What are the key elements of an agency agreement?

 

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5. What are the key elements of an agency agreement?

Key issues include:

  • Whether you require the agent to be an employee or self-employed.
  • What territory they cover and whether they have exclusive rights to that territory.
  • Which of your products they can sell.
  • What authority they have to act on your behalf.
  • Any restrictions on the agent's other activities (eg selling competing products).
  • What each of your responsibilities are in terms of promoting your product, making sales and fulfilling orders.
  • The agent's rights and restrictions in relation to your intellectual property, such as your brand names and trade marks.
  • Restrictions on disclosure of confidential information.
  • How the agent is paid and whether you meet any expenses.
  • What rate of commission will be paid to the agent and whether that will differ from product to product or customer to customer.
  • The arrangements for terminating the relationship.
    • The agreement needs to be carefully drafted to take into account possible legal consequences, such as your responsibility for the agent's actions (see 11). In the case of self-employed agents, the agreement also needs to take into account your obligation to notify them of any expected shortfall in their earnings (see 14) and the rules regarding termination of the agency (see 16) and compensation payments (see 17).