What is this agent agreement template for?
This agent agreement is suitable for a company (or individual) that wishes to act as sales agent for a manufacturer or supplier.
The terms of the agreement are fairly balanced, but they are biased in favour of the agent to some extent. If you are a supplier/manufacturer, you can use our document A101
Where the manufacturer/supplier (or “principal”) and the agent are in different countries, you should have the wording checked by a lawyer in the other country even if you want to have the agreement governed by the law of your country.
By the way, don’t confuse an agency agreement with a distributor agreement: an agent finds customers for their principal who then supplies the customer direct. The distributor, by contrast, buys the principal’s goods and then resells them in the agreed territory. For a distributor agreement favouring the distributor, see our document A118
What are the main issues for an agent when preparing an agreement with a supplier?
Scope of agreement. If the supplier produces a range of different products, you want to be able to sell all of them or only a limited amount? Also, what is the scope of your territory as agent? Be careful not to take on too big a product line or territory unless/until you have the team and/or infrastructure in place in order to service it.
Exclusivity. Is the agreement to be exclusive with regard to certain products and/or territory or non-exclusive? In either case, what happens if you make a sale outside the agreed territory? You need to be sure to get commission.
Commission. Both the amount of the commission and the payment terms need to be agreed – hopefully with payment of commission on a monthly or at most a quarterly basis. This should be based, ideally, on sales rather than on payments received by the principal. Apart from commission, do you get any expenses reimbursed , for example in travelling to a new territory to research the market for your supplier?
Sales targets. It is common for a supplier/manufacturer to have sales targets in the agreement. As an agent, you should be fairly conservative, at least in the initial period, so that you are confident of achieving the agreed target.
Supplier support. This can take various forms – the agreement should specify what support you need in terms of brochures, literature, training etc. Also, occasional visits from the supplier can be useful in generating sales.
Duration and Termination. Since it takes time for an agent to build up sales, you need a reasonably long contract period. And if your principal wants to terminate, he should only be allowed to do so after an initial period of, say, one year and then only on reasonable notice of, say, three months.
What detailed terms does the agency agreement template contain?
This Agency Agreement is an 8 page document with 10 main clauses covering
- definitions of key terms
- terms of appointment
- agent’s general obligations
- orders and sales
- principal’s general obligations
- intellectual property
- a general clause detailing assignment, subcontracting, notices, language, dispute resolution and governing law.
This agency agreement is for international use and it is generally compatible with EU legislation.
For more information on each of these sections, see our Explanatory Notes below which you will also receive when you download the document from our website.
For information on signing documents see our Contract Signing page
This agency agreement is written from the agent’s point of view. If you are a principal / manufacturer, see document A101.
When I download the document, can I change it and/or use it more than once?
Yes, all ContractStore’s templates are in MS Word and you can use the contract on more than one project. For more information, watch the video on this page of our website or see our FAQs
ContractStore supplies templates and is not a law firm. But all our templates are written by experienced lawyers, in this case by one of the authors of Exporting Made Easy . So, we can arrange legal assistance for customers who need special terms in one of our documents or a bespoke template. . For more information see our Legal Services page.
And if you want to contact us see our Contacts page.
Contract Author – Giles Dixon is a solicitor, with several years’ experience of drafting cross-border agency and distributor agreements, and he is co-author of Exporting Made Easy, a straightforward guide for exporters.
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Who can use this Agency Agreement? Any manufacturer or supplier of goods or services can use this agency agreement. What is this Agency Agreement for? The agreement sets out the terms on which the “principal”…
This Agency Agreement contemplates that a manufacturer or supplier of goods in one country will appoint an agent in another on an exclusive basis for the sale of those goods.
The Agreement is fairly evenly balanced, but biased in favour of the Agent. Whereas a distributor buys for re-sale, purchasing from the Principal, the role of an agent is to find buyers on behalf of the Principal and on the Principal’s terms and conditions of business.
When the Agreement is being used in a cross-border situation, with the Agent and Principal in different countries, the Agent should have the text checked by a lawyer in the Principal’s jurisdiction even if the Agent wishes to use the law of his own country, i.e. the Territory, as the governing law of the Agreement.
Specific comments on our model form, by reference to clauses, are set out below:
DATE AND PARTIES
See our separate note signing contracts. In the case of the parties, the official address of each of the parties should be inserted and where a party operates under a P.O. Box Number, a physical address might also usefully be included.
This is brief and needs no comment.
This contains a number of defined terms that need to be considered by the parties in the light of their own particular arrangements. Where reference is made to a defined term in the text of the Agreement, it is denoted by capital letters.
Products are to be listed in a Schedule. Especially when the relationship between the parties is a new one, the Principal may not want to list all his Products but only those which he considers are likely to sell most effectively in the Agent’s Territory. It is sometimes possible for a Principal to appoint different agents for different products in the same territory. The Agent should be aware of this and may endeavour to persuade the Principal that all Products of the Principal are covered by the Agreement.
If the Principal is new to the region where the Agent operates, the Agent may wish to propose that the Territory shall cover not only the Agent’s own country but also neighbouring ones.
