Agency and distribution agreements
Do you need to formalise arrangements with sales or marketing agents?
Do you need advice on an agency agreement already in place?
When expanding your business into new markets, you will face a number of options. Rather than employing more sales executives, you could enter an agency or distribution agreement with a third party. This is particularly common when entering new markets overseas, but can be used in a variety of situations.
Agents operate with different degrees of exclusivity and so it is important to understand how this will affect your sales. The main options are:
- An exclusive agency prevents you from actively seeking sales in the agent’s territory and from appointing other agents or distributors there.
- Sole rights prevent you from appointing another agent or distributor in the territory, but will not prevent you from actively seeking sales in the territory at the same level (i.e. customer/wholesaler/retailer/end-user) at which the agent is operating.
- Non-exclusive rights leave you free to appoint other agents and resellers and also actively to seek sales in the territory at the same level of customers as the agent.
It is always important to expressly state in the agreement exactly what rights the agent is to have. The clearer the agreement is the more it will help to avoid disputes later on or when the agency is terminated.
There are advantages and disadvantages over appointing an agent rather than a distributor. The most significant disadvantage is the right to lump sum payments for agents on termination of agency agreements, regardless of breach of contract by the agent.
At Myers & Co, our commercial solicitor can review your current arrangements and help you put in place agreements that will protect your business and minimise risk. Alternatively if you are considering terminating contracts with any of your commercial agents, then speak to us first.
Based in Stoke-on-Trent, Staffordshire, our commercial solicitors have a reputation for providing accurate advice, and dealing with complex problems in an efficient manner. For further advice contact our commercial law solicitors or call Myers & Co on 01782 577000.
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