Business agent contracts
Sun 17 December 2023
The main benefit of an agency agreement is that it allows the principal to expand into new markets without having to employ their own sales staff. This is because the agent acts as the principal's representative and is responsible for promoting and selling the principal's products or services to customers in the agreed-upon territory.
If you need a solicitor to draft a contract for a business agent, or are an agent offered a contract and would like to have it reviewed, please do get in contact. We also advise on legal issues and disputes relating to business agent dealings.
What to include in a Business Agent Agreement
The key features of an agency agreement include:
- Term of Agreement and Notice Period : Specify the duration of the agreement and the conditions for renewal or termination, notice Period: Define the notice period for termination by either party, ensuring a smooth transition of responsibilities.
- Control: The principal will generally want to retain a high degree of control over the agent's authority and transactions and so it’s important to specify the specific tasks or activities that the agent is authorised to perform on behalf of the principal and also generally the geographical area or market in which the agent can operate on behalf of the principal.
- Payment: The agent typically earns a commission for selling the principal's products or services and any other structure for compensating the agent for their services, including retainer fees, or performance-based bonuses.
- Risk: The principal bears the commercial risk and direct responsibility for transactions with customers.
- Complying with Principal’s expectations on sales and marketing - clearly outline the principal's marketing guidelines, potentially also allowing the agent some leeway with marketing materials and permitted activities to reflect local preferences and market conditions.
- Regular Communication: Open communication channels between the principal and agent should be established to discuss marketing strategies, identify local trends, and address any concerns.
- Good faith: Both the principal and agent have a duty to act dutifully and in good faith.
- Information: Both parties have obligations to provide information to the other. The agent should report on prospects, sales, and other relevant feedback, and the principal should provide the agent with the necessary information and assets to generate sales.
- Confidentiality: Establish clear obligations for the agent to protect the principal's confidential information and trade secrets.
- Non-Competition: Include a non-compete clause that prohibits the agent from engaging in similar activities for competing businesses during and after the termination of the agreement.
- Liability Exposure: Agents may be held liable for their actions or omissions, which could expose the principal to potential damages or legal claims.
- Intellectual Property Infringement: The agent may inadvertently infringe on the principal's intellectual property rights, leading to legal disputes and financial repercussions.
- Financial Losses: The agent's negligence or mismanagement could result in financial losses for the principal, such as lost sales or damaged reputation.
- Dispute Resolution: Outline a clear mechanism for resolving disputes, such as mediation, arbitration, or litigation.
Enhanced Rights of Agents under the Commercial Agents Regulations
In the UK, the Commercial Agents (Council Directive) Regulations 1993 provide specific protections for commercial agents. These protections can include notice periods for termination, compensation payable following termination, and restrictions on the agent's ability to compete with the principal.
Solicitors for agency agreements
We are experienced, practical and cost effective in drafting, reviewing and advising on contracts for business agents,whether sole agency or not and whether based in the UK or internationally (where English Law is expressly stated as the Governing law)
We can advise on the implications of these protections and help you resolve disputes arising from termination.If you are an agent,or a principal, we can help you navigate the complexities of agency law and protect your business interests.