Distribution law in England and Wales

We do not propose to discuss agency at common law in detail in this guide, which is primarily focussed on commercial agency.

However, common law agency serves as the underlying framework for agency relationships in England and Wales, including those involving agents, so it is important to appreciate the nuances of common law agency, including the types of agency, appointment, authority of the agent to act on behalf of the Principal and whether the Principal is disclosed or undisclosed (from the perspective of a third party dealing with the agent).

An agent can have wide-ranging rights to create, change, or terminate legal relations on behalf of its Principal. Others may have more limited rights (for instance, to promote sales without authority to finalise contracts).

An agent may have actual authority expressly given by the Principal to act on its behalf. Others may have apparent or ostensible authority, whereby a third party dealing with the agent perceives the agent to have authority to act on the Principal’s behalf. Authority of the Principal may also be given by ratification after the fact.

In addition to defining the roles of agents, the common law addresses the obligations of disclosed or undisclosed Principals, the duties between agent and Principal, and the implications of restraint of trade clauses.

Recognising these nuances will help both Principals and agents when considering entering into an agency relationship.

The Regulations are derived from EU law (when the UK was a member state) and implement the agents Directive (86/653/EEC), the aim of which was to enhance and protect the position of agents (as defined in the Regulations), while harmonising national laws on Agency Agreements within the EEA. The Regulations are crucial for defining the rights and obligations of agent and Principal in an agency relationship in England and Wales.

When drafting an Agency Agreement, it is essential to determine whether the Regulations apply because:

• certain terms cannot be excluded or can only be excluded if favourable to the agent;
• the choice of agency versus other models (like distribution) may hinge on the application of the Regulations;
• if the Agency Agreement covers multiple countries, different member states of the EEA may have implemented the Directive differently, necessitating local legal advice potentially for each jurisdiction.

In 2024, the Department for Business and Trade (DBT) launched a consultation on the future of the Regulations. The UK Government considered that the Retained EU Law (Revocation and Reform) Act 2023 provided an opportunity to review the effectiveness of the Regulations and to ensure that they meet the needs of UK businesses. The consultation tested, whether the Regulations  should be disapplied to new contracts entering into force after a certain date. The objective was to:

• simplify the UK’s legislative framework;
• reduce court time spent interpreting these regulations;
• make it simpler for businesses to contract with each other; and
• allow the UK government to develop its own law in this area to meet its own needs.

The consultation closed in August 2024 and the Government provided its response in February 2025. The Government stated that based on a careful review of the balance of the evidence, the Government’s policy was that the Regulations would remain in force without amendment. On balance, feedback from the consultation shows that the Regulations operated as intended for agents and the Regulations were well understood by respondents. The Government noted that although a few principals did comment that the Regulations did not allow for contracts to be negotiated freely between agent and principal, there was not a sufficiently large body of evidence to suggest that this is a major issue and that there is a strong case for change.

See section on Scotland for the application of the Regulations in Scotland.

To qualify for protection under the Regulations, an agent must meet the definition of a "agent", which is outlined in regulation 2(1):

“A agent is a self-employed intermediary who has continuing authority to negotiate the sale or purchase of goods on behalf of another person (the Principal), or to negotiate and conclude the sale or purchase of goods on behalf of and in the name of that Principal.” [emphasis added]

Key requirements

Self-employed intermediary: the agent can be an individual, a partnership, or a company (employees do not qualify);

Continuing authority: an agent must have ongoing authority to act on behalf of the Principal, not just on a one-off basis;

Negotiate: the agent must have the authority to negotiate sales;

Goods: the Regulations apply specifically to agents involved in the sale or purchase of goods, not services. "Goods" may include gas, electricity, and software; and

Authority to negotiate and conclude: there are two types of agent: (1) those who negotiate (“marketing agent”), and (2) those who can also conclude contracts on behalf of the Principal (“sales agent”).

The Regulations apply to agents performing activities in Great Britain, excluding Northern Separate (but similar) regulations apply in Northern Ireland.

The Regulations do not apply to secondary activities, based on criteria outlined in the Schedule to the Regulations. Generally speaking, activities generating goodwill for the Principal indicate a primary relationship, while those that do not generate goodwill suggest a secondary relationship.

