A distribution agreement is particularly useful when a prime contractor wants to sell its products in a market or territory in which it does not currently operate. Agreements are generally vertical in nature, between two companies at different levels in the same supply chain. The main advantages of using distribution agreements are: a distribution agreement has similarities to an agency agreement. However, the main difference is that the distributor enters into the contract with the end user (customer) in its own name and the manufacturer is not involved, unless the warranty or liability of the product is established. We often help our clients determine which option best fits their business objectives, and we design and negotiate the corresponding trade agreement to ensure that they have maximum legal protection in their dealings with the agents and distributors they have appointed. If the contract is not subject to the regulations, the termination is a function of the contractual relationship established in the agency contract. Any termination clause must take into account the regulations if they apply. Distributors cannot enter into contracts on behalf of suppliers. The legal relationship exists only between the supplier and the distributor. The distribution agreement defines the terms of the relationship between the supplier and the distributor, including the products marketed, the distribution sector, the exclusive sales objectives, the selling price and how the products are to be marketed. Companies often enter into contracts with customers, contractors and other companies. Dealer contracts and agency agreements are two of the most common types of contracts used by companies to establish a fiduciary relationship.
A fiduciary relationship means that one party, usually the company that institutes the contract, is legally obliged to represent the other biased and to act in the best interests of others. Some relationships require a distribution agreement, while others work best with an agency agreement. Agency contracts and distribution contracts set conditions defining the duration of the agreement, the obligations of the parties, payment agreements, intellectual property rights and what happens at the end of the agreement. There may also be provisions for reports, accounts and registrations, training, marketing, etc. An exclusive agency agreement generally consists in the agent and the client agreeing that the client will not appoint other agents (i.e. the representative`s competitors) in the representative`s agreed territory and that the prime contractor does not actively seek to sell himself, although the client sometimes reserves the right to speak directly to designated companies. An exclusive agency agreement can also prevent an agent from entering into similar agency transactions with the client`s competitors. In both distribution and the Agency, a supplier or manufacturer uses an intermediary to promote and distribute its products.
At first glance, the manner in which the relationship between the supplier and the intermediary is characterized does not appear to be significant.