A business which acts both as an agent and a distributor for the same supplier can face an important problem when the relationship ends.
Under the Commercial Agents Regulations, following termination of the agreement, a commercial agent will, in most situations, be entitled to either compensation or indemnity. A distributor does not have the same statutory rights.
But there is a further complication. Even where a business genuinely carries on some activities as an agent, it does not necessarily follow that those activities mean that the protection afforded by the Regulations applies. This is because the Regulations exclude agents whose activities as commercial agents are to be regarded as “secondary”.
For businesses which act as both agent and distributor, that exclusion deserves particular attention.
Agent or distributor?
An agent will act as a conduit between its principal and a buyer. Usually if an order is secured the agent will receive commission. In contrast a distributor normally buys goods from a supplier and resells them on its own account, earning its return through the resale margin.
In practice, however, commercial relationships do not always fit neatly into one category.
A supplier may appoint a business as distributor for some customers or products or for a particular territory while allowing it to act as agent for others. The same sales team may perform both functions. The documentation may be unclear. Sometimes the parties themselves use “agent” and “distributor” interchangeably.
That can be significant when the relationship comes to an end.
The secondary activities issue
The Regulations provide that an agent whose activities as a commercial agent are to be considered secondary is outside their scope. The Schedule to the Regulations contains provisions intended to determine when this is the case.
The difficulty is that the concept is not particularly straightforward.
Some years ago this was considered in AMB Imballaggi v Pacflex. The supplier was an Italian manufacturer of plastic packaging materials. Pacflex bought products from it and sold them in England. However, on termination of the relationship, Pacflex also argued that it had acted as an agent and was therefore entitled to rights under the Regulations.
There was no satisfactory written agreement defining the relationship. That left the court to examine what the parties had actually done.
The court concluded that Pacflex had acted as a distributor rather than as a commercial agent. In particular, it had not negotiated sales on behalf of the supplier in the manner required for the Regulations to apply.
But the judge went further. He considered what the position would have been if Pacflex had carried on some activity as an agent and concluded that such activity would in any event have been secondary.
Why does that matter?
The point is important for any business which performs more than one function for the same supplier.
It is not enough simply to establish that on some transactions the business is an agent as a matter of law. It is also necessary to consider whether that agency activity falls within the statutory exclusion for secondary activities.
That will be a problem where the commercial relationship is principally one of distribution, but an agency element has been added alongside it.
The parties may, for example, have a substantial buy-and-resell business, but also allow the distributor to introduce customers or solicit orders and be paid a commission. If the relationship ends, the intermediary may regard the commission business as an agency and expect the Regulations to apply.
The principal may respond that, viewed in the context of the overall commercial arrangement, the agency activity is secondary and therefore excluded.
The answer will depend on the circumstances and on the application of the Regulations to the particular arrangement. Labels alone will not resolve the issue.
Documentation helps
The problem is made more difficult where the parties have allowed their arrangements to evolve informally.
If a business is intended to act both as distributor and agent, the two roles should be identified clearly.
The agreement should address which products, customers, or territories fall within each role. It should make clear when the intermediary buys and resells goods and when it negotiates transactions on behalf of the principal. Payment arrangements should also reflect that distinction. But is also important that the parties’ conduct corresponds with the documents.
Separate agreements may assist, although documentation cannot turn a distribution relationship into an agency if the commercial reality is otherwise. Similarly, merely keeping separate accounting records will not necessarily determine whether agency activities are secondary.
The consequences of getting it wrong
For an agent / distributor, the consequences can be significant.
It may have carried on genuine agency activities and earned commission, but still find that it cannot claim compensation or indemnity under the Regulations because those activities are regarded as secondary.
But this does not, however, mean that the intermediary should stop its analysis there.
The distribution side of the relationship is governed by ordinary contract law. If the supplier has wrongfully terminated the distributorship (for example, by failing to give the notice required by the contract, or reasonable notice where that is required), the distributor may have a claim.
Two questions, not one
Where an intermediary acts both as agent and distributor, termination should therefore prompt two separate questions.
First, does the agency activity qualify for protection under the Commercial Agents Regulations, or is it possible that it will be regarded as secondary?
Second, irrespective of the answer to that question, has the distributorship been terminated in accordance with the parties’ contractual rights?
Originally published 24 Aug 2026.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
[View Source]