Agency & Distribution Agreements Solicitors

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What is an Agency Arrangement?

An agent works on your behalf to seek, negotiate and close contracts with purchasers. If you want to sell your products in a new market, the agent facilitates deals with new purchasers. However, they typically have no obligations or liability under the contract between you and the purchaser.

Although your agency agreement will define the obligations of both parties, due to the nature of the arrangement, the law offers additional rights to the agent. Your contract is subject to The Commercial Agents Regulations 1993, which also gives the agent extra rights, especially regarding the termination of the arrangement. 

Advantages 

An agency arrangement is preferable over a distributor arrangement:

• You can fix resale prices without breaking UK and EU competition law
• You can restrict the agent’s ability to choose the customers they deal with

Disadvantages 

There are some disadvantages of agency arrangements that you should be aware of:

• Under The Commercial Agents Regulations 1993, your agent has the right to a lump sum of capital at the termination of the agreement, even if they breached the contract
• Any contract created by the agent whilst acting for you is your contract and therefore enforceable against you.

Key Clauses

Generally, agency agreements will cover the following areas:

• The duties and responsibilities of parties
• The geographical area that the agent will operate in
• Whether the rights of the agent will be exclusive or non-exclusive
• The method, rate and timing of payments
• Any non-compete clauses
• Any confidentiality clauses
• Whether parties are authorised to make commitments on behalf of each other
• The duration of the agreement
• Any remedies to deal with breaches
• How the agreement can be terminated

Commercial Agents Regulations

If your agreement involves the supply of goods, it will need to comply with the Commercial Agents Regulations 1993, which are designed to protect the rights of commercial agents. Our agency contract specialists excel at determining:

• What terms of the regulations cannot be excluded
• Whether another model should be used instead
• Whether the agreement needs to be adapted to meet international regulations

What is a Distribution Arrangement?

If you manufacture products, you can use a distributor to get them into the hands of the public. Firstly, you sell your products to the distributor, and then, they sell them to their customers, taking the liability of that final sale. 

Your distribution agreement should be well drafted to set out the obligations of both parties. In the event of a missing or poorly written agreement, the law may imply terms that contradict your intentions. 

Distribution arrangements breach competition law and therefore have limited provisions. UK and EU competition law sets out a framework for assessing distribution agreements, and if their standards are met, your contract may be exempt from such limitations.

Advantages 

Choosing a distributor arrangement comes with multiple benefits:

• You can pass on the risks associated with your products
• You are not liable for your distributor’s actions
• The distributor may be more motivated to sell your products as they have taken on risks
• For agreements in the UK, the distributor is not entitled to compensation or indemnity when the agreement is terminated
• You do not have to establish new businesses in foreign territories, aiding your tax and administrative efficiency

Disadvantages 

You should understand the potential disadvantages of using a distributor over an agent:

• You do not have complete control over the distributor’s actions, unlike with an agent
• A distribution agreement has a higher risk of competition law complications than an agency agreement

What is the Difference Between an Agent and a Distributor?

An agent acts on behalf of the principal, the person who has authorised the agent to act on their behalf. The agent’s role is to set up a contract between the principal and the customer or simply introduce the principal to the customer. Generally, agents are not party to the agreement between the principal and the customer. A distributor, on the other hand, buys goods from the principal and sells them directly to the end customer.

Am I Responsible For My Agent’s Actions?

As the agent is acting on your behalf, you may be considered responsible for any mistakes or illegal activities the agent commits whilst representing you. Similarly, you may also be liable if the agent damages property or injures someone. That is why it is important to have clear terms set out in the agency agreement. Our highly experienced arrangements solicitors will help you limit your liability if the agent does something that has not been authorised.

Terminating an Agency Agreement

Many agency agreements do not have a specified end date or are fixed-term contracts that have continued. In such cases, minimum notice needs to be given under the Commercial Agents Regulations. For example, for the first year that the agreement has been in effect, one month’s notice is required whereas two month’s notice is required for the second year. In the third and subsequent years, three month’s notice is required.

Usually, the notice will need to expire at the end of the calendar month unless another agreement is in place. It is worth noting that it is not possible for parties to agree on shorter notice periods. However, the regulations do allow for parties to agree on longer periods of notice as long as certain conditions are met. 

Our Support

As you can see, agency and distribution arrangements are complex, and you have to jump through multiple legal hoops to protect your business. With our expertise, you do not need to worry about these obstacles.

We offer a comprehensive service that allows you to focus on your operations. With our experience drafting hundreds of agreements and protecting the interest of companies in the UK and abroad, we can recommend the best solutions. Whether you need help deciding between a distributor or an agent, or assistance selecting the right party, we offer decisive legal advice. Then we can explain the ramifications of your proposed market, especially if it is overseas. 

Finally, we manage all the negotiations and paperwork on your behalf. Our team of litigation specialists is ready to secure the best terms for your business.

Why Choose Witan?

When drafting any commercial agreement, you need legal expertise. We provide a bespoke service to every client who instructs us, catering to their individual needs. We will be there for you whenever you need us, ready to offer detailed insights and recommendations. You benefit from: 

• Over 100 years of experience supporting clients
• Representation by a Legal 500 firm 
• Dependable advice explained in simple terms
• A free, no-obligation case consultation 
• Commercially-minded legal professionals 
• Agency and distribution arrangement solicitors in London, Birmingham and Northampton

Meet Our Expert Team

We are immensely proud to have a team of solicitors and litigation professionals with a diverse range of experience. Combined, they have the necessary expertise to resolve any issue and support you through all your concerns. Look at our profiles to learn more about our qualifications and achievements.