Commercial Agency

No, it is not a legal requirement to have a written agency agreement in place, although it is often the case that a written agency agreement clarifies the rights, duties and obligations of both agent and principal, which assists in determining the contractual relationship between them.  Both agent and principal have a right to receive from the other a signed written document setting out the terms of the agency contract, on request.  Often, however, it will be in an agent’s interests not to have a written agreement in place.

If there is no written agency agreement in place, the Regulations will apply as the fall-back position.  Relying solely on the Regulations can have advantages and disadvantages depending on whether you are agent or principal and also the circumstances of any dispute which might arise between you.  The Regulations tend to favour agents, hence why not having a written agreement is often preferable for an agent.

This very much depends on the circumstances of your individual relationship with your agent/principal.  If you are an agent, it may be advantageous to you not to have a written agreement so that you are not bound by sales targets and so that you may benefit from the payment of compensation on termination under Regulation 17.  While there are definite advantages in having a written agreement, if the written agreement is poor or is drafted without an understanding of the workings of the Regulations, it may not do its intended job and may fail to provide you with the protection which you were expecting it to.

Yes – under Regulation 13 you are entitled, on request, to receive a signed written document from your principal, which sets out the terms of your agency contract.

At the outset of an agency, the agency and principal are free to negotiate and sign up to a written agreement.  However, if a commercial agent has been acting for a principal for some time without having had a written agreement in place, the principal is not able to then compel the agent to sign up to a written agreement when the contractual relationship is already in existence, where the agent does not want to do so.

No, a written agreement cannot exclude or contract out of the Regulations but it is possible to limit the extent and effect of some of the Regulations.  We would recommend that you take legal advice on which of the Regulations may/may not be limited.

This depends on the wording of the agreement and whether both parties agree that the terms of the agency relationship should be changed.  If this is the case, the original written agreement must be complied with in terms of any requirements for making amendments to the agreement between the parties.  If the written agreement does not provide for amendments, it will be necessary for all parties to the agreement to consent to the amendment and for a further document or addendum to the agreement, to be agreed and signed, in order for the amendment to legally take effect.

If you are a principal and your commercial agent is in breach of the agreement, this may entitle you to terminate the agreement without the need to make certain post-termination payments to the commercial agent (if the breach is serious enough).  If you are an agent and the principal is in breach of the agreement, you may be able to take action to, for example, compel the principal to provide you with sales data and/or accept any repudiatory breach of the contract and bring the commercial agency to an end and retain your right to a termination payment.

There are a number of common areas for disagreement when it comes to negotiating written agreements.  These include the imposition of sales targets on the agent, when either party is able to terminate the agency relationship, whether compensation under Regulation 17 is payable on termination, restrictions on the activities of the agent after termination and which country’s laws and courts should determine any dispute (where the agent and principal are based in different countries).

As set out above, you may wish to seriously consider sales targets and also, whether compensation will be payable in the event that the agency is terminated.  An agent should also beware of any other onerous obligations.

When agents service large or repeat order customers, it is not unusual for principals to wish to take these customers “in-house” and remove the agent’s involvement, such that the principal no longer has to pay commissions to the agent for sales made to those customers.  You may, therefore, wish to resist any attempt by your principal to take customers in-house or to cease the payment of commissions to you in relation to sales made to those customers.  Alternatively, you may wish to negotiate a settlement with your principal which compensates you for the loss of future commissions which you would have received from future sales to those customers.

It is highly likely that if your principal wishes to reduce your territory, your commissions will fall as a result.  Depending on the wording of any written agreement, it is not possible for a principal to vary the terms of an agency agreement without the agent’s consent and, therefore, if your principal does wish to reduce or change your territory, you may wish to negotiate a settlement to compensate you for the expected reduction in your future commissions.

Yes – commercial agency agreements can be specified as being only for a fixed term.  However, the fact that a commercial agency is specified as being only of a fixed duration does not prevent the application of the Regulations and, therefore, post-termination payments under the Regulation may still be payable to the agent after the end of the fixed term.

Generally, you would only be able to prevent an agent from competing against you if you have reasonable restrictions on such competitive activity within a written agency agreement.