Determining whether the Regulations apply to an Agency Agreement is crucial for several reasons. The Regulations grant a qualifying agent specific rights and protections, including entitlement to compensation or indemnity upon termination of the agreement, even if the agent is in breach. This can significantly impact the financial liability of the Principal, making it essential for the Principal to understand its obligations.

The application of the Regulations can influence the negotiation and drafting of the Agency Agreement itself, particularly regarding terms of termination, commission structures, and the scope of the agent's authority.

Failing to recognise the applicability of the Regulations could lead to unintended legal consequences and disputes, potentially undermining the intended commercial relationship. Overall, clarity on the application of the Regulations is important for both parties to ensure compliance and mitigate risks.

There are generally no strict formal requirements for an Agency Agreement under English law, other than in respect of restraint of trade clauses, which must be in writing to be effective. Agency Agreements can be executed both verbally or in writing and there are no special formalities to take into account, although a written agreement is recommended for clarity and evidence.

Either party does have the right to request a signed document from the other party setting out the terms of the Agency Agreement, including any later variations.

There are no specific information obligations regarding an Agency Agreement. While no specific disclosure obligations exist, clarity in defining the terms, rights, and obligations of each party is crucial. Transparent communication helps avoid misunderstandings (and disputes).

As with all commercial contracts, it is important that the terms of the Agency Agreement are sufficiently clear to avoid disputes which may arise, including in relation to the agent’s scope of authority, rights, and commission structure.

From a Principal’s point of view, it is important to specify what will happen at the end of the agency appointment (whether by termination or expiry), as failure to do so adequately may expose the Principal to compensation claims. Even post-Brexit, regulations derived from EU directives may still influence agency law in England and Wales, especially regarding anti-competitive arrangements, termination and compensation payable on termination or expiry.

In England and Wales, the law differentiates, including in a business-to-business (“B2B”) context, between individually negotiated agreements and agreements concluded on a party’s standard terms and conditions. In relation to agreements concluded on standard terms and conditions only, the Unfair Contract Terms Act 1977 ("UCTA") states that a party cannot rely on a contractual term to exclude or limit liability for breach, except insofar as the term is "reasonable".

On 1 June 2022, the 2010 EU Vertical Agreements Block Exemption (“VBER”) was replaced with the Vertical Agreements Block Exemption Order (“VABEO”) in the UK and the 2022 VBER in the EU. Both of these regulations have accompanying CMA and European Commission guidelines, which clarify the position of agency agreements under UK and EU competition law respectively

“Genuine” Agency Agreements remain outside the scope of EU and UK competition law.

The EU and UK Guidelines clarify the criteria for “genuine” Agency Agreements:

• Temporary ownership by the agent doesn’t prevent the agreement from falling outside Article 101(1) of the Treaty on the Functioning of the European Union (“TFEU”), as long as the agent doesn't bear costs or risks related to property transfer.
• Agreements are less likely to fall outside Article 101(1) TFEU if the agent represents many Principals.
• Online platform agreements usually don’t qualify as Agency Agreements under Article 101(1) TFEU, as they typically act as independent operators.
• Dual-role agents: To be classified as genuine, the Agency Agreement must not be imposed by the Principal, and activities carried out as agent must be fully reimbursed by the Principal.

Note that this criterion is aligned at both the UK and EU level.

Should an Agency Agreement not fall within the above stipulated criteria for “genuine” Agency Agreements, it would be necessary to consider whether it could potentially breach EU or UK competition law, depending on where the parties are operating and where the products are being sold. If there is any doubt, it may be prudent to assume that both EU and UK competition law applies.

The Principal and the agent are generally free to agree on the scope of the agency relationship. This includes defining the agent’s duties, territorial scope, and authority. However, broad limitations or over-regulation of the agent’s role could impact their legal standing as an “independent” agent.

The EU VBER and the VABEO in the UK only play a limited role in the field of Agency Agreements. However, whether it could apply to the agent in the individual case, especially through the market cap test, should be assessed at the beginning of the cooperation as this could have significant legal implications.

Obligations of the agent

As a general principle, an agent has the following primary obligations at common law and under the Regulations (if applicable):

At Common Law

• to obey the lawful instructions of the Principal;
• only to act within the limits of its authority;
• to use reasonable diligence, skill and care, and reasonable despatch;
• not to put itself into a situation where its interests will conflict with those of its Principal;
• to disclose all material facts to the Principal and to refrain from divulging confidential information to third parties;
• not to make a secret profit or to accept bribes;
• to account to the Principal for property and money of the Principal which is under its control; and
• not to delegate its authority.

