The Commercial Agents Regulations 1993 and How they may Affect your Business
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There are important questions both the principal and agent address before entering into or terminating agency agreements, including: |
- What is a commercial agent and do the Regulations apply?
- What are the duties of both the agent and the principal?
- What entitlements does the agent have to remuneration and commission?
- How long does the agreement last and how do you terminate it?
- What rights does the agent have to be compensated on termination?
- Whether to choose indemnity or compensation?
In this month’s newswire we will look at the first three questions.
1. What is a commercial agent and do the Regulations apply?
The Regulations define a commercial agent as a ‘self-employed intermediary who has continuing authority to negotiate the sale or purchase of goods on behalf of another person’.
Generally there are two types of agent that the Regulations apply to: a sales agent who has the power to conclude contracts and bind the principal, and a marketing agent who only finds and possibly negotiates with customers and then refers them to the principal.
Most important to note is that the Regulations do not apply to agreements to sell services. The Regulations also do not apply to company officers who have the power to bind the company or for one-off transactions.
2. What are the duties of both the agent and the principal?
In summary the duties of the agent and the principal can be set out as follows:
The agent must:
- Make proper efforts to negotiate and where appropriate conclude contracts.
- Communicate to the principal all available necessary information.
- Comply with reasonable instructions given by the principal.
The principal must:
- Provide the agent with all necessary documentation relating to the goods.
- Obtain for the agent all necessary information for the performance of the contract.
- Inform the agent within a reasonable period if the volume of transactions will be significantly lower than would be expected.
The parties cannot agree to contract outside of these provisions.
3. What entitlements does the agent have to remuneration and commission?
If the parties have not reached an agreement on remuneration, then the entitlement will be the commission that is customarily allowed for those type of goods in that geographical area. In the absence of any customary practice, the remuneration should be reasonable.
The agent may also be entitled to commission after the agreement has terminated if:
- The transaction is mainly attributable to the agent’s efforts during the term of the agreement and the contract was entered into within a reasonable period after termination.
- The order by the third party reached the principal or agent before the agreement terminated.
What is “mainly attributable to his efforts” and a “reasonable period” is likely to be decided on a case-by-case basis.
The right to commission is only lost if the contract between the principal and the third party is not executed, so long as the principal is not to blame.
The principal is obliged to provide quarterly statements of the commission due, and the agent has the right to request all the information necessary for him to determine the amount of commission due.
In next month’s newswire, Shane and Izabela will look at the duration of agreements, compensation on termination and the merits of indemnity.
For specialist advice on this or any related matter, please contact Shane Morris on scm@silvermansherliker.co.uk or call +44 (0)20 7749 2700. |
