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El Salvador Agent/Distributor and Contract Principles

This forum addresses the import regulations and trade information of El Salvador.

El Salvador Agent/Distributor and Contract Principles

Postby bridgat » Tue Nov 18, 2008 5:34 am

According to El Salvadoran law, an agent, distributor, or representative is a "natural or juridical person who, on a permanent basis and with or without legal representation through a contract, is appointed by a principal to establish a representation or distribution agency for some product or service in the country." The use of agents and distributors is the most common way of exporting products or services to the El Salvadoran market.

The agent/distributor relationship is governed by Sections B and C of Chapter II, Title II of the Salvadoran Commercial Code. As always, it is recommended that a local attorney or one familiar with the laws of El Salvador be consulted before entering into or signing an agreement with an agent, distributor or representative.

The Commercial Code categorically establishes some justified causes for termination or modification of the contract. Under certain circumstances however, if the principal should terminate, modify or not extend the relationship, the agent is entitled to compensation for the damages caused to him. The law describes the compensation allowed.

Agent/Distributor Contract Principles

The following is a guide to some of the matters that may need to be considered when preparing an agent or distributor agreement.

· Parties included.
· Territory involved.
· Products involved - description, catalogue.
· New products - policy for new products.
· Period of agreement - depends on the product, usually three years with right of renewal. A termination clause should be included - so many months' notice by either party and any time by mutual agreement.
· Probationary period - one year with review of performance after six months.
· Prices - refer to the price list.
· Discounts - promotional discounts and responsibilities. The agreement should include the principles to work on, not the detail.
· Method and timing of payment.
· Minimum orders.
· Production scheduling and lead times.
· Territory exclusivity for distributor.
· Exporter to refer enquiries to distributor.
· Distributor not to re-sell out of territory.
· Restraint of trade following termination of agreement.
· Spares and stock - distributor to hold stock/spares only, not an agent.
· Communication costs - each party to cover their own costs.
· Performance measures.
· Training and technical support.
· Samples.
· Advertising and promotion.
· Ownership of brand.
· Distributor to protect trademarks, patents, etc.
· Exchange of market information.
· Procedures for defective goods.
· Distributor to keep books of accounts.
· Relationship management - contact list, official addresses, etc.
· Confidentiality.
· Early termination for breach of agreement.
· Transfer of rights - distribution rights cannot be transferred without permission.
· Country in which legal action/arbitration to take precedence.
· Arbitration - a last resort.
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