In the UK, a business may choose to have a self-employed sales force. If goods are being sold, it is important to realise that commercial agents enjoy particular protection under the Commercial Agents (Council Directive) Regulations 1993 (“the Regulations”), which can make parting company with an agent expensive for a principal.
The Regulations impose comparatively little on the agent but do oblige the agent to perform his or her duties with reasonable care and skill and to comply with the principal’s instructions. Furthermore the agent should “make proper efforts to negotiate and, where appropriate, conclude transactions he or she is instructed to take care of” and “act dutifully and in good faith” towards the principal.
The Regulations are much more prescriptive with regard to the principal’s obligations, particularly in relation to the payment of commission. The principal should also “act dutifully and in good faith” towards the agent and provide the agent with “the necessary documentation relating to the goods”.
The termination of a commercial agency can give rise to a number of difficult issues and it is important that the principal takes legal advice before terminating an agency.
If the agent is entitled to be recompensed for the termination of the agency, as is frequently the case, the Regulations provide two alternative forms known as “indemnity” and “compensation”. This is often a problem area and is one of the main reasons why it is important when appointing a commercial agent that legal advice is taken and a well drafted Agency Agreement is in place.
Steeles Law is nationally recognised for its agency work. For further advice, please contact us