Agents & distributors
Using intermediaries can be attractive as
- local knowledge/contacts/expertise may be necessary to penetrate particular markets.
- capital investment can be minimised.
The use of a local representative may even be legally required in certain countries.
On the negative side you will have less direct control over the sales and marketing process and, in the worst case scenario, may simply be training up future competitors and giving them access to your customer base!
This makes it all the more vital for you to be confident as to the standing/solvency and expertise of proposed intermediaries.
Of course, if you rely on intermediaries in doing business there can be significant risks if things go wrong. Effectively drafted contracts will not only help flush out potential problems in advance but will also seek to protect both parties’ rights if the relationship goes astray.
Agent or distributor?
There is a fundamental legal difference between agents and distributors. An agent negotiates on your behalf and may be entitled to create a legal relationship between you and the customer.
A distributor buys goods on its own account from you and resells them to customers. It is the distributor which has the sale contract with the customer not you – the distributor takes on the financial risk of not being able to sell the product.
We frequently advise clients on agency and distribution agreements.
Steen Rosenfalck - Partner