Sales Agent & Distributorship Agreements

Front 1

What are the two most common means of distributing products abroad?

Back 1

1) Independent Foreign Agent
2) Independent Foreign Distributor

Front 2

Independent Foreign Agent

Back 2

• Does not take title of goods
• Usually paid in combo of salary + commission
• Doesn't bear risk that buyer won't pay
• No power to bind U.S. supplier

Front 3

Does an Independent Foreign Agent have the power to bind the U.S. supplier?

Back 3

Not usually, but may be considered to have implied power to do so, and certainly may be given express authority to do so.

Front 4

Which form of distribution tends to create more legal problems for companies selling abroad?

Back 4

Independent Foreign Agents

Front 5

(True or False)
Agency rules might be mandatory and not subject to alteration by contract, especially in civil law countries.

Back 5

True

Front 6

Independent Foreign Distributor

Back 6

• Buys company's products and resells them through its foreign network for a profit.
• Does not have power to bind U.S. supplier.

Front 7

What are the primary risks that an Independent Foreign Distributor faces?

Back 7

• Risk of being unable to sell goods, which it has taken title to.
• Risk of purchaser not paying

Front 8

Should a Independent Foreign Distributor agreement clearly define a principal-principal relationship or a principal-agent relationship?

Back 8

principal-principal relationship for limited risk.
Language from independent contractor contract may be useful here.

Front 9

Where foreign laws applicable to distribution agreements have been enacted, they are likely designed to...

Back 9

1) Benefit local agents/distributors, especially with regard to termination
2) Restrict or prohibit the use of agents/distributors
3) Apply domestic labor law to the distribution agreement

Front 10

Sale of goods to an independent foreign distributor means seller likley relinquishes control over what two things?

Back 10

price and where the product can be sold (thus some sellers choose agency agreements for this reason)

Front 11

Why is it important to keep an agent by contract rather than an agent by employment?

Back 11

Greater rights are typically granted to employees than contractors in most countries, and employees are likely subject to local labor laws.

Front 12

Why might the choice of an independent distributor rather than an employee agent create antitrust problems?

Back 12

Exclusive distributorship agreements may conflict with local laws, as might contracts prohibiting distributors from selling competing goods.

Front 13

In general, is it better to contract with an individual or a business entity?

Back 13

Business entity.
If agent is an individual, local labor laws may apply even if attempt is made to call individual an independent contractor.

Front 14

"Denial of import privileges" clause

Back 14

Allows supplier to stop sending products to a particular distributor if a "denial of import privileges" action is taken against it by a foreign court

Front 15

When are problems most prevalent for a company using a foreign distributor?

Back 15

Upon termination. Many countries (especially developing) don't look favorably on large foreign firms accused of unfair or wrongful termination.

Front 16

"Denial of export privileges" clause

Back 16

Allows suspension or termination of obligations to foreign distributor if U.S. government imposes restrictions on exports