Agency law

/ March 30th, 2012 / Comments Off on Agency law

Agency Law

What is Agency Law?

Agency Law concerns the relationship between one individual, known as the agent, acting for another individual or company, known as the principal, on legal authority and Agency Law generally relates to contractual or commercial dealings.

Under the Agency Law contract the agent is given the authority by the principal, the person or company the agent is acting for, to take on certain responsibilities and create legal relationships with third parties on the principal’s behalf.

An agent will be required to negotiate the purchase and sale of goods with third parties and create contractual agreements between them and the principal through the principal’s express or implied authority.

What is Express Authority?

Express authority is the authority given directly to the agent by the principal and may be given to the agent either verbally or in writing.

What is Implied Authority?

Implied authority is when an agent makes a decision to do something in the best interests of the principal even though he doesn’t have the express authority to do so.

The Responsibilities of the Agent

The agent’s responsibilities include:

  • Keeping the principal informed of any activities such as negotiations and transactions as and when they happen
  • Adhering to the principal’s instructions
  • Carrying out any transactions or negotiations in the correct manner and to the best of their abilities

The Responsibilities of the Principal

The principal’s responsibilities include:

  • Providing the agent with all the specific information and documentation required to carry out transactions
  • Providing all the necessary information the agent will require to carry out the contract
  • Keeping the agent informed when the level of commercial transactions fall below the level expected by the agent
  • Ensuring the agent receives pay rates equal to those of the other agents working in the same business sector
  • Ensuring the agent is given the appropriate statutory notice period on termination of their contract


The Advantages and Disadvantages of a Commercial Agent

There are numerous up-sides to using a commercial agent but companies should also take into consideration the down-sides before making their final decision.

The Advantages

  • Agents with specific knowledge and experience may find it easier to break into notoriously difficult markets
  • Recruiting a commercial agent often proves far easier than finding sales executives with the specific knowledge required
  • With the agent working remotely company overheads can be significantly reduced
  • Utilising an entire team of specialist commercial agents enables a wide range of markets to be reached in a more cost effective manner

The Disadvantages

  • An agent may not take the time to understand the products he is required to sell
  • With the agent working remotely a principal has little or no control over the agent’s working activities and can’t always ensure that the agent is working to the best of their abilities
  • An agent may have a particular way of selling a product which doesn’t fit with the principal’s ideals
  • An agent may sell the products to customers who are unsuitable and who, in turn, may compromise the value of those products
  • A commercial agent, regardless of whether or not they have breached their contract, may be entitled to compensation on termination of the agreement between them and the principal

Termination of the Agency

On termination of the agent’s contract you should be aware that under European law, you may well find that your agent is entitled to significant compensation, which may in fact apply regardless of the terms of your contract. This is a good reason to seek legal advice at the outset i.e before you agree terms with an agent, and possibly also before considering termination of the agreement.

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