Commercial Agents

A commercial agent is an individual or company appointed to sell goods on behalf of another. They are often paid a commission basis. Appointing a commercial agent can provide a business with a cost-effective way of selling into a new territory without incurring the cost of setting up a subsidiary company or branch.

Traditionally, the approach of English law has been to treat a principal - agent relationship as a commercial arm's length relationship with the parties being free, generally speaking, to agree whatever terms they may consider appropriate. That has not been the approach taken in, for example, France or Germany where a commercial agent is regarded as more akin to an employee, and in need of a degree of protection. The continental approach has been adopted throughout the EU and was incorporated into English law by the Commercial Agents (Council Directive) Regulations 1993. Many think that the Regulations do not sit very comfortably with the way in which business is done in the UK. It may seem odd to a UK businessman that, for example, the protection afforded by the Regulations may be invoked by a multinational company, which might be thought to be quite capable of looking after its own interests.

The Regulations impose a number of duties on both the principal and agent. They do not mandate the payment of commission. However, they contain rules that apply if the parties agree that the agent is to be paid on a commission bass. Amongst other things, these specify those transactions - whether during the agency contract or after its termination - which trigger a right to commission, the dates on which commission is payable and the principal's obligation to supply to the agent regular statements as to the commission due. The Regulations also impose minimum notice periods for terminating the agency contract.

One of the most contentious aspects of the Regulations has been the right of commercial agents to claim compensation or an indemnity in certain circumstances upon termination of the relationship. In some ways the way the Regulations work is similar to unfair dismissal law in that this right does not only arise where the principal terminates the agent's contract prematurely. It may also arise when a fixed term agency contract expires without being renewed.

Whether you are seeking to employ a commercial agent or are yourself a commercial agent, you need to make sure that you have a good understanding of the Regulations' requirements. Failure to do so may well cost you money. We have experience in advising both principals and agents on of all aspects of the Regulations.

If you are an agent who has had your agreement terminated, then contact Tom Silverwood-Cope. If you are a principal who would like general advice on the Regulations, or you are about to terminate, or have terminated, an agency relationship then contact Nick Crook.

Filed: 26/07/2011 10:28:07