Dealing through a Sales Agent/Agency

Dealing through a Sales Agent / Agency

Role of a Sales Agent

Whilst a sales agent may be anything from a one-man band to a business offering services such as warehousing, credit collection and market research, their shared feature is that an agent does not purchase in his own right, but commonly simply puts you in touch with prospective customers often leaving you to conclude negotiations. The use of sales agents is common with more complex goods where your involvement in negotiation may be appropriate.

Key Agency Considerations

The following issues are of key importance in establishing the legal framework between you and the sales agent: whether the agent has your authority to conclude negotiations with customers or incur expenditure; whether the agent has the discretion to offer discounts or special terms to customers; your respective responsibilities for promotional expenditure; the agent's role in developing promotional materials suitable for the local market.

Other Key Points of Agreement:

  • Whether the sales agency is exclusive;
  • whether the agent has the right to repackage or alter the goods;
  • the criteria used to evaluate the agent's performance;
  • the territory e.g. a part of the UK or a country overseas;
  • commission rates and payment terms;
  • whether the agent has responsibility for debt collection and bad debts;
  • the extent of the agent's confidentiality obligations and restrictions on dealing with competitors;
  • duration of the agency;
  • the law applicable to the contract and dispute resolution issues.

EU Agency Protection Laws

If your sales agent operates within the European Union, you must bear in mind legislation designed to protect the agent in relation to commission levels and payment terms. Most significantly the legislation gives the agent certain rights on termination including minimum notice and compensation. They also restrict any contractual limitations on the agent's activities after termination. These rules have substantially reduced the use of sales agencies.

Competition Law

Competition law issues are unlikely to be a problem with a normal agency because they generally only apply where the parties to an agreement are separate commercial entities - an agent who simply obtains orders for his principal is not normally considered a separate undertaking.