April 4, 1925.
CONTRACT TYPES
IN EXPORT TRADE
Division Chief of Bureau of Foreign and
Domestic Commerce Describes Various
Forms Which May Be Adopted and
Cites Advantages and Limitations.
VARIETY OF METHODS
Dealerships, Full Agencies, Limited Agencies, Bro-
kerage Arrangements and Other Modes Are
Fully Set Forth by Writer.
In order to arrive at some basic forms for con-
tracts between American manufacturers and firms and
individuals abroad employed in the distribution of
their products, it is necessary to establish certain
distinct types of arrangements existing between them.
It is exactly the failure to recognize this variety of
types that has made all forms of model contracts of
this character unsuitable for universal adoption,
writes A. J. Wolfe, Chief Division of Commercial
Laws, Department of Commerce, in Commerce Re-
ports.
The first of these types of arrangements is the
"dealership." The manufacturer grants a firm in a
certain foreign territory the exclusive right to sell all
or part of his products. The dealer or distributor
undertakes to sell no competing goods or no other
goods. No relations exist between the manufacturer
and the dealer's customers. The arrangement may
contain provisions for certain service features, for ad-
vertising, for a control of prices charged by the
dealer; it generally provides a certain specified quan-
tity of firm order purchases and estimates of require-
ments to be submitted to the manufacturer at certain
periods during the lifetime of the contract. The man-
ufacturer may quote the distributor a special distribu-
tor price, or he may arrange for a scale of discounts
from the list price, with the proviso that if the sales
exceed certain agreed-on proportions the discount
automatically increases over the basic rate, with ad-
justments at the end of 6 or 12 months.
The Foreign Medium.
The second type concerns arrangements permitting
the foreign selling medium to solicit business, orders
being transmitted to the manufacturer for approval,
and the manufacturer sells to the firm placing the
order. Elements of the financial standing and credit
terms enter into consideration, with the manufacturer
and the buyer as principally interested parties, and
the sales agent sometimes undertaking the delcredere.
The words "sales agent" here find a more proper em-
ployment than in the first type of contracts. The
soliciting of business is a function which presupposes
a certain limited principal and agent relationship be-
tween the manufacturer and the individual or firm
acting in that capacity, although care must be exer-
cised to indicate that the functions ordinarily under-
stood to be included in a full agency are expressly
excluded. The agent of this limited character may
exercise some specially designated duties, such as the
delivery of goods, the acceptance of payments for
transmission to the manufacturer, and the custody of
goods. He can not obligate the manufacturer beyond
the scope of his authority, he can not dispose of the
manufacturer's patents and trade-marks, and he can
not fully act in the stead and for the manufacturer.
His reimbursement is in the form of a commission
payable from time to time, with possible allowances
for such expenses as publicity, rentals, and cables.
The True Agency.
The third type is a full agency. The selling me-
dium abroad acts for the manufacturer in a capacity
of agent to principal. He not only solicits business,
subject to the company's approval, but can submit
bids to governments, and ordinarily acts as though
he were conducting a branch of the manufacturer's
business. This is the most delicate of all sales ar-
rangements abroad and requires most particular care
W. P. Haines & Co<
Manufacturers of
BRADBURY, WEBSTER
and
W. P. HAINES & CO.
Grand, Upright and Reproducing
Pianos
138th Street and Walton Avenue
NEW YORK
17
PRESTO
in the selection of the agent, in the framing of the
contract, in preventing breaches of trust or the com-
mission of acts in excess of the agent's authority.
The Domestic Contract.
The fourth type is an arrangement with an export
concern in the United States that maintains its own
selling organization in certain foreign markets. For
all intents and purposes this is a domestic contract.
The export organization most likely handles a con-
siderable number of nonconflicting lines.
The fifth type is a foreign resident agency which
handles several nonconflicting lines. This is a variety
of the fourth type really, but the parties reside in two
different jurisdictions.
The sixth type is that of a brokerage arrangement.
The characteristic of this type is its casual nature,
and the broker is not debarred from engaging in
similar services to the manufacturer's competitors.
The Simplest Form.
It is best to entitle the contracts between the man-
ufacturer and the selling medium as "agreement."
The simplest form of commencing this agreement is
as follows:
1. The A. B. C. Co., a corporation formed under
the laws of the State of New York, with headquar-
ters in New York City, hereinafter called the "manu-
facturer," and D. E. & Co., a partnership under the
laws of the Union of South Africa, hereinafter called
the dealer (or, the sales agent, the agent, the broker),
have concluded the following agreement:
2. The manufacturer desires to secure the proper
distribution of his products in the territory assigned
to the dealer (agent, sales agent, broker, as the case
may be), and the dealer, etc., desires to have the ex-
clusive right of selling (or the agency for) the prod-
ucts of the manufacturer, and the undertakings of
both parties to the agreement form a legal considera-
tion.
