A few days ago I got a call from a Spanish winemaker (I will call it “the Producer”), he had received an order online from a French company (I will call it “the Distributor”) who wanted to sell their wines in the UK. The distributor had sent his French Kbis extract (similar to our simple registration note), a scanned copy of the manager identity document, and all this from an email address whose domain included the name of the company and was signed by the Sales Manager (firstname.lastname@example.org).
The Producer verified the correctness of the KBis, its intra UE Tax number (VIES) and SEED, asked a bank guarantee covering the amount of the first shipment (43,000 euro), whose copy the Producer received scanned by email.
The bottles were received in the UK and the Distributor and Producer exchanged joyful emails and the Producer sent the bill also by email. The wines were being very well received in the UK so the Distributor made a second order (around 75,000 euro) to be delivered in s different store, also in the UK. The Distributor emailed a second bank guarantee for the new amount and the wines were sent.
While carrying, the French Distributor received at its headquarters in France the original bill for the first shipment (until then only the copy was sent by email). His manager (remember: the Producer had a scanned copy of his ID, and the company had confirmed the Kbis), informed then the Producer that the Distributor had never made an order, that did not have headquarters or warehouse in the UK, had never received the first order and, therefore, that he had no intention to pay the bill.
This well planned fraud encourages me to propose three simple recommendations to implement by anyone who is considering the distribution of his products abroad or in his own country so as to prevent something similar to this case. It all depends on the previous advice of a lawyer.
First. Signing a contract (supply, distribution, agency) is not a requirement for the validity of the sale, but its negotiation will allow to obtain certain guarantees that will prevent most problems: the verification of the existence of the distributor and its representative with a correspondent lawyer (beyond the mere registration information), the acceptance of conditions, application credentials, compliance in the past, etc.
Second. If even overcome all these filters an agreement with a distributor was reached (which it seems to me far more complicated), the checking of bank guarantees would add security to the transaction. By checking the guarantee (the issuing entity, representative, duration, amount, etc.) and by receiving the original document (a copy is not enough) will be considered usual practices in any business relationship and that a lawyer would not overlook.
Third. Said attorney may also propose other means of guarantee to have a safer transaction: prepayment of a first order, letters of credit, severally guarantees issued by solvents third parties, etc. All this will imply greater efficiency.
In conclusion, it is understandable that a manufacturer is thrilled by the prospective of large international sales that can also result in a permanent relationship with a foreign distributor, but it should keep cool head. An expert advice —whose cost, it is important to underline, will be much lower than the damages suffered in this case— will allow the wish come true.