An Agency Agreement is used where an individual is to act as an agent in order to sell the products, goods or services of the other party, usually known as the principal, in exchange for commission payments.
It is essential that both the agent and principal have clear written commercial terms agreed so that both parties know what to expect from their association.
To rely on orally agreed terms or negotiations without a final written agreement could prove costly to both parties in terms of lost sales, commission and any subsequent legal action to define and enforce the commercial terms.
Clauses in an agency agreement should include
- Duties and Responsibilities of the Agent
- Duties and Responsibilities of the Principal
- Terms of Agency
- Compensation & Indemnity
- Force Majeure
- Anti-Bribery Compliance
- Schedules of Products, Territory, Order Targets and Commission
The agreement should incorporate the Commercial Agents (Council Directive) Regulations 1993 and so can be used throughout the EU. These regulations are highly significant and are primarily designed to protect the interests of the agent, rather than the principal. However the principal needs to be fully aware of the directives impact. It is important to note that even if the regulations are removed from the agreement they will still apply in the EU.
An additional piece of legislation to be considered is the advent of the Bribery Act 201. The agency agreement should include the requirement for the agent to fully comply including the requirement for the agent to undertake appropriate training to ensure compliance.
Legal advice on the agreement should be sought independently by both agent and principal from suitably qualified legal practitioners to ensure all aspects are covered and fully understood.
This is a brief outline of some of the aspects that an Agency Agreement should address and we’ll return to more detailed views on what should be included under each clause in future blogs.
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