Commercial Agents Regulations

Mandatory rights and obligations.

Both the agent and the principal are subject to mandatory obligations and are entitled to some mandatory rights.

The principal must:

Act dutifully and in good faith.
Provide documentation relating to the goods concerned.
Notify the agent where there will be a reduction in goods from the volume expected.
Inform the agent of the status of any transactions procured. The agent must:
Look after the interests of the principal.
Act dutifully and in good faith.
Make a proper effort to negotiate and, where appropriate, conclude transactions.
Communicate all necessary information to the principal.
Comply with reasonable instructions given by the principal.

Pay

Pay is usually dealt with under the terms of an agency agreement however the Regulations impose default provisions for the calculation of remuneration where these have not been expressly agreed.

Commission

An agent is entitled to commission during the agency contract, and under certain circumstances, after the contract is concluded.

Agents are also entitled to information relating to the calculation of their commission, such as relevant accounts of the principal.

Restraint of trade

A restraint of trade clause limits the agent’s activities during a certain period following termination of the agency contract. To be effective, the restriction imposed needs to be reasonable in scope of territory, customers and time.

Notice of termination 

Where an agency contract is concluded without a breach of contract, notice is required to be given. The Regulations provide minimum notice periods relating to the length of service, as follows:

• 1 month’s notice during the first year of the contract;
• 2 months’ notice during the second year; and
• 3 months’ notice for the third and any subsequent years. These notice periods cannot be shortened, but can be extended.

Termination payment

On termination of an agency agreement, the agent is typically entitled to either compensation or an indemnity. The Regulations state that unless mentioned to the contrary, an agent is entitled to be compensated rather than indemnified.

Neither indemnity nor compensation are payable where the principal terminated the agency contract because of a default of the agent which justified an immediate termination of their agreement. Likewise, where an agent terminates the contract, it will not receive compensation or indemnification, unless the termination can be justified on grounds attributable to the principal. An exception is where the agent terminates the agreement due to age, infirmity or illness, which retains an entitlement to compensation.

If a claim for an indemnity or compensation is not made within one year of the termination, the agent will lose its entitlement to the payment.

The Regulations provide basic safeguards and rules to ensure the relationship between agent and principal is a fair one. If you believe that the Regulations apply to you, and require further advice on the creation of, or amendment to, an agency contract, please contact:  contact@ouryclark.com