What’s the difference between distribution and agency?
Distribution agreements and agency agreements are often confused. That’s logical, as there are many similarities. However, there are a number of significant differences between distribution and agency:
- The agent acts in the name and for the account and risk of the supplier of the product or manufacturer (the principal), whereas the distributor is considered to be a self-employed entrepreneur who acts on behalf of himself and at his own account and risk.
- Upon termination of the agency agreement, the agent is usually entitled to clientele compensation (goodwill indemnity). The distributor does not have this right.
- The agency agreement is governed by law providing the agent with a certain protection, whereas the distribution agreement is not governed by law. As a result, parties to a distribution agreement are free to make the agreements they want to, and they specifically have to do so as otherwise nothing will be established.
- The period of notice for a distribution agreement is usually much longer than the statutory notice period for an agency agreement.