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Supply, Distribution & Agency Agreements

LCF Law advises on all kinds of supply and purchase relationships. These may be structured as one-off or ongoing sales, as hire agreements, or as framework arrangements. Whether selling within the UK or across national borders, LCF Law has the experience and expertise to advise you carefully and commercially, and to prepare agreements that protect your interests; enabling you and your business to develop and grow your trading relationships with confidence.

Regardless of who is on the other side in any negotiation - whether a small business, a government or a large multinational - we take a sensible and commercial view and we protect your interests vigorously.

For supply of goods, we have advised on contracts in both the public and private sectors valued up to £55 million and covering arrangements in various different industries ranging from sports goods to joinery products to manufacturing. We have particular expertise in advising businesses on how to exploit their core technology commercially whilst ensuring maximum protection of their intellectual property rights.

For supply of services, we advise on a very broad scope of contracts. These range, for example, from consultancy arrangements, which often require specific advice to minimise risks relating to employment legislation; to advertising, sales promotion and sponsorship/endorsement arrangements; through to advising clients on contracts in the context of public procurement exercises.

Agency or distribution - recognising the differences, and why it matters

A manufacturer may appoint an agent or a distributor for a number of reasons including: to outsource the sales process; to take advantage of the agent’s or distributor’s market position and knowledge; or to enter new markets. It is often the case, however, that insufficient thought is given to the exact nature of the relationship; and, in particular, whether the relationship is one of agency or of distributorship?

The relationships of agency and distributorship are fundamentally different. An agent acts on behalf of another person (called the “principal”) and can actually create a contract between the principal and the customer. The agent, however, is not usually a party to the contract between the principal and the end customer. As such, the principal’s goods are sold directly to the end customer by the principal (although the contract will have been procured for the principal by the agent).

A distributor, on the other hand, is an independent trader who buys products from one party (the supplier) and sells them on its own account to its own customers. In doing so, the supplier contracts with the distributor to supply it with goods; the distributor then, in due course, seeks to contract directly with a customer to sell them the goods.

A supplier looking to expand into new markets may seek to do so by appointing agents or distributors. One of the advantages of appointing an agent or agents is the fact that the supplier (the principal party) retains more control over the sale. They can control the price, who they sell to, and the terms of sale, because the end customer is contracting directly with the supplier/principal. The agent, however, may benefit from the provisions of the Commercial Agents (Council Directive) Regulations 1993, which give them certain rights including, in many circumstances, the right to an indemnity or compensation payment on termination of the agency relationship.

By contrast, distributors will sell products purchased from the supplier on the distributor’s own terms and at their own prices. The supplier loses the ability to exercise a higher level of control, but equally the distributor assumes the risk of being unable to sell on the stock that it has purchased from the supplier. Furthermore, UK distributors cannot benefit from the rights to compensation or indemnity payments at the end of the relationship that commercial agents benefit from under the Commercial Agents Regulations.

LCF Law can provide in-depth advice on your agency or distribution arrangements, as well as on related issues that commonly arise, including Bribery Act and TUPE issues, and competition law compliance. We can help you navigate all these issues and prepare robust yet commercial agreements with your trading partners.

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