Dealing through a Sales or Commercial Agent / Agency
Role of a Sales or Commercial Agent
A sales or commercial agent may be anything from a one-man band to a business offering services such as warehousing, credit collection and market research. They often are appointed simply to put you in touch with prospective customers, leaving you to conclude negotiations or to accept customers orders that they pass on to you, rather than themselves accepting orders on your behalf. The use of an agent 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 an 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 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 Commercial Agency Protection Law
If your agent is a "commercial agent" as defined by the relevant legislation, you must bear in mind the provisions of that legislation designed to protect the agent, in particular in relation to minimum notice periods for termination, compensation on termination , commission levels, payment terms, and contractual limitations on the agent's activities after termination. These rules have substantially reduced the use of sales agencies.
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.
For more detailed guidance on legal and commercial aspects of sales and commercial agency, see Agents under Expanding the Sales Network