This chapter discusses the Israeli law and business practice relating to agents and distributors. It is divided into two sections, the first dealing with agents and the second dealing with distributors.
Issues that are common to both distributors and agents are discussed in greater depth in the section on agents, and are only cross-referenced in the section on distributors. For convenience of reference, the term 'intermediary' is sometimes used to encompass both agents and distributors.
In 2012, the Israeli Knesset enacted a new law entitled the Agency Contract (Commercial Agent and Supplier) Law, 5772-2012, (the 'Agency Contract Law'). The Agency Contract Law applies to contracts for consideration between a supplier and a commercial agent in which a supplier authorizes a commercial agent to solicit and engage new and existing clients to purchase tangible goods marketed by the supplier, excluding real property, on an ongoing basis. A discussion of the Agency Contract Law is set forth following the section on distributors.
Law of Agency
The distribution of goods and services in Israel by means of local agents and distributors is widespread. A foreign entity wishing to market and distribute its products in Israel can choose between a number of different business arrangements, as follows:
Doing business itself in Israel by means of a local branch or subsidiary; Retaining a local party to act as its legal agent, authorized to enter into transactions on behalf of the principal; Selecting a local party to serve as its marketing representative, with authority to find customers and negotiate transactions, but not to bind the foreign supplier; and Appointing a local distributor who buys and sells goods on its own account. In all of these possible relationships the dominant view of Israeli law is one of respect for freedom of contract. Unlike the situation in some other countries, there are no statutes with detailed mandatory regulations regarding distributors or other types of intermediaries, and the Israeli government and legal system are unlikely to intervene in the contractual relationship freely agreed between the foreign manufacturer or supplier and the local agent or representative.
However, as discussed in greater detail below, to the extent that the parties do not clearly define their relationship, the laws of contract and agency may supply certain missing terms and conditions.
The Agency Law 1965 is based, in part, on English Common Law principles and, in part, on Continental law. 'Agency' is defined as 'the grant of power to an agent to do, in the name or in place of a principal, a legal act in respect of a third party'. A 'legal act' is an act intended to modify the rights of, or...