Risk
In the case of having an agent, the commercial risk remains with the principal, although the agent could have the power to enter into binding agreements on the principal’s behalf. On the other hand, the distributor carries the commercial risk from the point the title of goods is passed to him. He has the absolute power to set contractual terms with the customers. Therefore, the agent would have a lower percentage of profit compared to the distributor, who carries higher commercial risk.
Control
The principal in any agency retains control by giving instructions to the agent; he has the freedom to determine the sale price of goods and the terms by which the goods can be sold, while the distributor gets a significant degree of freedom in this area. In the UK, competition law prevents the supplier from fixing a minimum price at which the distributor can sell his goods.
Liability
The principal could be liable for the action of his agent as he retains the direct relationship with the end customers, while the distributor retains the relationship with the end customers. Therefore, the supplier has no liability for the distributor’s agreements and obligations with his customers.