Agency Law


Agency law is an interesting yet important area of the law.  Without agency agreements the modern commercial world would function in a very different manner.  Businesses wanting to set up shop abroad without making a commitment to full establishment would find it very difficult to do so without agency agreements.

Employee, agent?

Every time you walk into a shop and buy something from a shop assistant, agency law plays a role.  When the shop assistant hands over the goods to you, he is acting as an agent on behalf of the shop owner (in agency law, the shop owner is called the ‘principal’).  He is acting as an agent because he has entered into a contract on behalf of the shop owner and has changed the legal position of the owner with respect to a third party (you).  At the same time, by carrying out the requirements of his role, the shop assistant is acting an employee.  The distinction between the two is fluid and often difficult to pinpoint.

Agency law is a legal minefield

Clearly agency is a minefield.  Get it wrong, and you could find that your agent has unforeseen powers to conclude contracts on your behalf or that he is in fact your employee.  Needless to say, this will undo  all the benefits of having an agency relationship in the first place, the benefits including reduced tax obligations for both employer and employee, reduced exposure to ordinary standards of employment law, cost savings (agents can be paid on a commission basis) and flexibility.  You could also find yourself facing expensive litigation, particularly in relation to Commercial Agency Regulations compliance

The influence of EU law in commercial agency

EU law is highly influential in commercial agency.  In particular, the Commercial Agency (Council Directive) Regulations 1993 give agents significant rights, including rights to notice and significant amounts of compensation where an agreement is unfairly terminated.

Agency agreements

To make sure you get what you want out of an agency agreement and prevent your agent legally binding you to unfavourable contracts and deals, it is vital that you have a properly drafted agency agreement in place.  A good agency agreement will:

  • · Place unequivocal restrictions on the agent’ powers
  • · State the amount of commission that will be paid according to targets
  • · The agent’s territory
  • · State the circumstances in which the agreement can be terminated
  • · State the circumstances in which the agreement will be breached
  • · State the principal’s position on expenses

Get in touch

If you represent a business and are considering an agency agreement or you are having problems with agreements already in place, get in touch with our specialist agency law solicitors to find out what we can do to help.

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