Distribution and agency agreement review checklist

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Terms such as "distributor," "agent," "reseller," and "referral partner" are often used loosely in business discussions, but each carries very different legal risk profiles. The practical differences turn on whether the intermediary acts as an authorized agent for the manufacturer, purchases and resells goods in its own name, or merely introduces sales leads for the manufacturer to close.

Commercial models and legal classification

An authorized agent may enter contracts on the manufacturer's behalf, making the manufacturer the contracting party with the customer. An intermediary that merely brokers a contract does not acquire authority to bind the manufacturer simply by doing so. Under a resale arrangement, the distributor buys inventory and resells it in its own name, absorbing pricing and inventory risk while adhering to brand standards and territory boundaries. Under a referral model, the intermediary simply routes prospective clients, making lead registration and commission timing the primary focus. A contract's title alone does not determine its legal nature; a document styled as a distribution contract may in substance be a simple referral arrangement.

Commission terms and direct-sale carve-outs

Where remuneration takes the form of commission, intermediaries should examine whether it applies when the manufacturer closes a sale directly, whether broad carve-outs for existing customer accounts diminish eligible leads, and whether renewals or expansions generate commissions. The agreement should also address lead registration and protection periods. Without suitable terms, substantial sales efforts risk going uncompensated. A reseller's revenue may instead come from its resale margin.

Exclusivity, sales quotas, and remedy provisions

Exclusive distribution rights can support the partner's investment, but may cost the manufacturer sales opportunities if the partner underperforms. Agreements should clearly set the territorial scope of exclusivity, realistic minimum sales targets, and unambiguous mechanisms for termination or reclassification to non-exclusive status. The parties should consider a process for discussing adjustments when shortfalls stem from market conditions, supply problems, or product defects, rather than relying only on immediate penalties.