As well as in Italy and France, in the United Kingdom there is no specific legislation that regulates distribution contracts concerning wine, especially because it is a common law system, in which the contract theory remains substantially based on the principle of negotiating autonomy of contractors and on the value of case law precedents.
It is important when considering marketing a product, to be aware of the difference, in legal terms, between an agency agreement ("agency agreement") and a distribution agreement ("supply agreement").
The distribution agreement is usually used when a supplier has no presence or representation in a specific market or territory. A distributor is a person who buys goods from a supplier (or a manufacturer) and then resells them to his customers, adding a margin to cover costs and to profit from them.
In the UK, there is no one-size-fits-all model for such agreements, however, typically supply agreements:
- cover aspects relating to the minimum purchase order by the distributor;
- establish the price of the product;
- set the duration of the contract;
- establish if the contractual relationship should be subject to an exclusive clause, for which the distributor is prohibited from selling or promoting products other than those purchased from the supplier; and finally
- indicate the applicable law and the competent court in case of legal disputes.
A distribution agreement has similarities to the agency contract, however, the main difference between the two kinds is that in the distribution agreement, the supplier purchases from the manufacturer and resells to the end user (the customer) on his own account, without involving the supplier/manufacturer, except as regards the guarantee of the same supplier or the warranty and the product liability.
However, in the agency, the contract is between the agent and the supplier (or manufacturer). An agent is therefore an intermediary, involved in entering into a contract between the supplier/producer and the customer of the supplier/producer. The agreement usually establishes what the agent will do, the modalities and how the latter will be paid (usually on a commission basis). The agency agreement establishes reciprocal rights and obligations between supplier and agent, for example regulates good faith and can establish the methods that the agent must respect in order to best market the supplier's goods.
In an agency contract, the agent procures customers for the supplier and when he sells goods, ownership of the goods passes directly from the supplier to the customer. In fact, unlike the distribution contract, the agent never owns the goods he sells, but acts only to facilitate the sale of the supplier to the customer.
From a commercial point of view, the agency contract is preferable where the supplier wishes to maintain a close relationship with the customer, since, on the contrary, the distribution contract inevitably moves the supplier away from the end customer. This contract remains preferable even if the supplier wants to maintain greater control of the sales conditions of its products, in particular as regards pricing. In fact, the imposition of a resale price on a distributor is illegal under the competition law of the United Kingdom and the EU, while through the agency contract the supplier can validly retain the freedom to set his own selling price.
Lastly, please note that the relationship between a supplier and its agent or distributor must emerge unequivocally from the contract. The initial definition of "Supply agreement" or "Agency agreement" does not constitute sufficient proof of the nature of the agreement. In case of disputes, the judge will examine the substance of the agreement between the parties.
The general rules on the "supply agreement" are found in section 12 of the "Sale of Goods Act 1979" and in section 2 of the "Supply of Goods and Services Act 1982" as regards the obligations of the parties, while in the "Consumer Protection Act 1987" is set for the guarantee from defective products.
In view of the changes that will occur with the exit of the United Kingdom from the EU, several bilateral agreements are being made aimed at increasing trade between countries.
Pending the agreement with Japan, an agreement between the United Kingdom and the United States on the "Trade in Wine" was concluded in 2019, which aims to facilitate the exchange of wine between the parties and establishes that each party, on request, must cooperate to help the other to make available to producers the information relating to the specific limits of contaminants and foreign residues in force in their territory.