Legal Reset · Contract Structuring
Agency or distribution: the mistake that changes who carries the risk
They're used as synonyms in everyday conversation, but on paper they're not. Signing a commercial agency agreement when the actual operation is distribution, or the other way around, creates obligations that neither party consciously agreed to.
- Agency and distribution aren't legal synonyms: signing the wrong one creates obligations nobody agreed to.
- In distribution, the distributor buys the product and bears the resale risk; in agency, the agent only earns a commission.
- In a dispute, what matters is the reality of the relationship, not the label on the document.
- The question that settles everything: who bears the risk if the product doesn't sell?
They're used as synonyms in everyday conversation, but on paper they're not. Signing a commercial agency agreement when the actual operation is distribution, or the other way around, creates obligations that neither party consciously agreed to.
It all comes down to who loses if it doesn't sell
In distribution, the distributor buys the product and resells it on its own account: if it doesn't sell, the distributor is the one who loses. In a commercial agency agreement, the agent only intermediates in exchange for a commission and doesn't take on that risk. That difference, which sounds like accounting, is what later determines who owns the client base and what's owed at termination.
| Criteria | Distribution | Commercial agency |
|---|---|---|
| Buys the product | Yes | No |
| Takes on resale risk | Yes | No |
| Earns | Resale margin | Commission |
| Owns the client base, by default | The distributor | Depends on what's agreed with the principal |
When the paper says one thing and the operation does another
The most common mistake isn't choosing wrong: it's that the contract says "agency" while the operation runs like distribution, or the other way around. When there's a dispute, what gets analyzed is the reality of the relationship, not the label on the document. That's where compensation the company never budgeted for shows up.
How to avoid it
The question that settles everything is simple: who carries the risk that the product won't sell? Answering it honestly, and then drafting the agency or distribution agreement accordingly, avoids the conflict before it exists.
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