These common law duties can be contracted out of as between the Principal and the agent where both are businesses.

Under the Regulations

To the extent that the Regulations apply to an agency relationship, other duties are imposed by the Regulations. These duties cannot be contracted out of:

• the agent must look after the interests of the Principal and act dutifully and in good faith; and
• the agent must ‘make proper efforts' to negotiate and conclude those transactions it is instructed to take care of, communicate to its Principal all necessary information available to him, and comply with its Principal's reasonable instructions.

Obligations of the Principal

As a general principle, subject to variation by agreement and the Regulations (where applicable), the Principal has the following obligations based on common law and the Regulations:

At Common Law

• to pay the agent's remuneration and/or commission; and
• to pay the agent's expenses and indemnify them against losses incurred in the performance of lawful acts within the scope of the agent's authority.

Under the Regulations

• to act dutifully and in good faith towards the agent to give the necessary documents and all necessary information relating to the goods concerned and information necessary for the performance of the Agency Agreement;
• to inform the agent within a reasonable period of its acceptance or refusal of any commercial transactions negotiated or concluded by the agent, and of any non-performance by the Principal of any transaction arranged by the agent; and
• to give advance notice of any significant fall in demand for the products in the territory.

There are no mandatory rules governing the remuneration of the agent, although agents are commonly compensated through payment of commission on sales they generate, albeit fixed fees or a mix of both are also possible. Payment terms should be clearly set out in the Agency Agreement to avoid disputes.

During the contractual term, in the absence of contractual agreement as to payment, the agent can claim a commission fee if:

• the business transaction has been concluded as a result of its action;
• the business transaction has been concluded with customers that were assigned to the agent;
• the business transaction has been concluded within a territory that was assigned to the agent; or
• the transaction has been concluded with a third party whom it has previously acquired as a customer for transactions of the same kind.

For business transactions which are concluded after the contractual term has ended, in the absence of a contractual agreement to the contrary, the agent can claim commission if:

• the business transaction is mainly attributable to the agent's efforts during the contractual term and if the business transaction was entered into within a reasonable period after the end of the contractual term; or
• the order of the third party reached the Principal or the agent before the termination of the Agency Agreement.

There are no specific rules on the term of an Agency Agreement. The parties are generally free to set out the parameters of the contractual term, for example, in agreeing on a fixed term or an indefinite term, or a combination of both.

If the parties agree on a fixed term and, after the expiry of the fixed term, continue to perform the Agency Agreement, the Agency Agreement is considered to have been automatically renewed for an indefinite term.

If no term is agreed (either orally or in writing) then the Agency Agreement shall be deemed to have been agreed for an indefinite term.

If the Agency Agreement has been entered into for a fixed term, as a general principle, the Agency Agreement may be terminated for material breach or failure to perform. However, the Principal's obligation to act in good faith would probably mean that an attempt to terminate the agreement on a technicality would put the Principal in material breach of its good faith obligations and give rise to a cause of action for the agent.

If the Agency Agreement has been entered into for an indefinite term, or for a fixed term which ends and renews indefinitely, it may be terminated for convenience by complying with certain minimum notice periods. The Regulations set out the following minimum notice periods that must be given:

• during the first year, a minimum notice period of one month;
• during the second year, a minimum notice period of two months; and
• during the third and any subsequent year, a minimum notice period of three months.

In the case of a fixed term Agency Agreement which renews indefinitely, the earlier fixed period should be counted towards the period relevant for notice entitlement.

Unless otherwise agreed, the notice must expire at the end of a calendar month. The default notice periods may not be shortened. The notice periods may be extended by contractual agreement, provided, however, the notice period for the agent is at least the same length as the notice period for the Principal.

English law does not provide for a written form requirement with respect to the termination notice. For evidentiary purposes, we recommend setting out such requirement in the Agency Agreement and in any case terminating the Agency Agreement in writing with confirmation of receipt.

Where the Regulations apply, termination can be complicated due to compensation or indemnity rights of the agent. Unless there are certain precluding circumstances, termination of an Agency Agreement triggers the agent's entitlement to financial compensation or indemnification.

Although a settlement for ‘indemnity' or ‘compensation' can only be finalised after the Agency Agreement has terminated, the parties can agree in the agreement whether ‘compensation' or an ‘indemnity' will be payable upon termination, with the prevailing view now being that the ‘indemnity' option is preferable from the Principal's point of view, as it is subject to a maximum cap.

