For better or for worse? Are agents better off or worse off in having a written agreement with their principal?

Overwhelmingly, and generally speaking, agents are in a much better position in having a written agreement with their principal – however, as to whether agents are in a better or worse position by entering into a particular written agreement with any principal will obviously depend on what are the actual proposed terms of the relevant document. In other words, if the proposed terms are to the overwhelming disadvantage of the agent then (obviously) it would to the agent’s corresponding disadvantage to have a written agreement in that instance in agreeing to those particular terms.

On the other hand, if the terms proposed are neutral, or otherwise to the agent’s advantage, then, and similarly obviously, it would then be to the agent’s advantage to agree to those acceptable terms, in order to secure the benefit of having a contract in writing. Everything therefore depends on what are the actual terms proposed, but the best advice (and to reiterate) is always to have a written agreement, but incorporating terms which are not materially to the agent’s disadvantage.

Remember also that parties to an unsigned contract may (in certain circumstances) be bound nevertheless by certain or all of its terms, depending on what was said/written and how the parties conducted themselves towards each other following the presentation of the draft agreement.

What are examples of good things to record to in a written agency agreement?

Non exhaustive examples of advantageous points to include in a written agency agreement include:-

• Date when the agency commenced

• The precise names of the parties so as to be able to accurately identify them

• The role expected of the agent (i.e.:- selling on behalf of the principal), and an acknowledgment that it is the role of a ‘commercial agent’

• The territory area to be covered by the agent (and whether that be by geographical reference or by reference to a named group)

• A description of the products to be sold by the agent

• A statement that the agency is exclusive to the agent (i.e. – that he or she will receive commission in respect to all sales)

• The rate(s) of commission to be paid to the agent

• The date by when commission has to be paid

• That any stipulated sales targets are targets that the agent will aim to achieve but not to be obligatory in sense of constituting a breach in event of any failure

• That any other agreed obligations on the part of the agent are obligations which the agent is clear are within his or her own control

• The notice period to be afforded by the parties to terminate

• No variations to any terms agreed unless both parties consent in writing

Keep in mind that certain provisions of the Commercial Agents (Council Directive) Regulations 1993 will anyway afford the agent certain protections (and otherwise supplement the terms of whatever may be agreed in writing), but that the above are examples of what terms to include in an actual written agreement.

Keep in mind also that there are many other examples of beneficial clauses which could be considered for inclusion in an agreement in writing, and that the above are just a few examples.

What, and on the other hand, are examples of things definitely not to agree (and which would not form part of the terms by dint of anything in the Commercial Agents Regulations):

• That, without the agent’s prior consensus, the principal has the right to make any changes to the terms of the contract

• That any failure to achieve a sales target constitutes a breach of obligation on the part of the agent

• Obligations on the part of the agent which are not within his or her own control to achieve

• Any failure on the part of the agent to comply with any obligations to result in the agent’s loss of right to a compensatory payment on termination

• Any clause effectively excluding the agent’s prospective entitlement to post termination commission in the pipeline

• Post termination restrictive covenants

There are in fact many other examples of clauses which should never be included as part of an agreement (i.e.:- I have come across so many that the above list constitutes just a few examples, and not necessarily at all the most important). Remember also (and on the other side of the coin) that certain provisions of the Commercial Agents Regulations which are favourable to the agent may actually be specifically (but not always in an obvious way) excluded in a written agreement (i.e. – not all of the Regulations are mandatory and can thus be excluded by consensus between the parties, and hence the obvious need to seek legal advice before signing any agreement or, indeed, before communicating a position in respect to a draft which is presented, or otherwise before taking no action at all (which is never advisable)).

©  David Bentley
Bentley Agency Law Limited

7 Littlemoor Road, Pudsey, Leeds LS28 8AF
Tel: 0113 236 0550
Fax: 0113 236 2511

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