Commercial contracts

Distribution & agency

A distribution agreement facilitates independent sales by resellers. In contrast, an agency agreement involves an agent in the brokerage process, with the principal taking charge of the terms. The following briefly discusses the difference between distribution and agency.

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Distribution Agreement

A distribution agreement is an agreement under which a reseller is granted the right to purchase products for an (un)definite period of time and then resell them in his own name and for his own account and risk. In principle, the reseller is also allowed to determine the terms of the sales agreement whereby he resells the products or services, including the price.

No special provisions in Dutch law apply to the distribution agreement. Thus, general contract law applies to it. However, a distribution agreement also obliges the distributor to perform certain obligations by order of the principal. As a result, the distribution agreement can often also be partly considered a contract of assignment.

Agency Agreement

Unlike the distribution agreement, the agency agreement does have a special regulation in Dutch law and, for that matter, in many other countries in the EU. According to the law, the agency agreement is: an agreement whereby one party ("principal") instructs the other party ("agent"), for a fixed or indefinite period of time and in return for remuneration ("commission" or "fee"), to mediate in the formation of contracts and possibly to conclude the contract in the name and on behalf of the principal. The agent is not employed by the principal.

The major difference with distribution is that contracts are made in the name and on behalf of the principal. Thus, no contract is established between the agent and the buyer. It therefore makes sense that the principal has the freedom to determine the terms of the agreement with the buyer, including the price.

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FAQ

A distribution agreement is a contract that gives a reseller (distributor) the right to purchase products or services and then sell them in its own name and at its own risk and expense. The distributor basically has the freedom to determine the terms of sale, including the price.

A distribution agreement is a contract that gives a reseller (distributor) the right to purchase products or services and then sell them in its own name and at its own risk and expense. The distributor basically has the freedom to determine the terms of sale, including the price.

Agency agreements have a special arrangement in Dutch law. This means that the agent is instructed to mediate in the conclusion of contracts for a principal, often in return for a remuneration such as commission or fee. The agent acts in the name and on behalf of the principal and is not employed by the principal.

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