Agent Distributor Agreement
Agency and distributorship agreements are used to help organizations expand their operations. These can be used domestically if a company wants to increase its presence in a different state or region without incurring the costs of relocation or reincorporation. They can also be used if a company is seeking to gain exposure to foreign markets.
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Agency Agreement Defined
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In an agency agreement, a company appoints an agent to market its products or services in a determined market. Agents are usually not entitled to negotiate prices or finalize sales. Although the sale is executed between the company and the buyer, the agent is typically paid a commission on that sale.
Distributor Agreement Defined
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In a distributorship agreement, a company nominates a distributor to sell its products in a determined market. Under this arrangement the distributor buys the company's products and resells them at a profit in that market. The sale is executed between the distributor and the buyer.
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Agency and Distributorship Agreements in International Commerce
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Agency agreements are often preferred in international commerce because they enable the seller to maintain direct contact with international customers as well as to avoid antitrust laws. However, under a distributorship agreement the seller bears little or no risk in the resale of the product. This is an attractive strategy for sellers willing to reach out to foreign markets without incurring set-up costs.
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