Agent/Distributor Agreements Checklist

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Final Considerations

You have decided to export through an intermediary - an agent or distributor.  Before you commit yourself be sure that you are clear about the distinction.  The terms are sometimes used interchangeably, but there are important differences.

An agent sells your products on your behalf using your name and you pay him a commission on the sales made.

A distributor buys products from you and on-sells them in his own right making a profit from the difference between what he pays you for the products and the price for which he sells them.

It costs you more to maintain stock under an agency arrangement, but you have more control over an agent than a distributor.

The following is a guide to some of the matters that may need to be considered when preparing an agent or distributor agreement.

• Parties included.
• Territory involved.
• Products involved - description, catalogue.
• New products - policy for new products.
• Period of agreement - depends on the product, usually three years with right of renewal.  A termination clause should be included - so many months' notice by either party and any time by mutual agreement.
• Probationary period - one year with review of performance after six months.
• Prices - refer to the price list.
• Discounts - promotional discounts and responsibilities.  The agreement should include the principles to work on, not the detail.
• Method and timing of payment.
• Minimum orders.
• Production scheduling and lead times.
• Territory exclusivity for distributor.
• Exporter to refer enquiries to distributor.
• Distributor not to re-sell out of territory.
• Restraint of trade following termination of agreement.
• Spares and stock - distributor to hold stock/spares only, not an agent.
• Communication costs - each party to cover their own costs.
• Performance measures.
• Training and technical support.
• Samples.
• Advertising and promotion.
• Ownership of brand.
• Distributor to protect trademarks, patents, etc.
• Exchange of market information.
• Procedures for defective goods.
• Distributor to keep books of accounts.
• Relationship management - contact list, official addresses, etc.
• Confidentiality.
• Early termination for breach of agreement.
• Transfer of rights - distribution rights cannot be transferred without permission.
• Country in which legal action/arbitration to take precedence.
• Arbitration - a last resort.

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A brief exchange of emails may constitute a contract that will prevent you from changing your mind, but is without the necessary details to ensure your products will be marketed effectively.

The issues which are not addressed may be the ones you need to protect you if your agent or distributor stocks your goods, but recommends your competitors' products stored alongside them, becomes insolvent, or uses your logo inappropriately.

An informal agreement may prove to be unclear, ambiguous or, for other reasons, misunderstood by your overseas agent or distributor.

Every territory has a different regime of local laws which may affect your agency or distributorship.  Anti-competition is a sensitive point in the European Union and the USA.  Termination is contentious in the Middle East.  There may be legal requirements for registration, signing or notarisation which will invalidate your agreement if you do not comply.