The first and most
important consideration is to
ensure that the agreement
clearly states what the
relationship actually is --
agent or distributor. The
rights and duties of the two
different relationships are
very significant (see
following article). Given this
distinction, the agreements
should state very plainly and
clearly what relationship is
being established.
The following basic items
normally are included in a
typical foreign sales
agreement:
Date when the agreement
goes into effect
Duration of the
agreement
Provisions for extending
or terminating the
agreement
Description of product
lines included
Definition of sales
territory
Establishment of a
policy governing resale
prices
Maintenance of
appropriate service
facilities
Restrictions to prohibit
the manufacture and sale
of similar and competitive
products
Designation of
responsibility for patent
and trademark negotiations
and/or policing
The assignability or
non-assignability of the
agreement and any limiting
factors
Designation of the
country of contract
jurisdiction in the case
of dispute
Determine whether the
relationship is exclusive
versus non-exclusive
State which geographic
regions are to be covered
Set forth issues of
payment for the products
(in the case of a
distributor) and for
payments of commissions
(in the case of agents)
Determine the currency
in which payments are to
be made and address
currency fluctuation
issues
Provide specific
provisions regarding
renewal of the agreement,
including specific
parameters for
performance, promotional
activity and notice of
desire to renew
Establish a specific
provision for termination
of the agreement and for
what reasons, i.e.,
failure to perform to the
terms of the contract. (Be
careful with this
provision. Some foreign
countries restrict or
prohibit termination
without just cause or
compensation.)
Outline the termination
process for the end of the
agreement period
Provide for workable and
acceptable dispute
settlement clauses
Assure that the
agreement addresses
whether or not
intellectual property
rights are being licensed
or reserved
Do not allow, without
seller's consent, the
contract to be assigned to
another party (sub-agents
or sub-distributors) to be
used to fulfill
obligations in the
contract or the contract
to be transferred with a
change of ownership or
control over the
agent/distributor
Assure that your
contract complies with
both U.S. and foreign laws
on topics such as: export
and import licenses;
customs duties and sales
taxes; relevant
antitrust/competition laws
relating to marketing
restrictions and pricing
methods; relevant laws on
bribery (Foreign Corrupt
Practices Act) and
employment and marketing
discrimination
(Anti-Boycott Law)
The agreement should also
contain statements to the
effect that the representative
will not have:
Business dealings with a
competitive firm
Will not re-export
contrary to the national
security and foreign
policy interests of the
United States
Will not reveal any
confidential information
in any way that would
prove injurious,
detrimental or competitive
to the U.S. firm
Will not enter into
agreements binding on the
U.S. firm
Will refer all inquiries
received from outside the
designated sales territory
to the U.S. firm for
appropriate action
At all times, exporters
should avoid articles that
could be contrary to U.S.
antitrust laws. Legal advice
should be sought when
preparing and entering into
foreign agreements.
