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Distributor

An entity or individual who sells a principal’s product on the distributor’s own account. A distributor buys products from the supplier at a discount and resells the products with a mark-up or profit margin. The distributor is therefore liable to the supplier for the value of goods received, unless there is a “sale or return” provision in the distribution agreement. By contrast, an agent sells on the supplier’s account the goods or services, i.e., the agent never takes title to the goods and contracts of sale are between the supplier and the customer with the agent usually being paid a commission.

Although distributors and agents are in principle different legal ‘animals,’ in practice, agency and distribution agreements often create hybrid creatures that are difficult to categorize the parties as either. It is usually wise to ensure that such agreements explicitly define which type of relationship exists. Even where the status of the distributor or agent is stated in the contract, courts may consider the facts of the relationship as opposed to the description, applying a ‘duck test.’ It is also the case that relationships may overtime have evolved from an agency to a distributorship or vice-versa. See VAR, Agency Directive, Agent, Belgian Distributor Rights, Franchise.

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