3. The territory assigned to the dealer is as fol-
lows: (Follows description of territory). A map is
appended to this agreement with delineation of the
territory. Here follow provisions, if any, for the
protection of the dealer or agent in his territorial
rights and of parties to other existing territorial
agreements.
4. Duration of contract—provision for cancella-
tion at a certain time or under certain eventualities,
for automatic renewal under certain circumstances.
5. Personal character of agreement—dealer or
agent can not transfer it without written assent of
the manufacturer.
6. Terms of payment, schedules of prices, credit
terms to customer—if lengthy, a brief reference to a
detailed appendix which is made part of the contract
is included.
7. Provision for the protection of the manufac-
turer's patents, trade-marks, good will, etc. Provi-
sions for proper use or prohibition against use of
manfacturer's name or brands in the style of the firm
employed by dealer or agent.
8. Reimbursement for services, whether commis-
sion or discount, and provisions for maintaining ap-
proved prices in selling the manufacturer's products.
9. A full description of products which enter into
the scope of the agreement. 10. The agreement in
English is the only valid agreement. Translations
appended for the convenience of parties. 11. Inter-
pretation under the laws of New York or other Amer-
ican State. 12. Arbitration clause.
13. Arrangements for publicity, cable expense,
service organization, subdealers, or subagents.
14. Signatures of parties, with proper indication
of authority where individuals act for a corporation.
15. Consular attests.
There should also be included provisions for de-
lays in delivery; acts of God; title to consigned goods
if any; accountings and similar procedures; bonuses;
and a provision preventing the party of the second
part from giving himself out as an agent of the man-
ufacturer, or where such a relation exists clearly out-
lining the full scope of authority and forbidding the
excess of this authority.
TUNER AS SALESMAN.
"Because of its possibilities for business-getting,
the tuning department should rank as one of the im-
portant factors in every dealer's business," was the
advice of Herbert Sinclair, a prominent English
dealer at the recent convention of the British music
trade. "I am convinced we do not realize to the full
the tuner's value as a missionary, but are prone to lose
sight of the fact that after the initial transaction the
personal touch is only maintained through his visit.
Should he pay this visit merely as a mechanic, much
of his value is wasted. Too often, unfortunately,
having performed this technical function satisfac-
torily, his purpose is considered to have been accom-
plished. But the far-seeing employer will not be thus
easily satisfied."
FEATURES STARR PIANO.
The building at 227 Sixth street, Portland, Ore.,
has been leased for a long term by the Portland
Music Co., the representative of the Starr Piano Co.,
of Richmond, Ind., in the sale of pianos, pianoplayers
and phonographs. The company was recently incor-
porated by Lewis Lunsford, P. J. Hibler and H. H.
Barber.
LATE GULBRANSEN
ADVS. CREATE COMMENT
Campaign in Literary Digest Affords Good
Examples of Newspaper Publicity Which
Is Helped by Illustrations.
The advertisement of the Gulbransen Co., Chicago,
in the Literary Digest of March 21 has met with a
good deal of favorable comment and there seems to
be an increasing recognition on the part of the trade
of the publicity service of the company.
A type of newspaper illustration tying up with the
ad alluded to is shown in accompanying cut.
Newspaper mats and electros, lantern slides, and
enlargements and envelope enclosures tying up with
this advertising have been prepared for the use of
Gulbransen dealers.
The LEADING LINE
WEAVER PIANOS
Qrandu, Uprights and Playars
Finest and most artistic
piano in design, tone and
construction that can be
made.
YORK PIANOS
Upright* and Player Pianos
A high grade piano of great
value and with charming tone quality.
Livingston Pianos— Uprights and Playar Pianos
A popular piano at a popular price.
Over 70.000 instruments made by this company are sins-
ing their own praises in all parts of the civilised world.
Write lor catalogues and state on what terms you would
like to deal, and we will make you a proposition if yea are
located in open territory.
WEAVER PIANO CO., Inc.
Factory: YORK, PA.
Established 1870
For a
Bigger and Better
Business
There is nothing to compare
with the complete line of
M. SCHULZ CO.
The Players are RIGHT in
everything t h a t means
money to the dealers and
satisfaction to the public
You will never do anything better
than when you get in touch with
M. SCHULZ CO.
711 Milwaukee Avenue
CHICAGO
OUTHEKN BRANCH: 790 Gandlar Hid*. ATLANTA, GA
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