Foreign Trade

Distributorship Agreement: It is a type of agreement between the Manufacturer/Exporter Company (supplier) and the company that will enable the distribution or marketing of this company's products abroad. Its basis is the resale of the goods purchased from the supplier within the framework of the agreement rules.

Agency Agreement: It can be summarized as carrying out the commercial affairs of the exporter company on behalf of the company in return for a profit. It is based on the provision of a service within the framework of the agreement made with the exporting company.

Within the framework of general practice, the agency has the authority to sign agreements that will bind the supplier company. However, the agreements made by the distributor do not put the supplier company under any obligation. In this context, while the contracts for the sale of products in the agency are between the supplier and the customer, the distributors make the product sales agreements on their own behalf. Generally, the agency does not undertake any obligation under the sales agreement made on behalf of the supplier. E.g; The seller, that is, the supplier, bears the risk of uncollectible receivables. The exporter is obliged to pay commission to the agent on sales. The distributor, on the other hand, makes the sale independent of the supplier (on its own behalf). While there is control over the price in sales made through the agency, the supplier's price control may be limited in distributor sales. The supplier company determines the appropriate agreement type depending on the current/planned business volume, price policy, market information, risk preferences and personnel structure for the country.

The purpose of the agency/distributor agreement is basically; to define the relationship between the two organizations, to establish this relationship on legal grounds, to determine the commercial targets and ways of working, and to show how the conflicts that may arise can be resolved.

In such agreements to which the companies will be a party, the definition of the agreement, that is, the agreement made, should be stated as a distributorship/agency agreement. Since these agreements require a more detailed arrangement in terms of purpose and scope than other agreements whose subject is purchase and sale, it is recommended that the terms of the agreement be determined by carefully examining them. It is important that the agreement be written in as much detail as possible in order to avoid possible disputes.

Once the deal is done, it may be a good idea to test the performance of the broker before signing a binding contract. If you are not satisfied with the performance of the agent, it will be easier to end the relationship. When concluding a brokerage agreement, it is helpful to learn about the laws in force in the broker's country and consult a lawyer. It is useful to be especially careful about cancellation clauses. A text of thirty days' notice of cancellation is sufficient. No one wants to be legally bound for an extended period of time to a potentially hostile distributor or agent after a warning. In some countries, you cannot cancel the distribution contract just because you want it, as required by the legislation. Local laws may require you to take back unsold goods and reimburse shipping. Local laws governing distributor compensation provisions in the event of a cancellation require prior review. If a single distributor is used for distribution to many countries, the country with the most appropriate laws regulating distribution relations for the company should be selected. It would be helpful to have the contract signed after it has been approved by a lawyer or an expert.