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Sales Agency Agreements

June 2011

Businesses selling products will often choose to employ the services of a commercial agent. The use of sales agents as opposed to an employed sales team has a number of advantages including reduced sales costs, low recruitment costs and – perhaps the greatest benefit – only paying the for sales completed. Moreover, agents will often already have an established customer base to bring to your business, will have credibility with that customer base and will know the market in their area.

The Agency Agreement

Central to the relationship between a business (a principal) and their agent should be the Agency Agreement. This contract will set out in clear terms precisely what the agent will be selling, where the agent will be selling, how those sales are to be transacted, the commission payable on those sales and other key rights and responsibilities of the parties.

Simply-Docs has offered sales agency agreements for some time; and these documents have now been comprehensively updated and added to.

Formerly known as “the principal’s version” and “the agent’s version” our existing sales agency agreements now set themselves apart on a different key factor: compensation vs. indemnity upon termination. Under the Commercial Agents Regulations 1993 a commercial agent is entitled to either compensation or an indemnity upon the termination of their agency. The default position under the Regulations is compensation, however it is up to the parties to decide which they will use. It should also be noted that the right to such a payment is not absolute. Indeed it is subject to a number of exceptions which are also detailed in the agreements.

The former differences between the sales agency agreements are now integrated into both versions by way of optional clauses allowing for easier adjustment of the bias toward one party or the other.

In addition, certain elements in the documents which were once standard (primarily those pertaining to the holding of stock and the making of direct sales by the agent) are now optional, thus allowing the agreements to be applied to a broader variety of agency relationships.

New Del-Credere Agency Agreements

Two new versions of the sales agency agreement have been created (again, differentiated on the basis of compensation vs. indemnity) which appoint the agent as a del-credere agent. As a del-credere agent the agent undertakes to guarantee all sums owing to the principal by customers found by the agent and with whom the agent has concluded contracts on the principal’s behalf.

Whilst adding additional security for the principal, it is important to note that as a general rule, del-credere agents will also benefit from a higher rate of commission as compared to their non-del-credare counterparts so as to reflect the increase risk to them.

All of these documents are available to subscribers to the Business document folder and can be accessed directly via the links on the right.

The contents of this Newsletter are for reference purposes only and do not constitute legal advice. Independent legal advice should be sought in relation to any specific legal matter.

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