Agency and distribution contracts: what to regulate

To grow in new markets you rarely hire your own sales force straight away: you work with agents and distributors. These are two figures that are often confused, but legally very different — and the difference weighs on commissions, risks and on the final bill when the relationship ends. Let’s look at what to regulate before signing.

Agency and distribution are not the same thing

Agent (agency contract, art. 418a et seq. CO): an independent intermediary who, on a stable basis, procures or concludes business in the name and on behalf of the principal. They do not buy the goods: they sell them for you and earn a commission. The agency contract is regulated in detail by the Code of Obligations, with rules that are partly mandatory.
Distributor (or authorised dealer): buys the products in their own name and resells them, taking on the business risk. Their margin is the difference between the purchase price and the resale price. The distribution contract is not specifically governed by the CO: it is an atypical contract, so what you write matters even more.

The choice between the two models changes who bears the inventory and credit risk, how the price to the final customer is formed and which legal protections apply.

What to regulate in the agency contract

Since the law already fixes many points, the contract serves to define the scope and to complete the mandatory rules:

Territory and products assigned, and any exclusivity (by area or clientele).
Commission: percentage, calculation basis, the moment it accrues and when it becomes due. The agent is entitled to commission on the business concluded thanks to their activity.
Del credere clause: if the agent guarantees the customer’s payment, they are entitled to a special remuneration and the clause requires written form.
Reimbursement of expenses, reporting obligations and non-competition.
Termination: the law provides notice periods that increase with the duration of the relationship; they must be respected and, if possible, made explicit.

The client indemnity: the point that surprises

It is the item that is most often forgotten and then disputed. At the end of the relationship, the agent may be entitled to a client indemnity (art. 418u CO) if they have considerably increased the number of clients and the principal continues to benefit from it. Some points to keep in mind:

the indemnity is due unless it proves inequitable;
its maximum amount corresponds, in principle, to one year’s commission or net average remuneration of the last few years;
it is not owed if the relationship is dissolved for a cause attributable to the agent.

It is a right that is largely mandatory: it cannot be excluded in advance with a simple clause. Anyone structuring a network of agents must budget for it from the outset.

What to regulate in the distribution contract

Here the law is silent, so the agreement is everything. The key points:

Exclusivity (yes/no, over which territory or category) and its reciprocity.
Minimum purchase or turnover targets and the consequences of failing to reach them.
Prices, discounts and delivery conditions; beware of the limits regarding the setting of resale prices, which competition law views with severity.
Use of the brand and marketing material, and what happens to the brand at the end of the relationship.
Warranty, product liability and management of returns.
Duration, termination and the fate of unsold stock at the end.

On the distribution contract, Swiss case law has in some cases recognised, by analogy, a client indemnity when the distributor is integrated into the supplier’s organisation like an agent: one more reason to define the roles well from the outset.

The mistakes that cost

Confusing the two figures, using a “distribution” contract while in fact the person acts as an agent: the risk is having the mandatory rules of agency applied, indemnity included.
Not regulating the end of the relationship: notice periods, indemnity and residual stock are the items over which disputes arise.
Ignoring competition law on exclusivities, territories and prices.
Neglecting brand and confidentiality: whoever distributes or represents gains access to price lists, customers and know-how that must be protected.

How SIH ONE supports you

The Tax & Legal division sets up tailored agency and distribution contracts — commissions, del credere, exclusivities, termination and management of the client indemnity — coordinating them with brand protection and with the corporate and tax structure. Before opening a new market or signing with a partner, we build the right contract.