commercial agents & distributors

Many businesses appoint agents or distributors to ensure their goods or services reach as wide an audience as possible. The distinction between an agency and a distributor relationship is an important one as, in law, an agency generally has more onerous provisions than a distribution appointment.

In certain circumstances, an agent is afforded protections under the Commercial Agents (Council Directive) Regulations 1993 (the “Regulations”). The definition of “commercial agent” under the Regulations is quite wide and open to interpretation.

The effect of the Regulations is to afford greater protections to agents in relation to commission payments and the termination of the agency, thus often rendering an agency arrangement less attractive to the supplier.
 

When deciding to appoint a third party (as agent or distributor) the following will help to establish whether an agency or distributorship is being created

• the remuneration of the third party (will they be entitled to charge a mark-up on the price paid or will the price be stipulated by the supplier with the third party receiving a commission payment);
• which party will be entering into a contract with the ultimate customer; and
• will the third party be required to purchase goods in its own right.