Oxbridge Notes | Marketing Agreements - International Commercial Law

Definition

Relationship whereby one party (principal) give another (agent) authority to act on her behalf
Contracts concluded by agent are binding between principal and TP, if agent has authority

Types of Agency Agreement

Sales agency agreement: agent is intermediary; title in goods passes directly from principal to TP; agent can conclude contracts directly with TP
Other types: ‘marketing’ or ‘introducing’ agreements: agent introduces client to customers (causing them to enter contract), even negotiates terms, but no authority to conclude contract
Court will pay more attention to actual relationship than to labelling of agreement

Types of authority

Express authority	Scope of agent’s authority set out expressly in agreement
Implied / actual authority	May arise in two ways: 1) Agent has implied authority to do things incidental to performance of duties 2) Implied authority arises out of customs of particular trade
Apparent / ostensible authority	Arises where principal has given distinct but false impression that agent had authority to enter into a particular contract. Authority arises from estoppel if: 1) At some stage, principal represented (by words or conduct) that agent had authority 2) TP must rely on that representation, believing agent had authority 3) TP must alter his position, by entering transaction (Freeman & Lockyer v Buckurst Part Properties [1964])
Authority by ratification	Where agent does not have authority, or has exceeded authority, principal may ratify acts
Authority arising by customer	?

Effects

	Principal and TP	Agent and TP	Principal and agent
Actual authority (express / implied)	Contract between principal and TP; each party can sue the other	Contract is between Principal and TP (Agent drops out)	N/A
Apparent authority	Contract between Principal and TP; each party can sue the other; Principal estopped from denying contract	Contract between Principal and TP; Agent drops out of picture	Principal may be able to bring actions against Agent if acted outside authority
No authority	No contract between Principal and TP	TP may sue Agent in deceit, where Agent knew s/he had no authority; cannot sue for breach of contract	Agent may be liable to Principal if latter suffers loss

Disclosed / Undisclosed Principal

Disclosed principal: TP is aware Agent is acting on behalf of another person; that person may be “identified” (TP knows identity) or “unidentified” (TP does not know identity)
Undisclosed principal: if not disclosed to TP that Agent acting as agent+TP thinks s/he is dealing with Principal, TP has a choice: if Agent acted w/in authority, TP may sue Principal or Agent

Restraint of trade

Usually valid in context of agency agreements, for duration of agreement, if in writing and reasonable for protection of valid business interests and not contrary to public interest
Must relate to the geographical area, customers and goods under agency; no more
Must last for no more than 2 yrs from termination
Must comply with competition law principles; if Agent is not “commercial agent”, post-termination restraint of trade clause will not be valid
Types: restrictions related to any grant of exclusivity; obligation not to sell competing products

Exclusive, non-exclusive and sole agents

Exclusive rights: prevent Principal from actively seeking sales in Agent’s territory and from appointing other Agents / Distributors there; Principal may reserve certain rights (continued right of supply to named (groups of) customers
Sole rights: prevent Principal from appointing other Agents / Distributors in the territory, but not from actively seeking sales itself
Non-exclusive rights: Principal is free to appoint other Agents etc and to actively seek sales
Principal may also reserve right to convert from one type to another (e.g. sole rights to non-exclusive), contingent on, e.g. sales figures

Exclusive agency / distributorship	P agrees not to appoint other As / Drs in territory Also agrees not to sell products itself within territory
Sole agency / distributorship	P agrees not to appoint any other As / Drs in territory Remains free to sell products in territory itself
Non-exclusive agency / distributorship	P can appoint other As / Drs in territory Can sell products in territory

DISTRIBUTORSHIP AGREEMENT
Definition	Supplier sells goods to Distributor, which then re-sells them on its own behalf E.g. manufacturer – wholesaler – retailer Title in goods passes from Principal to Distributor to customer; contractual relationships are: Principal Distributor Distributor Agent No contractual relationship between Principal + customers (may be tortious liability)
Mixed arrangements	Note that it is possible for an Agent to be both a sales Agent and a Distibutor for the same Principal in relation to different products

Definition

Supplier sells goods to Distributor, which then re-sells them on its own behalf
E.g. manufacturer – wholesaler – retailer
Title in goods passes from Principal to Distributor to customer; contractual relationships are:

No contractual relationship between Principal + customers (may be tortious liability)

Mixed arrangements

Note that it is possible for an Agent to be both a sales Agent and a Distibutor for the same Principal in relation to different products

Agency	Distribution
Agent (A) appointed by principal (P) under agency agreement. A receives commission (usually agreed percentage of sales or introductions). Can be used for marketing services as well as goods.	Supplier (S) enters distribution agreement with distributor (D). D buys the goods from S for resale, and retains all profits from resale. Generally only suitable for marketing goods.
Requires close supervision by P. Less suitable if A + P are based in different countries or P has ltd time. More suitable for bespoke products, those requiring close contact / after-sales service. Useful to protect brand/ rep.	Requires ltd supervision. D decides how and where to market goods. More suitable for mass-produced products or where S likely to encounter unfamiliar markets / language problems. More difficult to protect brand / rep.
More suitable where direct contact is needed between Principal + customer (bespoke work / specialist after-care)	More suitable where there is no need for direct relationship between...

Marketing Agreements - International Commercial Law