Global trading companies | Corporate and commercial law

Thursfields encouraging West Midlands’ global trading companies to tighten up foreign commercial contracts

Canny companies in the West Midlands are formalising their supply, distribution and agency contracts whether they trade in Europe or on a global scale.

Stuart Price, Corporate and Commercial Director in the Birmingham office of Thursfields, said that Brexit and the need to trade on a global stage, had prompted many companies to tighten up and possibly extend their formal trading relationships with their foreign-based distributors, suppliers and customers.

“The canny ones are ahead of the game and have been putting more formalised relationships and agreements in place in the period since the results of the referendum on the UK’s membership of the EU were known,” he said.

The Birmingham office of Thursfields Solicitors has recently been advising companies trading with the United Arab Emirates, China and Germany, among others.

“Political developments and the increasing awareness of the 24/7, 365 days a year, nature of global trade combined with giant strides in e-commerce and fulfilment, has focused the mind of many CEOs and business owners,” said Stuart.

He said it was absolutely essential that companies understood not only how UK legislation affected them but also how any agreement would be treated in the target jurisdiction.

“There are many kinds of ‘business to business’ agreements, whether supply, distribution, agency or franchise, and it is vitally important to understand the differences and distinctions between all of them.”

A supply agreement sets out the basis upon which a supplier will provide goods or services, either to the end users or another business operating in a wider supply chain.

A distribution agreement forms the relationship between a supplier and a customer, where the customer purchases goods to then sell on in a particular territory. Often this type of agreement is exclusive and operates to lock out other competitors.

An agency agreement will come into effect where a company wishes to appoint someone in a particular territory to use their contacts in that that territory to market products. When orders are obtained, the company will then enter into a supply contract directly with the customer, often paying the sales agent a commission.

A franchise agreement enables someone to purchase the right to operate a turnkey business operation in a particular territory. Again, there is often a degree of exclusivity in these arrangements, and generally intellectual property owned by the franchisor, is licensed for use.

The franchisor will often create what is known as a master franchise agreement for a wider territory and the recipient of that master agreement, will have the exclusive right to offer franchises to franchisees in that territory. This is, therefore, an effective way of growing an international franchise operation.

Stuart said: “Whereas no one likes onerous paperwork, taking the time to formalise your commercial relationships can actually be welcomed and bring comfort to both parties.

A little bit of certainty in a relationship is a rare commodity in these difficult times and something to be cherished by both parties!” he said.

Thursfields are regularly asked to advise clients to review, revise and negotiate commercial contracts, both with national and international characteristics. You can contact Stuart Price on 0121 227 3371 or email sprice@thursfields.co.uk if you would like more advice on the implications Brexit might have on your business.