Agency Law
AGENT LAW AND CONTRACTS WITH AGENTS
The law relating to business or sales agents is generally not well known when compared to other areas of law. This is surprising given that in today’s flexible economy, many businesses now outsource parts of their sales functions to sub-contractors. It is also surprising because failure to know or understand the law before engaging an agent can have serious and expensive implications. This is because European law has created Commercial Agency Regulations (”the Regulations”) which generally favour agents and which apply under English law.
Termination of an agency agreement by the principal may well lead to substantial claims by the agent under the Regulations.
The Regulations define a commercial agent as a self employed intermediary who has continuing authority to negotiate the sale or purchase of goods on behalf of a principal.
The Regulations further provide that a principal will owe certain duties to the agent, including :-
- To provide appropriate documents relating to the goods concerned
- To provide the agent with information which the agent needs to fulfill his or her duties
- To provide the agent with prior notice if it is anticipated that the volume of commercial transactions will be less than the agent could normally have expected.
The regulations also stipulate that agents owe duties to the principal for:-
- proper effort to be made for negotiating and concluding sales
- To provide the principal with all necessary information available to him/her.
- To act in accordance with reasonable instructions.
The above duties cannot be contracted out of by the parties to an agency contract.
Another common and important clause in agency agreement is a restraint of trade clause and care needs to be taken to ensure these clauses are valid (they can always be struck out or varied by a court in any event as being unreasonable) and in any event such a clause must only relate to the geographical area or to the group of customers or to the type of goods dealt with by the agent under the contract and can only apply for a period of 2 years maximum.
Please also take a look at our agency contracts guides page.