Many business relationships involve one party (known as the principal) giving authority to another party (the agent) to act on their behalf. For example, this could include the agent buying or selling goods or services for the principal or negotiating contracts on the principal’s behalf. Both the agent and principal may be individuals, partnerships or companies.
In each case, the resulting contract is made between the end customer and the principal (and not with the agent). In return the agent will receive payment, usually in the form of a commission, often as a percentage of the agreed price.
These arrangements have some special characteristics and are quite different from a distribution agreement, where the supplier or manufacturer sells their goods or services to the distributer, who then sells to the end customers.
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One particular form of agency is a commercial agency, which is where a principal appoints an agent to negotiate the sale or purchase of goods (but not services) on their behalf. In addition to the usual principles, commercial agency is governed by the commercial agents (council directive) Regulations 1993 which give commercial agents special rights and protections in their dealings with their principals, especially upon termination of the agency agreement.
Our dispute resolution team has particular experience dealing with the following types of issue involving agents and their principals:
- Whether the Commercial Agents Regulations apply to a particular agency arrangement;
- Termination and related disputes over indemnity and compensation payments under the Commercial Agents Regulations;
- Commission disputes, including clawback mechanisms
- Breach of the agent’s duties owed to the principal, such as the duty to act in good faith and not to make a secret profit
- Breaches of restrictive covenants following the termination of an agency agreement.
We also work closely with our colleagues in our commercial contracts team who have expertise in drafting and negotiating commercial and other forms of agency agreements, acting for either principal or agent.