Debt collection by agent
Where wine is being supplied to one of the large UK retailers, the producer's agent (see terminology) may suggest that he should collect customer payments on behalf of the producer, because that it is how those retailers prefer to work. Rather than having hundreds of individual wine producers set up on their systems as suppliers, the larger retailers prefer deal with a relatively small number of UK agents as suppliers. Each agent receives payment on behalf of the producers he represents, and remits the various amounts due to each of them, less his commission. The advantages to the retailers are obvious. Having far fewer supplier accounts and payments to deal with makes life simpler and reduces costs. But there are significant potential dangers in this sort of arrangement.
Dangers for producers
Once he has made payment to the agent (A), the customer (C) will be discharged from liability to the producer (P). If P has credit insurance covering C's debts to him, that insurance will only cover the risk of C defaulting. Even where A does some business with P as distributor (i.e. buying from P and re-selling – see terminology), and P has credit insurance cover in respect of debts owed by A, that insurance cover will not cover default by A in his capacity as P's agent. So if A collects payment from C and then goes into administration or liquidation, without paying what is due to P, that liability will be uninsured and P will be an unsecured creditor in A's insolvency.
The risk of A defaulting must therefore be guarded against in other ways.
P should decline to go along with this sort of arrangement, and insist on dealing with C as its supplier. If the response to this is that C will not list your wine, or will de-list it, if you insist on being the supplier, you will have to consider very carefully whether that genuinely is the position. If it is, and you want the business, can anything can be done to change C's attitude? See Contracts – Supply Agreements with major UK supermarkets.
If C is adamant that A must be the supplier, consider switching to the distribution model (again, see terminology). That might be the answer, provided you can obtain satisfactory credit insurance cover on A. But that may not be possible, in these difficult times.
If there really is no alternative, there should as a minimum be .....
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