Marketing Agreements

Two of the most commonly used marketing agreements are agency and distribution agreements.

Agency agreements are used vastly in the commercial world. The nature of an agency agreement is one where the agent is able to bind the principal, i.e. the agent has authority to act on the principal’s behalf. Therefore, an agent is free to negotiate and conclude contracts with third parties without the principal’s permission.

A distribution agreement differs in that the supplier sells its good to the distributor, which then re-sells them to third parties. The most well known example of a distribution agreement is where a manufacturer sells its goods to a wholesaler, which buys them to sell to its own customers.

It is important to consider the benefits and disadvantages of each type of agreement before deciding which one is most suited. An agency agreement will require constant supervision by the principal over the agent and will therefore not be appropriate (perhaps) if the principal and agent reside in different countries, however an agency agreement may be most suited where the principal wishes to be in contact with the ultimate consumer and wants greater control over who the consumer will be. In addition, agents are protected by the Commercial Agents Regulations 1993, which govern the relations between commercial agents and their principals.

Distribution agreements require little supervision by the supplier, it is ultimatley the distributor’s responsibility to market the goods once the supplier has sold the goods to the distributor. If anything goes wrong with the product, the consumer will have a remedy only against the distributor and not the supplier, with whom there is no contract with. A distribution agreement essentially removes the supplier away from the ultimate consumer. However, a distribution agreement is likely to infringe European Competition law becasue many distribution agreements try to dominate the way which goods are sold, i.e. containing clauses such as price fixing and exclusivity which are deemed as being anti-competitive.

It is important to consider the above issues when deciding how best to market your goods. Of course, there are other options, such as franchise and licence agreements.

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