Under the Regulations, the compensation alternative is the default rule. The parties must expressly choose the indemnity alternative, otherwise it will not apply and the agent will be entitled to compensation.

Under a compensation claim, the agent is entitled to be compensated for the damage it suffers as a result of the termination of its relationship with the Principal. Such damage is deemed to occur particularly where the termination takes place in circumstances which either:

• deny the agent the commission which proper performance of the Agency Agreement would have generated, while providing the Principal with substantial benefits linked to the activities of the agent; and
• have not enabled the agent to amortise the costs and expenses that it had incurred in the performance of the Principal.

The calculation of the compensation claim according to the above principles is subject to case law which must be taken into account. Unlike the indemnification claim, a compensation claim is not subject to a cap.

If the parties have expressly agreed that the indemnity alternative applies, the agent is, upon the termination of the Agency Agreement, entitled to an indemnification claim if:

• during the contractual term, the agent has acquired business with new customers or significantly increased business with existing customers of the Principal and the Principal continues to derive substantial benefits from such business; and
• payment of the indemnity is equitable having regard to all the circumstances of the individual case and, in particular, the commission lost by the agent.

The amount of the agent's indemnity is capped at an amount equivalent to the average annual remuneration over the preceding five years (or the whole life of the Agency Agreement, if shorter). The cap may be used as an estimate figure for a Principal to assess the financial risk of terminating the Agency Agreement.

No compensation or indemnification is due to a agent when:

• the Principal has terminated the Agency Agreement because of default attributable to the agent which would justify summary termination of the Agency Agreement at common law (i.e. repudiatory breach);
• the agent has terminated the Agency Agreement, unless such termination is justified by circumstances attributable to the Principal or on grounds of age, infirmity or illness of the agent in consequence of which he cannot reasonably be required to continue its activities; or
• the agent assigns the Agency Agreement to another agent with the Principal's consent.

A Principal cannot withhold payment of compensation or indemnity once it has served a notice to terminate the Agency Agreement, even it subsequently discovers a breach by the agent during the notice period.

Even if a agent is awarded compensation or indemnity under the Regulations, a agent may still claim common law damages for breaches by the Principal during the agency relationship, depending on the specific circumstances of the termination.

In the absence of a contractual agreement to the contrary, English law does not stipulate any post-contractual restrictions on a agent.

However, the parties can agree, in writing, on post-contractual obligation (e.g. non-compete) for a maximum period of two years calculated from the end of the Agency Agreement. The obligation must be limited to the territory or client group and to products competing with the products for which the Agency Agreement was executed.

A agent must provide notice of any claim for indemnity or compensation within one year from the date of termination of the Agency Agreement. This one year time limit is crucial, as failing to do so will forfeit the agent’s right to claim.

Any claim arising from an Agency Agreement is subject to the normal limitation periods under the Limitation Act 1980 for bringing claims in England and Wales (e.g. six years for a breach of contract claim).

While Agency Agreements offer a variety of advantages, they also come with notable disadvantages that should be carefully considered:

• Right to compensation or indemnity on termination:
  An agent may have a right to compensation or indemnity on termination of the Agency Agreement. This can lead to significant financial liabilities for the Principal.
  In the UK, this is mandated under the Regulations, which does not apply to distributors.
• Tax implications:
  Factors such as the type of agent (sales vs. marketing) and whether they hold stock or have a permanent presence can influence tax considerations.
  It is recommended that local advice is sought whenever a party is considering entering into an Agency Agreement in any foreign jurisdiction.

Under English law, there are no specific statutory rules on Distribution Agreements. Subject to certain requirements, general provisions of law may apply, for example the law on the sale of goods or UCTA.

There are no strict formal requirements for creating a Distribution Agreement under English law. A Distribution Agreement can be entered into both verbally or in writing, although a written agreement is recommended for clarity and evidence.

There are no specific information obligations regarding Distribution Agreements.

As with all commercial contracts, it is important that the terms of a Distribution Agreement are sufficiently clear to avoid disputes which may arise, including in relation to the Distributor’s scope of authority, rights, exclusivity, territorial coverage, intellectual property rights, dispute resolution and performance metrics.

