Companies often set up distribution agreements with agents either in the United Kingdom or elsewhere in order to distribute their products.
UK agency law is highly regulated particularly by EU law. The Commercial Agents (council directive) Regulations 1993 provide sales agents with certain rights including minimum notice periods and potentially significant compensation on terminations.
It is therefore important to make it clear in the contract whether it is going to be an agency agreement or a distribution agreement.
A distributor take title to the goods supplied by the supplier and resells them either to a retailer or another wholesale or the final consumer. In effect a distributor is an independent contractor. What he does not create a contractual relationship between the third party customer and supplier.
By contrast an agency occurs where one party (the agent) has authority from another party (the principal) to create a legal relationship between the principal and a third party.
The types of Distribution Agreements
There are a number of forms of distribution agreements:
Exclusive distribution where the manufacturer/supplier is precluded from selling the goods direct to the territory or the customer group.
Non exclusive distribution where the manufacturer/suppler can sell directly and appoint further distributors within the territory.
Selective distribution where a network distribution system is established through outlets and meets certain minimum requirements.
Terms of business