will have an agreement with the supplier/principal and then will enter into individual contracts with its own customers (not the principal’s customers) for the sale of goods/services to them.

Another distinction is made with regards to income. An agent is generally paid a commission by the principal for sales or introductions whereas a distributor’s income is generated from the profit margin between the price paid for the goods from the distributor and the price it sells the goods for to its customers.