Agency Distribution & Supply Agreements

Agency arrangements involve the interposing of a third party between the seller and buyer of goods or services. As such, a separate regime of legal duties and obligations applies to such relationships, some of this is imposed by UK domestic law and some it originates in the EU, as for example the Commercial Agents Directive.

As a method of growing and developing businesses, agency shares some similarities with distribution and franchising in the use of a  third party between seller and buyer. Yet it is distinctive from the others and its choice as the medium through which to operate and grow a business will depend on the particular dynamics of the business involved.

Distribution 

Distribution replaces the agency relationship with one where the distributor buys the goods or the right to provide the service in his own name before selling on to others. The liabilities of the distributor will therefore be higher than those of an agent and, in the absence of specific regulation or agreement to the contrary the distributor will be free to conduct sales as he things fit.  Since the relationship of agent does not exist, the Commercial Agents Directive will not apply. A distributor will also have complete freedom on pricing which the agent is unlikely to have.

Factors which will affect the decision on whether to appoint a distributor will include the distributor's market reach, particularly if exclusivity is to be given.

Supply

Every business will supply its goods or services on the basis of contractual terms. To the extent that they have not been specifically agreed between the parties, they may be imposed by statute or implied by custom, course of dealings or the courts. The fact that this is not a satisfactory way to conduct business means that businesses will seek to impose specific terms on the contracts they enter into. Such terms will favour the side whose terms are accepted; these terms will often be specific to the particular industry sector, taking into account accepted industry standards, codes and legislation. Terms should be reviewed periodically to reflect both general law and industry-specific changes. Businesses which sell to consumers will particularly need to review their terms more frequently because of the frequency with which consumer rights are developed.

Businesses selling online or by other distance selling media such as telephone are subject to additional regulation.  Distance Selling, E-Commerce and Provision of Services Regulations provide mandatory compliance obligations in addition to the older statutory provisions.