Distribution and agency agreement review checklist

Hello, this is Legal Agent.

"Distributor," "agent," "referral partner" and "reseller" are used almost interchangeably on the ground, but the legal structure behind each label changes the risk considerably: whether the intermediary contracts with the customer as the manufacturer's agent, buys and resells in its own name, or simply introduces leads that the manufacturer closes.

Three different commercial structures share one label

Under an agency structure, the intermediary contracts with, or brokers a contract with, the customer on the manufacturer's behalf, and the manufacturer typically remains the contracting party. Under a resale structure, the distributor buys the product and sells it on in its own name, carrying inventory and pricing risk while the manufacturer retains an interest in brand and territory rules. Under a referral structure, the intermediary only introduces prospects, and commission timing and overlapping leads become the central issue. The word used in the contract title does not settle which structure applies: a distribution agreement may in substance only cover referrals.

Commission triggers and the scope of the sales right

Distributors should check whether commission is paid when the manufacturer closes a deal directly, whether an existing-customer carve-out swallows their own leads, and whether renewals are covered, since otherwise sales effort goes uncompensated. Exclusive rights raise the stakes on both sides: they justify a distributor's investment but can cost the manufacturer sales if the exclusive partner underperforms, so the scope of exclusivity, minimum targets, and the conditions for termination or conversion to non-exclusive status need to be explicit, with room for adjustment where market conditions or product defects are the real cause of a shortfall.