Specialists In Agency Agreements
When considering how best to market, sell and/or distribute your business’ products, it is important to consider and be aware of both the legal and practical differences between appointing an agent or a distributor. An agency agreement helps the parties to focus on both the practical and commercial issues which need to be considered when entering into such a relationship. Other business law services at Tinsdills include:
Trusted Guidance & Advice For Agency Agreements
When preparing an agency agreement, there are many options for the powers delegated to the agent by the supplier or manufacturer (known as the ‘principal’). Agency agreements can be exclusive or non-exclusive. An agent may be given authority to negotiate and enter into contracts on behalf of the principal, or they may act as the principal’s representative without authority to enter into new contracts.
In most countries, there are some laws that have the aim of protecting agents. Each country has different rules and regulation and English law on agency relationships is particularly complex. There are also more regulations on agency relationships than there are in respect of distribution arrangements. For example, if the agency relationship relates to the sale and purchase of goods, that relationship will be subject to a law known as the Commercial Agents (Council Directive) Regulations 1993. These regulations provide for, amongst other things, compensation or an indemnity (payable to the agent) if the principal terminates the relationship.
Our team of specialist business law solicitors are able to assist in the preparation and negotiation of an agency agreement and to advise you on the complex area of agency law. We take the time to understand the relationship between the agent and principal, understanding the background and reasoning behind every agreement to help minimise costs and the risk of a dispute between the parties.
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.
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