Agency and distribution compared
Agency and distribution compared

The following Commercial guidance note provides comprehensive and up to date legal information covering:

  • Agency and distribution compared
  • Initial considerations
  • Comparison of main characteristics
  • When agency may be preferable
  • When distributorship may be preferable
  • Other options

Initial considerations

Agency and distribution are examples of channels to market: means by which a manufacturer, producer or an intermediary, such as a wholesaler, gets its products to end-user customers. Other channels to market include direct sales (where sales staff are employed directly by the manufacturer) or where the manufacturer sells at a distance (eg via the internet), entering into a joint venture with a local business, and franchising (which has many features in common with distribution). For further details on franchising see Franchising—overview.

This Practice Note compares sales agents, who procure (and often conclude) contracts with customers for their principal, with distributors. Sales agents also commonly handle marketing. Other common types of agent in commercial matters include freight forwarding agents and media agents who represent media or sports personalities.

Distribution has certain features in common with agency, but the legal structure is different. A distributor buys from a manufacturer and sells as independent principal, applying a mark-up to the manufacturer's sale price and re-selling to customers. For this reason a distributor is referred to as a re-seller in some jurisdictions. Title to the products concerned passes to the distributor, and the distributor not the manufacturer, has the contractual relationship with customers.

By contrast, an agent negotiates and (sometimes) concludes contracts with customers on the principal's behalf and is remunerated by