Even post-Brexit, EU competition law will still influence Distribution Agreements in England and Wales. It is important to ensure that the Distribution Agreement does not violate applicable competition law, which can result in enforcement action by the relevant authorities (e.g. Competition and Markets Authority (“CMA”) in the U.K.).  

In England and Wales, the law differentiates, including in a B2B context, between individually negotiated agreements and agreements concluded on a party’s standard terms and conditions. In relation to agreements concluded on standard terms and conditions only UCTA states that a party cannot rely on a contractual term to exclude or limit liability for breach, except insofar as the term is "reasonable".

The parties are generally free to agree the scope of a Distribution Agreement. In particular, when it comes to limiting the geographic region in which the Distributor may (or may not) sell the products and the customers to which it may (or may) not sell them, EU and U.K. competition law has a significant influence. Such limitations are admissible only under specific requirements, which need to be assessed on a case-by-case basis.

Furthermore, agreements with respect to the amounts of products the Distributor must source from the Principal are subject to competition law: contractual provisions which require the Distributor to source 80% or more of its demand in products solely from the Principal may only be agreed for a maximum term of five years.

Non-compete clauses are valid subject to competition law. If the market shares of both parties are below 30%, non-complete clauses are valid provided that they do not exceed five years and are geographically limited and proportional to the rights and interests of the Principal. The five-year period may be extended by mutual agreement for a further five years.

The Principal is generally not allowed to influence the Distributor's resale of the products. The Distribution Agreement can only impose maximum prices or suggest recommended resale prices, although the parties must be confident that the maximum or recommended price will not operate as a disguised fixed price. This point is important in all cases, but above all where the Principal's and/or Distributor's market share is over 30%.

The Vertical Block Exemption Regulation (“VBER”) came into force on 1 June 2022 and provides for a general exemption from competition rules for all types of Distribution Agreements, through a safe harbor under Article 101(3) TFEU.

Traditionally, an "exclusive distribution arrangement" is one by which a supplier agrees to sell the contract products only to one Distributor within a certain defined territory or in respect of a defined customer group, and agrees not to appoint other Distributors or sell the products directly to other customers within the territory or to the defined customer group.

Competition law now recognises the concept of “shared exclusivity” where a supplier may appoint more than one exclusive Distributor. However, there must not be more than five Distributors, if it is to remain an exclusive distribution arrangement for competition law purposes.

The following restrictions are permitted under the EU competition law regime (and under VBER):

• a restriction on active sales by the exclusive Distributor and its direct customers into a territory or customer group reserved to supplier or allocated by supplier to a maximum of five other exclusive Distributors;
• a restriction of active or passive sales by the exclusive Distributor and its customers to unauthorised Distributors located in a territory where supplier operates a selective distribution system for the contract goods or services;
• a restriction of active or passive sales to end users by an exclusive Distributor operating at wholesale level;
• a restriction of exclusive Distributor’s ability to actively or passively sell components to customers who would use them to manufacture goods similar to the supplier’s products.

A selective distribution system is where the supplier undertakes to sell the contract goods or services, either directly or indirectly, only to Distributors selected on the basis of specified criteria and where these Distributors undertake not to sell such goods or services to Distributors not authorised by the supplier within the geographical area reserved by the supplier in the agreement in order to operate that system

Selective distribution can be used for all suitable goods and/or services. This means that it can be used for products whose nature requires an enhanced level of service or advice at the point of sale to the customer or where the products require after-sales support.

The following criteria can be used to determine whether selective distribution is permitted:

• nature of goods must necessitate selective distribution (e.g. high value cosmetics, pharmaceutical products and high value electrical goods);
• resellers selected based on objective, non-discriminatory qualitative criteria; and
• must be proportionate (i.e. not go beyond what is necessary).

In assessing whether selective distribution can be considered ‘necessary’ the following factors are considered:

• selective distribution is generally held to be justified in relation to products which have a high value or an established and valuable trade mark which the supplier would not wish to dilute by dealing with certain types of Distributor, such as supermarkets or cash and carry outlets;
• in the case of technically complex products the use of selective distribution may be justified on the grounds that the supplier needs the Distributor to provide a higher quality of service to assist consumers in the selection and operation of the products in question. 

If the above conditions be satisfied, it is possible to impose the following restrictions in compliance with UK competition law: 

• a supplier may impose a restriction of active or passive sales to end users by selective Distributor operating at wholesale level; and
• a supplier may impose a restriction on ability to actively or passively sell components, supplied for the purposes of incorporation, to customers who would use them to manufacture the same type of goods as those produced by supplier.

