Contracting with Sales Representatives and Distributors in Foreign Markets

By John Dorsey, Strasburger & Price LLP

Many Austin-based companies successfully expand their international sales of goods and services by contracting with sales representatives or distributors in foreign markets. These arrangements involve special considerations.

Know Your Partner.  Before drafting any contract, research and investigate prospective foreign business partners’ expertise and financial capability to perform the duties under the contract. Is the prospective business partner a good citizen? A thorough inquiry enables many companies to avoid disastrous international business relationships.

Be Specific.  The contract should clearly specify the duties to be performed by the sales representative or distributor as well as the rights and obligations of both parties. For example, it should include comprehensive provisions regarding protection of intellectual property, confidentiality, purchase orders, manner and method of payment for goods or services (e.g., letters of credit), shipping and risk of loss of goods, compliance with local laws, warranties and disclaimers of warranties, management of customer warranty claims, breach of contract and remedies for breach, termination, dispute resolution, governing law, and other provisions.

Understand Your Remedies.  If a business partner is located in a foreign jurisdiction, enforcement of contractual rights and guaranties may be limited by law, expense, time, or other factors. The only practical remedy in certain situations may be to terminate the contract. 

John Dorsey is a Senior Associate at Strasburger & Price, LLP. He represents start-up and middle market companies in business formations, joint ventures, mergers and acquisitions, and seed funding and other transactions, including distribution and intellectual property licensing transactions. He is the founder, author and editor of www.mexicolawblog.com. John Dorsey can be reached at (512) 499-3646 or john.dorsey(at)strasburger.com.