Solicitors in Birmingham

The Commercial Agent Regulations- what do I need to know ?

The Commercial Agents (Council Directive) Regulations 1993 apply to commercial agents only. Under the Regulations, commercial agent is “a self-employed intermediary who has continuing authority to negotiate the sale and purchase of goods on behalf of another person (“the principal”), or to negotiate and conclude the sale or purchase of goods on behalf of and in the name of that principal…”

The most important provisions of the Regulations provide that:

A principal owes certain general duties to a commercial agent i.e.

• To supply him with the essential documentation as to the goods concerned
• To provide information which the agent needs to execute the contract
• To inform the agent if he thinks that the number of transactions will be lower than expected.

An agent owes duties to the principal i.e.

• To make proper efforts to negotiate and conclude transactions.
• To provide the principal with all the necessary information known to him.
• To abide by the principal’s reasonable instructions.

In the absence of an agreement as to remuneration, the agent is entitled to remuneration customarily allowed to agents. If there is no such practice, the agent is entitled to reasonable remuneration. Other points to note :-

• There are rules dealing with where remuneration is commissioned based and when it becomes due.
• Regulations control the conclusion and termination of agency contracts
• The agent is entitled to an indemnity or compensation
• If the fixed term contract continues after the end of the term, it is converted into a contract for an indefinite period.
• If a contract is for an indefinite period, it may be terminated by either party by notice.
• Each party is entitled to request from the other a signed statement containing the terms of the agency.
• The rules allow for immediate termination for breach or in exceptional circumstances

What degree of control do I have over what my agent  can do  ?

This depends on what has been agreed and if this is not documented it can cause problems as the answer will ulimately depend on interpretation. It is also worth noting that if the degree of control is very tight, this can result in inadvertently creating an employment relationship.  If an agent exceeds the limits of authority,  and you let this go, in legal terms you may be seen to be waiving the agent’s breach and be liable for anything he/she has agreed to do on your behalf. Consequently, it is also worth perhaps checking with third parties the agent is dealing with, that he/she is not overstepping the mark.

What is the position on terminating an agency agreement ?

The starting point here is whether you agreed a fixed term contract, as normally the agreement will end on expiry of the term, but be wary of simply continuing the arrangement therafter, as the agent will then have an indefinite contract. If the agency agreement was not fixed term at the outset it is important to specify a notice period to be given by either party, subject to the possible right to terminate without notice based on a fundamenatal breach of the contract.  With self-employed agents, the minimum notice period you would have to give under UK and European law is 1 month in the first year, 2 months in the second year and 3 months subsequently.

Agent or distributor ?

There are fundamental legal differences between agents and distributors, but aside from these, the practical consideration on this issue often include :-

• It is generally easier, due to legal relationships to control the sales process using an agent rather than a distributor. using an agent does not necesarily mean a lack of conatct with clients or customers, with distributors it generally does
• Distributors are  motre commonly useful for vaolume sales of lower price products wheraes agents are perhaps more appropriate for important products and particularly for selling services.

For more general information about agency law, please also consider our main agency law page.