Commercial Law

Tutorial 4
Summary of differences between "distribution" and "agency"
Criteria Distribution Agreement Agency Agreement
Regulating legislation The Egyptian Commercial Code No. 17 of 1. Commercial Code.
1999 (the "Commercial Code"). 2. Commercial Agency, Commercial Mediation and
Real Estate Brokerage Law No. 120 of 1980 (the
" Commercial Agencies Law") and its executive
regulations. It should be noted that the
Commercial Agencies Law is to a large degree
agent biased and provides numerous protections
to agents.
Definition The Commercial Code defines the term Under the Commercial Agencies Law, "commercial
"distributor" as the importer of a product agent" is defined as any natural or juristic person
for the purpose of trading in same, who, without being engaged under an employment
however, it does not provide detailed contract or a lease of services agreement, habitually
provisions regarding such arrangements undertakes to submit bids, concludes purchases,
(unlike a commercial agency). sales or leasing operations, or provides services in
the name and account of manufacturers, merchants
or distributors, or in its own name but for the account
of such parties.
Ownership of products A distributor buys goods from the An agent arranges sales for the manufacturer to the
manufacturer in his name then resells customer, but never takes title to the goods; as the
them to the customer for a profit margin. title passes directly from the manufacturer to the
customer.
 Criteria Distribution Agreement Agency Agreement
Registration A distribution agreement/distributor is not Under the Commercial Agencies Law, an agent is
required to register with any special required to register with GOEIC by depositing the
registry. notarized agency agreement in addition to other
documents.
However, it has been a common practice
in Egypt over the years for the local
distributor to request the counterparty, in
addition to the distribution agreement, to
issue a simple form notarized and
legalized agreement/letter to be submitted
to the Egyptian General Organization for
Export and Import Control ("GOEIC"), on
the premise that it would facilitate the
importation and the local activities.
Therefore, if the local distributor proceeds
with registration of such an
agreement/letter with GOEIC (typically
deemed an agency letter); the stringent
rules of the Commercial Agencies Law for
termination and non-renewal of the
agency may easily be invoked.
 Criteria Distribution Agreement Agency Agreement

Termination/ There are no formal The termination of definite term agency agreements is subject to the
renewal requirements as to the agreement's terms.
termination and renewal of a
distribution agreement. However, under the Commercial Agencies Law executive regulations, the
General contract law shall principal may be required to compensate the agent if:
apply in this regard and thus
termination and renewal shall 1. The principal's fails to give notice of termination.
be subject to the parties’ 2. The principal does not renew the definite period of agreement without an error
agreement. or default from the agent in performing the agreement. Provided that the agent’s
activities had arguably resulted in the promotion of the products or increased the
number of clients.

In this regard to we note that, article (189) of the Commercial Code provided for
a similar compensation requirement for non-renewal of a definite term agency
agreements. However, said article was rendered unconstitutional in 2012. To
date no decisions were issued from the Supreme Constitutional Court with
regards to the non-renewal compensation provided for under the Commercial
Agencies Law's executive regulations. In theory, the executive regulations text
still remains in force.
Examples
1- Youssef owns a shop that sells cars. He sells BMW cars, but he is not
representing BMW in Germany. Youssef receives a profit margin for the
selling of each unit.

2- Omar owns a piece of land that he wishes to sell. On the other hand,
Ahmed is looking for a piece of land to buy. Youssef who is acting on
Omar’s behalf in selling his land.

In examples 1 & 2 which is considered an agency contract, and which is

considered a commission contract?
 AGENCY AGREEMENT

This Agreement is made and entered into as of __________, 2015 by and

between:
1. ___________ a corporation organized and existing under the laws of
________ having its principle place of business located at _______, duly
represented by Mr. ________________ (hereinafter referred to as the
"Principal");and
2. _________, an Egyptian joint stock/limited liability company having its
principle place of business located at ______, Cairo, Egypt, commercial
registration No. _____ the duly represented by Mr. _____(hereinafter referred
to as the "Agent").
 Preamble
WHEREAS, the Principal is engaged in __________________the
manufacture/processing/sale of the products (or provision of services)
outlined in Exhibit "A" which is attached hereto and made an integral part
hereof (the "Products")/(or "Services"); and

WHEREAS, the Agent wished to provide services and advice in connection

with the sale and promotion of the Products.

