Includes typical use of agents and distributors and how to find a good partner, e.g., whether use of an agent or distributor is legally required.
Last Published: 7/30/2018

Sales agents or representatives solicit business for a foreign company and serve as a conduit for purchase agreements. In most cases, a sales agent does not have the power to negotiate terms, or to finalize the sales contract.  Instead, the sales representative forwards the contract to the foreign company that either accepts, rejects, or proposes modifications. The sales representative, nonetheless, is considered to be an agent of the foreign corporation, and under the general laws of agency, the foreign corporation may be liable for the actions of its agent.

Agents assume a number of duties and obligations once a representation contract with a foreign company is finalized, including adherence to the principal’s instructions, good faith in the interests of the principal, and maintenance of proper accounts. The agent retains the right to remuneration and the right to an indemnity for liabilities or losses incurred due to improper termination. Australian law, however, does not require indemnity payments.

Parties may stipulate specific causes for termination in the agreement.  Either party may terminate the agreement upon receipt of reasonable notice. Although no specific time period exists which defines a reasonable notice period, courts may take into consideration the nature and length of the contract when determining whether reasonable notice was given.

A distributor acts as an independent contractor, purchasing products from the foreign corporation and distributing them to wholesale buyers or retailers. Generally, a foreign corporation cannot restrain a distributor from selling competitors’ products.   Australian distributors often ask for exclusive geographic rights to market a foreign corporation’s products. Due to the size of the market, Australian distributors often request nationwide exclusivity.

American companies can choose to have Australian or US law govern their contracts when drafting an agreement.  The choice of jurisdiction does not, however, preclude the application of mandatory provisions in Australian law.  Without a stipulation of law, Australian courts will apply the law of the jurisdiction where the agent or distributor works, that is, Australian federal law and appropriate state and local law.  Notification of agent/distributor appointments should be submitted in writing to satisfy various state jurisdictional laws, especially when they last for more than one year or include terms for commissioning the agent.  Either fixed or indefinite-term contracts may be employed. Repeated renewal of fixed-term contracts will not cause the contract to achieve indefinite-term status.

For many products the use of an agent or distributor is not legally required. However, there are products such as dangerous goods that can only be brought into Australia through an import permit or license. Other products like cosmetics may need an importer/introducer to ensure compliance with regulatory requirements.

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.