Dual distribution occurs when a supplier distributes directly to end-customers and also through independent Distributors. The supplier and the Distributor therefore compete at the retail level.

The EU block exemption confirms that dual distribution can now benefit from the safe harbour as long as the buyer does not compete with the supplier at the upstream level where the buyer buys the contract goods. The upstream level may be the level where the supplier is active as manufacturer, importer or wholesaler.

In this context, information exchange between a supplier and its Distributor is permitted:

• where directly related to implementation of agreement; and
• necessary for production or distribution related efficiencies

Notably, this exemption is removed for online intermediation service suppliers who also supply goods in competition.

Up until 1 June 2022, the VBER applied to vertical agreements in the UK. However, following Brexit, this was replaced by the VABEO.

Whilst the UK VABEO shares many concepts and substantive provisions with the EU VBER, notable differences include the following:

Under the VABEO, the number of exclusive Distributors appointed must be determined "in proportion to the allocated geographical area or customer group in such a way as to preserve the incentive of the Distributors to invest in promoting and selling the supplier's goods or services".

This contrasts with the position under VBER, which establishes that suppliers can appoint up to five exclusive Distributors for any given territory or customer group.

Under VABEO there is now greater protection for members of a selective distribution system.  A supplier can now restrict its authorised Distributors and their customers from making active or passive sales to unauthorised Distributors located within the geographical area where the supplier operates a selective distribution system.

A selective distribution system can be combined with an exclusive distribution system in the same geographic territory, provided that they are established at different levels of the distribution chain (i.e. exclusive distribution at the wholesale level and selective distribution at the retail level). 

This contrasts with the approach under the EU VBER, which only allows the combination of selective and exclusive distribution in different territories within the EU.  

The CMA has retained the exemption for dual distribution, and the VABEO also extends this to wholesalers and importers.  

However, the VABEO does not exclude online intermediaries from the exemption. In contrast, as mentioned above, the new VBER does not apply to vertical agreements relating to the provision of online intermediation services where the provider of the online intermediation services is a competing undertaking on the relevant market for the sale of the intermediated goods or services.

Moreover, the CMA's Guidelines confirm that the benefit of the block exemption extends to information exchange in dual distribution scenarios, but only if it is required to implement the vertical agreement and does not restrict competition by object. 

There is limited divergence between the UK and EU on the issue of information exchange in dual distribution arrangements. However, the VBER provides a differently formulated limitation to the application of the block exemption, stipulating that it does not apply "to the exchange of information between the supplier and the buyer that is not necessary to improve the production or distribution of the contract goods or services by the buyer".

As a general principle, it is assumed that the Distributor has the following primary obligations:

• to actively promote, sell and distribute the products within the agreed territory;
• to provide the Principal with relevant information regarding the market, (potential) customers and requirements concerning the products;
• to diligently safeguard the interests of the Principal in all business respects; and
• to maintain confidentiality.

Generally speaking, the Principal may have some or all of the following obligations:

• to provide the Distributor with the products, as agreed;
• to offer necessary training and support for the Distributor to effectively market and sell the products;
• to provide adequate information about the products, including technical specifications and compliance requirements.

It is recommended that the parties obligations are set out clearly in the Distribution Agreement. As there are no specific requirements on Distribution Agreements, this is important to avoid disputes.

As a general principle, the Distributor is not entitled to a specific remuneration for its distribution activities. The remuneration of the Distributor consists in the profit it generates in purchasing the Principal's product and selling them to its customers at a higher price. The parties may, however, following the principle of freedom of contract, agree on any additional remuneration or commercial terms, such as minimum monthly payments or volume discounts.

There are no specific rules governing the duration of Distribution Agreements under English law. The parties are thus, as a general principle, free to set out the parameters of the contractual term, for example, in agreeing a fixed term or indefinite term, or a combination of both.

The parties are generally free to agree their respective termination rights, including most commonly for convenience on notice at any time, for breach or default by a party or for insolvency affecting one of the parties.

Parties are free to set out termination notice periods in the Distribution Agreement. Where the Distribution Agreement is not for a fixed term and does not expressly set out the notice period for termination, it can be terminated by either party giving reasonable notice. What constitutes “reasonable notice” is likely to take into account the following:

• length of the relationship between the parties;
• the time and money invested by the Distributor;
• the percentage of the Distributor's turnover attributed to its activities under the Distribution Agreement; and
• any acceptance that the Distributor would not sell products which competed with the supplier's products.