NOW, THEREFORE, in consideration of the mutual covenants herein

contained, the Principal and Agent do hereby agree as follows:
Article 1
The above preamble constitutes an integral part of this Agreement.

Article 2 - Appointment of Agent

2.1 Principal hereby appoints Agent as a non exclusive agent in the Arab
Republic of Egypt (hereinafter referred to as the "Territory") for the sale and
promotion of the Products within the Territory and Agent hereby accepts such
appointment [or for purposes of certain tender].
2.2 It is understood that Principal shall have the right to bid directly to the
private and/or public sectors in the Territory [or for purposes of a certain
tender - include tender details]. Principal shall not pay Agent a commission
on such direct sales and/or services resulting there from
Article 3 - Obligations and Services of Agent
3.1 Agent shall investigate, analyze, and promote the market for the sale of
the Products and solicit orders for the Products throughout the Territory in
accordance with the marketing and sales policies agreed upon by the
Principal and Agent.

3.2 Agent shall regularly keep Principal informed of current market conditions
in the Territory.

3.3 Agent shall keep Principal fully informed of any facts likely to be relevant
in relation to the manufacture, promotion, sale, distribution, use,
development, service, or maintenance of the Products within the Territory.
3.4 Agent shall deliver to Principal promptly by courier service all documents
for invitations to bid or requests for tender for any of the Products that are
issued by any government agency within the Territory or any political
subdivision, ministry, agency or authority thereof. Principal shall reimburse
Agent for the purchase and shipment costs of such documents. Agent shall
consult with and assist Principal fully and promptly as requested by Principal
in the preparation and submission or proposals for such bids and tenders
and in qualifying Principal as a bidder.

3.5 Agent shall promptly refer to Principal any after-sales inquiry or matter
relating to the Products.
3.6 Agent shall assist Principal in expediting the Products into the Territory,
including clearing the Products through customs, and otherwise dealing
with governmental ministries and agencies in the Territory so as to facilitate
the promotion, sale, distribution, service and maintenance of the Products.

3.7 Agent shall comply with all laws and regulations of the Territory as may
be applicable to this Agreement and to all transactions and activities to be
performed hereunder and shall keep Principal informed of any laws or
regulations of the Territory which may affect the Products and the
transactions contemplated hereby in order that Principal will not violate any
such laws or regulations through ignorance thereof.
3.8 Agent shall not, without prior written approval of Principal, appoint any
subagent or distributor for the promotion, sale, distribution, service or
maintenance of the Products in the Territory.

3.9 Agent shall not give any representation, warranty or condition relating to
any of the Products, make any firm quotations or offers for sale of any of the
Products, accept any order for any of the Products, or enter into, modify, or
terminate any agreement between Principal and any purchasers of any of
the Products, without prior written approval of Principal
Article 4 - Obligations and Duties of Principal
The Principal shall:
4.1 Pay Agent the commission fees stipulated hereunder when due.

4.2 Provide Agent with all advertising, promotional and sales materials in
relation to the Products.

4.3 Reimburse Agent for all expenses Agent incurs in connection with its
performance of its obligations under this Agreement.

4.4 Provide Agent with such personnel as may be required from time to time
to assist in the promotion, sale and maintenance of the Products
Article 5 - Commission
5.1 Principal shall pay Agent a commission on all sales orders for the
Products obtained by Agent in the Territory at the following rates: _____%
for amount of sales obtained by Agent.
5.2 Such commission shall be computed on the net invoice value received
by Principal in respect of all sales of the Products to purchasers within the
Territory.
5.3 "Net invoice value" means the price charged to a purchaser less all
applicable value added, use or other taxes, trade discounts, exports
packing, freight and transportation allowances or collect transportation
costs.
5.4 Agent shall be entitled to the commission on any sale of the Products for
which full or partial payment is received by Principal. Payment of commission
shall be effected within [ ] days from the date of payment is received by
Principal.

