Chapter Twelve

Agency Agreements： Proposal, Negotiation and Closure

Section 1 Introduction

• A large volume of the world’s trade is conducted through

the agency system.

• There are three types of agents: general agents, sole or exc

lusive agents, and ordinary or commission agents。• The principals seeking agents abroad and prospective age

nts each have concerns about the other and need to negoti

ate terms of contract in a careful manner.

Section 2 Specimen Documents Specimen 1: Asking a firm or individual to represent you

• We have been in touch with the consular section of your Embassy at Beijing, which recommended your firm as a possible agent for porcelain ornaments in Finland.

We manufacture porcelain ornaments and hope to increase our exports to overseas markets. We are seeking an organization that can introduce and handle a considerable amount of business.

• Kindly let us know if you are interested in representing us, and if you consider that the volume of business you can obtain would warrant our granting you a sole agency.

• Our export price list, catalogue and a sheet giving full details of agency commission and terms are enclosed.

• We look forward to hearing from you.

Specimen 2: Accepting an agency (a positive reply)

• We were very pleased to receive your letter … offering us the agency for your porcelain ornaments. We are certainly willing to be your agents and sell your products throughout Finland.

• When you draw up an agreement …, we suggest the inclusion of the following points:

We operate as Sole Agents for a period of three years, after which period the contract will be renewed annually.

A commission of 7½% will be paid on all sales, whether from us or direct from customers.

Monthly accounts of sales will be kept and sent to you. We will accept your quarterly drafts for the net amount.

We agree not to handle any imported competitive products. All advertising expenditure for the first year will be refunded by you,

thereafter to be divided equally between us. All reasonable outlays for postage, faxes, and trunk calls will be refun

ded by you. Office expenses are payable by us. • We would be happy to discuss these points at your convenience and a

ny other issues you may wish to raise.

Specimen 3: Manufacturer’s confirmation of agency terms We were pleased to learn … that you are willing to accept an agency for marketing our p

orcelain ornaments in Finland. ….. The terms agreed were as follows:

1. The agency will operate as from 1 January 2013 for a period of three years, subject to renewal.

2. The agency will be the sole agency for marketing our goods in Finland.

3. No sales of competing products will be made in Finland either on your own account or on account of any other firm or company.

4. All customers’ orders will be transmitted to us immediately for supply direct.

5. Credit terms will not be given or promised to any customer without our express consent.

6. All goods supplied will be invoiced by us direct to customers, with copies to you.

7. A commission of 5% based on fob values of all goods shipped to Helsinki, whether on orders placed through you or not, will be payable at the end of each quarter.

8. A special del credere commission of 2½% will be added.

9. Customers will be required to settle their accounts with us direct. A statement will be sent to you at the end of each month of all payments received by us.

10. All questions of difference arising under our agreement will be referred to arbitration.

Please confirm your agreement to these terms. A formal agreement will then be drafted and copies sent for your signature.

Specimen 4: Offering a marketing agency

• We understand that …, and we wish to offer our services

with a view to marketing your products.

• … we can offer unrivaled expertise in obtaining orders

and handling sales and documentation for you, because

of the considerable experience already gained of dealing

in textiles and leather merchandise of more than15 years.

• If you are interested in our proposal we will be very

pleased to provide bank and trade references.

• We look forward to hearing from you.

Specimen 5: Letter of appointment of agency

• We have .. and we are pleased to grant you a consignment agency for the period of one and half years (January 1, 2013―June 30, 2014). After this period, the arrangement will be agreed annually.

• A commission of 5 per cent will be paid on all sales made through you, and we will allow reasonable expenses incurred on our behalf.

• Enclosed are our export catalog, price list, order forms, and two copies of the contract. We will supply you with goods on credit not exceeding €20 000. Payment should be made by draft.

• Our Mr Wang will be flying out to you on May 25 to agree the terms of the contract. He is authorized to sign on our behalf. You will shortly be hearing from the XYZ Company who will witness the signing of the contract documents.

• We look forward to receiving your first order.

Section 3 Useful Expressions

• We write to offer our services as your agents in South America. If, however, you are already satisfactorily represented here, please ignore this letter.

• Regarding your proposal to represent us in ... for the sale of …, we have decided to appoint you as our agent in the area you defined.

• We have noted your request to act as our agents in your area, but before going further into the matter, we would like to know your plan for promoting the sale of our products and the annual turnover projected to materialize in your local market.

• With your excellent connections, it will be possible to promote the sale of our products in your market, and we hope your acting as our sole agent will be to our mutual benefit.

• The question of agency is still under consideration and we hope that you will continue your efforts to push the sale of our products at the present stage.

• Before we can accept your request for acting as our agent in your local market, we would like to know your plan for promoting the sale of our products and the annual turnover you can realize there. Quite similar to no 3

• A considerable number of our well-established connections have shown excellent trading results.

• We are a well-established trading organization in Qingdao, China and have wide connections with leading factories throughout the country.

• The appointment will be for a trial period of twelve months. We will pay you a commission of 5% on the net value of all sales against orders received through you, to which would be added a del credere commission of 2½%.

• We will render monthly statements of sales and accept drafts you draw on us for the net amount due.