Agency law covers a multitude of different types of agreement and agents are a common feature in business and many are covered by the Commercial Agency Regulations.
Commercial agency is a legal minefield. There are numerous different types of contractual relations which might be loosely described as commercial agency, rightly or wrongly, and the legal implications of ignorance or mistakes can be very costly, particularly in relation to the Commercial Agency Regulations.
Businesses often use sales agents in order to :-
• Set up/represent their business in a different country
• Keep fixed costs down by utilising an agent on a commission basis and not as an employee
The difference between the relationship of employer and employee and principal and agent is quite fluid under English law, and generally each case is considered on it’s own merits by the courts in the event of dispute. A relationship which may have started with the intention of being agency can change over time, and be found by the courts to have become an employment relationship. This can result in:
• The agent gaining significant employment law rights
• Taxation implications for both parties.
Agency law is highly regulated, particularly by EU law. The Commercial Agency (Council Directive) Regulations 1993 (“the agency regulations”) gives sales agents rights, amongst other things to minimum notice periods and potentially significant compensation on termination. These rights cannot be varied even with both parties consent, so it is highly advisable to take advice on whether what is intended as an agency contract is likely to be classified legally as employment, sales agency, marketing agency or distribution agreement. Marketing and/or distribution agreements are not subject to the agency regulations, making them potentially attractive for the above reasons.
It is highly advisable to have a professionally drafted agency agreement which will make detailed provision, amongst many other things, for :-
• Clear restrictions on the agent’s authority to agree things on behalf of the principal with customers
• Commission levels
• Exclusivity
• Territory
• Termination of agreement
• What will constitute breach of the agreement
• Position on expenses incurred
If you are a business considering an agency arrangement or an agent offered an agreement, please contact us now fby completing our online agency agreement enquiry form for an immediate fixed fee quote for a professionally drafted, tailored agreement to maximise your position and minimise your risks under the agency regulations.