5.5 Payment of commissions hereunder shall be made by bank transfer,

check or other acceptable means in the same currency that Principal has
been paid for the sale of the Products to the Agent’s registered address in
Egypt.
Article 6 - Non-Competition
During the term of this Agreement Agent shall not, whether as principal,
servant, distributor or agent, directly or indirectly, within the Territory deal in,
promote, or otherwise be concerned with the sale of any goods competing
with the Products.
Article 7 - Confidential Treatment
Principal and Agent each shall treat as confidential any proprietary or secret
information pertaining to the other party or to any party of the other party's
business or assets, which is received at any time from the other party for the
purposes of this Agreement, and shall appropriately safeguard said
information both during the term of this Agreement and thereafter until such
time as said information properly comes into the public domain.
Article 8 - Disclosure of this Agreement
This Agreement may be discussed with, shown to, [and filed with any
governmental ministry, agency, or official] when said disclosure is necessary
after the prior the consent of the Principal. Article
9 - Effective Date and Term
0.1 The Effective Date of this Agreement shall be the date upon which this
Agreement has been signed by both of the parties hereto.
10.2 Subject to earlier termination pursuant to Article 10 hereof, this
Agreement shall have a term lasting for a period of _____ (_) year(s) from
the Effective Date hereof and expiring on _______, [and shall be terminated
by virtue of a written notice which notice shall be sent not less than sixty (60)
days prior to the expiration date.] [consider the expiry of the tender].
Article 10 – Termination
This Agreement may be terminated upon [ ] days written notice by either party if
the other party has breached any of its obligations hereunder and has failed to
cure such breach within [ ] days after receipt of a written notice of said default or
breach. However, any commissions due to Agent shall be paid when due even
after the termination of this Agreement provided same have been accrued
before termination.
The Principal may also terminate this Agreement, without liability and without
the need for any compensation and without the need for any legal notice, legal
procedures or issuance of a judgment to this effect, in any of the following
events:
Article 11 - Assignment
Agent shall not, directly or indirectly, (whether by succession, amalgamation,
merger or otherwise), assign this Agreement or any of Agent’s rights or
obligations hereunder, without the prior written approval of Principal.
Article 12 - Taxes
Agent shall be responsible for any taxes imposed by the Territory upon Agent
in respect of any commission received.

Article 13 - Independent Contractor

Agent is independent contractor fully responsible for its own activities with
respect to this Agreement and is not, and shall not, hold itself out as a partner
or joint venture of or with Principal. Any person employed by Agent shall be
considered an employee of Agent and shall not for any purpose be deemed to
be an employee of Principal
Article 14 - Governing Law, Language and Amendments
This Agreement shall be interpreted and construed in accordance with, and
governed by, the laws of Egypt. The English language version of this
Agreement shall be controlling and all notices or other communications
contemplated hereunder shall be in the English language. Any amendment
to this Agreement shall be in writing. In case this Agreement is translated
into Arabic, the English text shall prevail in case of any discrepancies.
Article 15 - Trademarks and Trade Names
Agent shall have the right to use the trademarks and names of Principal in
its sales activity of the Products. However, Agent shall not acquire any rights
to or under any goodwill, trademark, trade name, or other property of
Principal as a result of such use.
Article 16 - Arbitration
All disputes and differences of any kind arising under this Agreement shall
be submitted to arbitration. The arbitration shall be conducted, in English, in
Cairo, Egypt and shall be finally settled in accordance with the Rules of the
Cairo Regional Center for International Commercial Arbitration by three
arbitrators appointed in accordance with such Rules.

The decision of the arbitration tribunal shall be final and binding upon the
parties and may be enforced in any court of competent jurisdiction.
Article 17 - Notices
17.1 All notices and communications made pursuant to this Agreement shall
be in writing and shall be deemed to have been properly given if sent by
registered airmail, or by hand delivery to the address of the intended
recipient.
17.2 All notices and communications shall be deemed to have been
received (i) in the case of registered airmail letters within [ ] business days of
dispatch, and (ii) in the case of hand delivery upon receipt.
17.3 All notices and communications sent to Agent shall be addressed as
follows:
17.4 All notices and communications sent to Principal shall be addressed as
follows:
Article 19 - Supplement Conditions
Exhibit B contains the supplement conditions that the parties wish to
supplement to the conditions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed on the ______ day of _______________, 2015

___________________
By:___________________
Its:___________________
_______________________
By: ___________________
Its: __________________
Questions
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