The Territory covered by the Agreement is defined by reference to a Schedule. The Territory may cover a complete country, part of a country or more than one country, but whichever the case, it is important to define it clearly. Do not, for example, refer to “any country in the Middle East”, since there may be an argument as to whether certain countries are included in the Middle East.
2. APPOINTMENT AND DURATION
This confirms the appointment of the Agent on an exclusive basis – i.e. the Principal by appointing this Agent will not be able to appoint another Agent for the same products in the Territory.
In clause 2.2 the Agreement contemplates a fixed Initial Period of  years and after that the Agreement will roll over unless terminated.
3. MAJOR TERMS OF APPOINTMENT
The basic principle of this clause from the Agent’s perspective is that he should be entitled to commission on all sales of the Products to customers in the Territory including Products sold elsewhere but destined for delivery to the Territory. This may be very different from the Principal’s perspective under which, for example, certain sales are sensitive and the customer wants to deal only with the Principal. In such a case the parties need to reach agreement on what, if any, commission will be payable.
4. AGENT’S GENERAL OBLIGATIONS
This contains a number of self-explanatory provisions requiring the Agent to promote the sale of the Products, undertake an advertising campaign etc. As this document is drafted from the Agent’s point of view, it is shorter than the Principal might wish for. (See document A101 for a clause favouring the Principal).
5. ORDERS AND SALES
Since the Agent is negotiating sales on the Principal’s behalf he is required in this clause to apply the Principal’s list prices and not to offer any discount or impose any surcharge outside agreed limits.
The second alternative in clause 5.4 requires the Agent to pass orders directly to the Principal, which will be confirmed by the Principal. Payment will be made directly by the customer to the Principal, but if the Agent does receive payment, he is required in clause 5.5 to forward the payment to the Principal within 30 days.
Commission is dealt with by reference to Schedule 3.
Clause 5.7 deals with statements to be sent to the Principal against which the Principal will make Commission payments. Under this wording, the Principal is required to pay relatively quickly from the date of receipt of a statement, which is acceptable to him. Longer payment periods would require adjustment of the wording. Interest is payable to the Agent in the event of late payment. However the Agent should note that although it is useful to include this provision in such an agreement it will often be commercially imprudent to insist upon payment of interest where there is a continuing commercial relationship. It should be noted that interest is not payable where it is agreed that an amount disputed was in fact not due to the Agent.
6. PRINCIPAL’S GENERAL OBLIGATIONS
For the Agency to operate successfully, the Principal needs to provide regular support, including advertising material, technical data etc. as well as ensuring the price lists are kept up to date.
In appropriate cases where training is necessary for the Agent’s staff, 6.1.4 provides for the Principal to provide free training, and this may include the employees’ travel and accommodation costs. Sometimes the Agent will bear such costs or they might be shared on an agreed basis.
The clause also obliges the Principal to confirm orders and make deliveries in accordance with those confirmations as well as maintaining product liability insurance and indemnifying the Agent against any Product defects.
7. INTELLECTUAL PROPERTY
The Principal will usually want to protect his trademark, trade name and other intellectual property rights. The Agent is required to notify any infringement and prevented from registering any of the Principal’s trade names or other intellectual property rights. Provision for protection of the Agent’s intellectual property rights is also included.
Under our clause, either party can terminate in the event of the other’s material (i.e. not trivial or insignificant) breach of contract or insolvency. Termination by the Principal may not be as easy in practice as this clause suggests and legal advice is recommended before attempting to terminate.
Clause 8.3 deals with the consequences of termination and, as will be seen, outstanding sales will be honoured and the Agent will receive commission that has already been earned.
Clause 8.4 contains provision for the Principal to pay compensation to the Agent unless termination is due to the material breach of contract or insolvency of the Agent. This is intended to avoid disputes as to what the level of compensation should be but, once again, advice on this clause before the Agreement is signed is important.
Under EU legislation there is provision for the Principal to pay either compensatory damages or an indemnity to the Agent unless termination is due to a material default or insolvency of the Agent. It should be noted that this right to compensation/indemnity will also arise where the Agent terminates by reason of ill health/old age or by reason of the Principal’s conduct.
For more details on the difference between compensation and indemnity as well as other aspects of EU law, see our free document Z163 – on Commercial Agents. Also, note that under EU law, if the Agreement is within the EU, claims for compensation or indemnity must be made within 12 months of termination.
This is intended to restrict the Principal from competing with the Agent’s business after the Agreement has been terminated by appointing another agent in the Territory, unless the Agent’s material breach of contract or insolvency was the reason for termination. (This is the opposite of Document A101 where the restriction is imposed on the Principal.)
This contains a number of standard provisions designed to regulate the arrangements between the parties.
10.1 restricts either party from assigning the agreement without the other’s written consent. Clause 10.2 gives the Agent the right to appoint sub-Agents. Clause 10.3 deals with formal notices. In clause 10.6 we have suggested direct negotiation followed by mediation (if agreed) and, ultimately, arbitration in the event of disputes.
For other standard clauses and for a more detailed discussion of dispute resolution, see the Free Document (Z140) on our website which can be downloaded free of charge.
Finally, a reminder that you should get appropriate legal advice before using this Agreement.