English law does not provide for a written form requirement with respect to the termination notice. It is recommended that requirements relating to termination of the Distribution Agreement are clearly set out in writing.

In England and Wales, no compensation or indemnity is payable on termination of a Distribution Agreement, unlike perhaps in some other countries. Parties are nonetheless free to provide remedies (e.g. liquidated damages) or indemnities (e.g. for loss of goodwill) in the Distribution Agreement.

English law does not provide for specific post-contractual obligations (e.g. non-compete). The parties may set out expressly in the Distribution Agreement obligations that survive termination, such as confidentiality clauses or non-compete obligations. Any post-termination restrictions, such as non-compete or non-solicitation, should be carefully draft and limited in scope and duration, or otherwise risk being held to be unenforceable.

Any claim arising from a Distribution Agreement is subject to the normal limitation periods under the Limitation Act 1980 for bringing claims in England and Wales (e.g. six years for claims for breach of contract).

In England and Wales, organisations are increasingly required to ensure their compliance with relevant law, and throughout their supply chains, including complying with the Bribery Act 2010, Criminal Finances Act 2017, Modern Slavery Act 2015, the applicable data protection legislation and The Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”).

In respect of the Bribery Act 2010, of particular concern to a Principal in an agency relationship is the section 7 corporate offence of failure to prevent bribery by an “associated person”.

A commercial organisation is guilty of an offence if a person associated with it (which includes  its agents) bribes another person intending to obtain or retain business for the commercial organisation, or to obtain or retain an advantage in the conduct of the business for the commercial organisation.

The only defence available to a Principal is if it can show that it has in place adequate procedures designed to prevent bribery by its associated persons.

It is questionable whether a Distributor can be classified as an “associated person” of the supplier for these purpose, albeit it is nonetheless prudent for a supplier in a distribution relationship to ensure compliance with relevant legislation.

Recent case law (as summarised below) relating to distribution law, including commercial agency under the Regulations, software licensing, competition, and intellectual property highlight several significant trends, particularly with regard to digital commerce and agency relationships.

A prominent theme is the ongoing redefinition of traditional concepts like "goods" and "sales" to encompass digital products and services, as considered in the Software Incubator case (see below). The court's recognition of electronically supplied software as "goods" marks a critical shift towards aligning legal frameworks with modern commercial practices.

Similarly, the rulings concerning Agency Agreements reveal a growing emphasis on equitable treatment of agents and sub-agents, suggesting that the rights of all parties in agency relationships are increasingly scrutinised.

The competition law case concerning resale price maintenance illustrates a nuanced approach, where the context of agreements is now pivotal in determining legality.

Additionally, the implications of intellectual property rights in the e-commerce space continue to be a focal point, particularly in the realm of patent enforcement and the responsibilities of parties within distribution agreements.

Overall, the recent cases reflect a broader trend toward adapting legal principles to ensure fairness and clarity in an increasingly digital and interconnected marketplace.

Software Incubator agreed to promote Computer Associates’s release automation software across the UK and Ireland. The software, delivered exclusively by electronic download with a perpetual licence, allowed users unlimited access without further payment. When Computer Associates terminated the agreement, Software Incubator sought compensation under the agents (Council Directive) Regulations 1993.

The CJEU needed to assess if a software licence constitutes a “sale” for the purpose of the Regulations, thereby qualifying Software Incubator for protections as a agent. The first legal issue to consider was whether software supplied electronically and not on tangible media constituted “goods” under the agents Directive (86/653/EEC). The second question was whether the perpetual software licence could qualify as a “sale” under the directive.

The CJEU defined the term “goods” by reference to the case law as “products which can be valued in money and which are capable, as such, of forming the subject of commercial transactions”. Using this definition, it ruled that electronically supplied software – whether tangible or digital – constitutes "goods" if it is transferable, valuable, and commercially tradable. Further, the CJEU held that a perpetual licence equates to a “sale of goods,” since it grants the user permanent access rights, transferring economic ownership akin to a sale of physical goods. The decision marked a significant alignment of European legal standards with digital commerce realities, extending agent protections to software resellers under EU law. For further commentary see further in our Law Now article. 

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