Agency Agreements

An agency agreement in a commercial context is a legal arrangement where one party, known as the principal, authorises another party, the agent, to act on its behalf in business transactions. The agent may have the authority to negotiate, make contracts, or represent the principal in dealings with third parties. Terms such as duties, compensation, and the scope of authority are typically outlined in the agreement to govern the relationship between the principal and the agent. An agency agreement is key when needing to distinguish the agency relationship from a distributor relationship. Where there is no written agreement, it may not be clear what the role of each of the parties is.

What should you be thinking about as an agent?

As an agent entering into an agency agreement, you should be able to clearly understand and define the extent of your authority to act on behalf of the principal - you'll want to ensure the agreement specifies the limits and nature of your responsibilities. Speaking of which, you'll want to define how you will be compensated for your services - this may include commission structures, fees, or other forms of payment.

The agreement should also address any confidentiality requirements and non-compete clauses to protect the principal's interests and trade secrets. You'll also want to be clear on the conditions under which either party can terminate the agreement - including notice periods and any consequences of termination. It'd also be worth considering whether insurance coverage or indemnification provisions are necessary to protect against potential liabilities arising from your actions as an agent.

It's crucial to thoroughly review and understand all aspects of the agency agreement before entering into it, and if necessary, seek legal advice to ensure your rights and obligations are clearly defined and protected.

What should you be thinking about as a principal?

As a principal entering into an agency agreement, you should clearly define the agent's authority and limitations - specifically the tasks and activities the agent is authorised to undertake on your behalf. You should determine the duration of the agency relationship and decide whether it will be for a fixed term, ongoing, or contingent on specific conditions. During this term you will need to remunerate the agent and the agreement should specify how the agent will be compensated for their services - outlining any commission structures, fees, or other forms of payment, and how they will be calculated.

You'll want to ensure your confidential information is protected and determine the agent's obligations regarding confidentiality and non-disclosure. You should also establish clear procedures for record-keeping and reporting - ensuring that the agent provides regular updates on activities, transactions, and other relevant information.

It's important that you protect your interested in case of any liabilities arising from the agent's action so you should consider stipulating insurance requirements and indemnification clauses within your agency agreement. It's likely that one day you may need to rely on termination provisions so make sure to provide conditions under which either party can terminate the agreement - specifying notice periods and any consequences of termination.  

How can we help?

Clear and precise documentation is crucial to avoid misunderstandings, protect both parties' interests, and establish a framework for a successful business relationship. Thoroughly reviewing and understanding the terms of the agency agreement is essential for both parties. Seeking legal advice can help ensure that your interests are protected and that the agreement aligns with your business objectives.

We specialise in providing cost-effective legal solutions clearing your path to success, which means our bread and butter lies in crafting, reviewing, and dissecting commercial contracts. From T&Cs to aaS agreements and commercial negotiations, we support the likes of Onfido, Multiverse, and Office & Dragons - ensuring they can build, break, or bolster their commercial relationships.

In need of support from commercial contract lawyers in the UK? Get in touch with our team.

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