- Independence of the parties: unlike the agent, who is instructed by the principal to either acquire or sell property on behalf of the principal, the distributor undertakes to sell the goods of the principal on his own name and on his own account, so assuming all the risks and benefits associated with the distribution of the goods.
- Control over the title to the goods and the goods themselves: by contrast to an agent, the distributor is able to take both title and possession of the goods, hence he can modify and repackage them.
- Control over the customer base: the distributor is used to having a direct relationship with the customer base, as any customer is usually his own customer and not the costumer of the principal; the principal will hardly deal with these customers. Differently, the agent acts on behalf of the principal who then retains the control over the customer base.
- Control over pricing: as opposed to distribution agreement, which is generally characterised by a complete discretion of the distributor over the pricing of the goods (unless the parties agree upon introducing into the contract a recommended retail price list), agency contract refers to situations in which the principal desires to exercise the control over pricing; in the latter case the agent is generally instructed by the principal and has not any power in relation to the resale prices of the goods.
- Monitoring performance: unless differently agreed upon by the parties, the principal is used to having difficulties in monitoring the performance of the distributor.
- Profits: the profit that the distributor accrues belongs to the distributor, whereas the agent receives a commission by the principal in relation to his results.
- Termination: generally speaking, with regard to the Principal’s point of view, is more easier to terminate a distribution agreement rather than an agency agreement, which usually entails the agent to receive a compensation by the principal.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Avv. Davide Palazzo – Palazzo Law Boutique.