Agency Agreement

An Agency Agreement is a contract between a principal and an independent agent in international trade, authorizing the agent to promote goods, solicit orders, or provide after-sales services on behalf of the principal in a specific territory or market, and to receive commission accordingly. It is commonly used when an exporter wants to leverage a local agent's channels and language advantages to explore overseas markets without establishing a branch. Key points: the agreement must specify the type of agency (exclusive or general), territory, product scope, commission rate and payment terms, minimum sales target, intellectual property protection, confidentiality clause, term and termination conditions. The core difference from a Distribution Agreement is that an agent does not take title to the goods, does not bear profit or loss from sales, and acts only in the principal's name, whereas a distributor buys the goods and bears its own profit or loss. Unlike a commission agency, an agency agreement may include exclusive rights, in which case the principal may not sell through other channels in the territory. In addition, local agency laws must be observed, such as the EU's mandatory protection rules for commercial agents.