An area of Commercial law dealing with a contractual or quasi-contractual tripartite set of relationships when an Agent is authorised to act on behalf of another (called the Principal) to create a legal relationship with a Third Party. This branch of law separates and regulates the relationships between:

  • Agents and Principals;
  • Agents and the Third Parties with whom they deal on their Principals' behalf; and
  • Principals and the Third Parties when the Agents purport to deal on their behalf.

The common law principle in operation is usually represented in the Latin phrase, qui facit per alium, facit per se, i.e. the one who acts through another, acts in his or her own interests and it is a parallel concept to vicarious liability and strict liability in which one person is held liable in Criminal Law or Tort for the acts or omissions of another..


In international transactions, an agency or a representative relationship is created by a contract (often called, agency agreement or representative agreement) between a person acting on behalf of another in a foreign country and the principal. The agent normally receives commission (instead of profits from the sales and purchase) from the principal for its services of finding parties, marketing products and services, negotiating consummation of deals, etc.

A marketing agreement or a consulting agreement often falls into this category and it is not uncommon to find such agreement to have a provision for independent contractor relations to clearly segregate the liabilities of the principal and the agent.
A similar concept of representing another person is called power of attorney which creates attorney in fact (as differentiated from attorney at law) when it is granted by one person to another.


A distributor works as an independent dealer for the marketing of certain products and services. It usually obtains profits by buying products from the wholesaler or manufacturer and re-sell them to another party with profit. In international transactions situations, a distributor can be an importer in one transaction and a domestic seller or an exporter in another transaction.
Because a distributor tends to opt for an exclusive dealing with the manufacturer, it may run afoul of anti-trust law that prohibits as illegal certain exclusiveness that substantially lessons competition in the relevant market. Therefore, special attention is required in drafting a distributorship agreement or a dealership agreement.

This form of international trade is highly popular in the commodity trading with technological support and so, in many situations, a distribution agreement contains technology licensing or technical assistance as part of the agreement.
(3)Franchise System

Franchising (from the French for free) is a method of doing business wherein a franchisor licenses trademarks and methods of doing business to a franchisee in exchange for a recurring royalty fee. According to Financial Times, if sales by US franchise businesses were translated into national product, they would qualify as the 7th largest economy in the world.

In the United States, franchising falls under the jurisdiction of a number of state and federal laws. Contrary to what might be expected, there is no federal registry of franchising or any federal filing requirements for information, but franchisors are required by the Federal Trade Commission to have a Uniform Franchise Offering Circular to disclose potential franchisees about their purchase. Instead, states are the primary collectors of data on franchising companies, and enforce laws and regulations regarding their spread.

Inherent in a franchise system is the concept of licensing (a trade mark). So, you will find many franchise agreements are in fact called ¡°license agreements¡±. Like a license agreement, therefore, you can easily identify certain arrangements in a franchise that may run against anti-trust law among others.
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