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Agency Agreement used where one party is to act as an agent in order to sell the products, goods and services of the other party (the principal) in exchange for commission payments. The agreement is also known as a sales agent agreement or commission agreement.
This up-to-date agreement grants the agent a defined territory within which to sell for the period of the agreement. The territory can of any size from a city, county, country, continent to worldwide. The agent could also be granted more than one territory. It is up to the principal to decide on the territory granted. Some principals grant one territory, and then offer more territories once an agent has proved they can effectively promote and sell the products or services.
A further consideration is whether the agency agreement should be exclusive or non-exclusive for the particular territory. Again this is a commercial decision for the principal. If the principal has a product or service that has a low margin and requires a large volume of sales to generate a good profit, then the more agents the better. However, the counter argument to that is that if an agent has an exclusive agreement they may be more willing to work to promote and sell the products.
This template allows for the commission structure favoured by the principal. It also sets out clearly and in detail the responsibilities of both the agent and the principal.
The agreement incorporates the Commercial Agents (Council Directive) Regulations 1993 and so can be used throughout the EU, and worldwide. These regulations are significant and are primarily designed to protect the interests of the agent, rather than the principal. It is important to note that even if the regulations are removed from the agreement, they still apply in the EU. So it is not possible to avoid them or contract out of them.
The regulations provide the following protections for the agent:
1. The agent actually has the right to request a written agency agreement from the principal. (This is a good reason to buy this agreement.)
2. The agent is entitled to a reasonable rate of commission, where none is expressly stated. Our agency agreement does include detailed reference to commission rates and the prinicpal should clearly state commission rate(s) in the agreement. It is vital for both parties to have certainty in this area.
3. The agent is entitled to an indemnity where the principal ends the agreement, but continues to derive substantial benefits from the work already done by the agent. The indemnity is usually capped at one year's commission received by the agent, averaged over the previous 5 years or less of the agreement.
4. However the indemnity does not prevent the agent from seeking further damages for costs incurred in carrying out their duties under the agreement.
5. Compensation can also be sought if the principal terminates the agreement on the death of the agent.
6. Finally, the agent needs to inform the principal of their intention to seek damages and/or an indeminity under the regulations within 12 months of the termination of the agreement.
Our agency agreement also includes the requirement for the agent to fully comply with the Bribery Act 2010. Including the requirement for the agent to train (and pay for such training) of their own staff to ensure compliance.
Clauses in this agency agreement include:
It is imperative that both the principal and agent have clear written commercial terms agreed so that both parties know what to expect from their deal. Relying upon orally agreed terms or negotiations without a final written agreement could prove costly in terms of lost sales, commission and any subsequent legal action to define and enforce the commercial terms.
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