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” appoints the agent to find buyers for its goods and services on an exclusive basis in a defined territory. This version is written from the point of view of the manufacturer or supplier – the principal. For a bias in favour of the agent please see template A102.
What are the main issues?
Scope of agreement: it will identify the goods or services that the agent will sell and the area in which the agent operates – the territory.
The duties of the agent: these may include producing marketing literature, arranging submissions and providing after sales services as well as the basic task of finding buyers.
Commission arrangements: not just the percentage but also frequency of calculation and payment. There may be special arrangements for sales made outside the territory where the agent was involved in procuring the sale.
Targets: it is useful to fix an annual target for the agent against which you can measure performance. This can also be useful when dealing with a compensation claim if you decide to dismiss an agent the poor performance.
Duration & Termination: establishing a successful agency is not necessarily a short-term activity and you need an agreement that is long enough to enable the agent to get properly established and bringing decent returns. As for bringing it to an end, beware: you may have to pay compensation even if the agent is not performing well. The rules vary in different countries, so be sure to check.
What detailed terms does the Agency Agreement contain?
This is a detailed agent’s appointment with 11 main clauses covering
- definitions of key terms
- appointment of an agent
- minimum sales targets
- principal’s right to make direct sales in certain circumstances
- general obligations of agent and principal
- procedures for ordering products
- intellectual property
- a general clause detailing indemnity, assignment, subcontracting, waiver, severability, language, resolution of disputes and governing law.
Example of the agreement
The Principal manufactures and sells the Products defined below and wishes to appoint the Agent as its agent for the sale of the Products in the Territory defined below.
THE PARTIES AGREE AS FOLLOWS:
In this Agreement:
means [ ], being the date upon which the appointment of the Agent under this Agreement commences;
means the initial period as specified in clause 2;
means the designs, specifications, trademarks, trade names, copyright, patents, proprietary information and processes, know-how and other intellectual property rights in the Products, whether registered or not, which belong to the Principal in relation to its business and/or the Products;
"Minimum Sales Targets"
means the minimum sales targets for the Products listed in Schedule 3;
means the products of the Principal listed in Schedule 1;
means a period of three months commencing on 1 January, 1 April, 1 July or 1 October;
means the territory(ies) listed in Schedule 2;
means any day (other than a [Saturday or Sunday]) that is not a bank holiday or a public holiday in the Principal’s place of business.
2. APPOINTMENT & DURATION
2.1 The Principal appoints the Agent as its exclusive agent for the promotion and sale of the Products in the Territory on the terms set out in this Agreement and the Agent accepts this appointment.
2.2 The Agent’s appointment shall commence on the Commencement Date and shall continue for an initial period of  years. Unless terminated in accordance with the terms of this Agreement, it will then continue from year to year, with such Minimum Sales Targets as the parties agree in writing.
2.3 Either party may terminate this Agreement by giving to the other not less than [3 months] written notice to expire at the end of the Initial Period or at the end of any calendar month in a subsequent year. Either party may also terminate this Agreement in accordance with the provisions of Clause 8.
3. MAJOR TERMS OF APPOINTMENT
3.1 During this Agreement the Principal will not appoint any third party as its agent or distributor for the sale of the Products in the Territory.
3.2 The parties have agreed Minimum Sales Targets for the Products as shown in Schedule 3. These will be reviewed and revised by the Principal in consultation with the Agent at the end of each year of this Agreement. If the Agent fails to achieve the Minimum Sales Targets in any [two] consecutive Quarters, the Principal shall be entitled to terminate this Agreement (unless there have been exceptional circumstances (accepted as such by the Principal) which, through no fault of the Agent, have been a major factor preventing the Agent achieving the Minimum Sales Targets).
3.3 The Principal reserves the right to make direct sales to those persons listed in Schedule 4, if any. [The Agent shall not be entitled to commission on sales to those persons.] [The Agent shall be entitled to commission on sales to those persons at the reduced rate specified in writing by the Principal.]
3.4 The Principal will refer to the Agent any enquiries received directly from the Territory except in exceptional circumstances (as decided by the Principal) including those where a prospective purchaser decides not to deal with the Agent. The Principal will have absolute discretion whether or not to pay commission to the Agent where exceptional circumstances apply and the rate of that commission.
3.5 Any enquiry received by the Agent from within the Territory or from outside the Territory with respect to delivery of the Products outside the Territory shall promptly be referred to the Principal. The Agent shall give all reasonable assistance to the Principal in the handling of such enquiries.
3.6 The Agent shall not without the prior written consent of the Principal make any sale of the Products outside the Territory or to third parties whom he has any reason to believe may offer the products for re-sale or delivery outside the Territory.
4. AGENT’S GENERAL OBLIGATIONS
4.1 During this Agreement, the Agent shall:
4.1.1 actively promote the sale of the Products in the Territory;
4.1.2 undertake advertising and marketing in accordance with a marketing plan previously approved by the Principal, using only advertising material and sales literature prepared by or previously approved by the Principal;
4.1.3 engage sales personnel who are appropriately qualified and in such numbers as may be reasonably required;
4.1.4 act in good faith in all dealings with the Principal and not do anything which might be contrary to the interests of the Principal in the Territory;
4.1.5 comply with all reasonable instructions of the Principal;
4.1.6 carry on its business in accordance with the applicable laws and regulations and, where appropriate, maintain registration of its business with appropriate governmental and other authorities in the Territory;
4.1.7 make it clear to all third parties with whom the Agent is dealing that the Agent is the sales agent of the Principal in the Territory;
4.1.8 keep the Principal fully informed of its activities with respect to marketing and sales of the Products, submitting regular [monthly] reports to the Principal in a format and with such detail as the Principal may require;
4.1.9 maintain adequate office, warehouse and other facilities to enable it to deal adequately with sales of the Products;
4.1.10 maintain adequate stocks of samples and spares as from time to time agreed with the Principal, it being the responsibility of the Agent to ensure the safe storage of all Products;
4.1.11 maintain adequate insurance cover with respect to the Agent’s business and the Products [and product liability] in the Territory. The Agent shall promptly provide such proof of insurance cover as the Principal may from time to time request; and
4.1.12 arrange visas, hotel accommodation and office facilities as requested for personnel of the Principal visiting the Territory, on a cost reimbursable basis.
5. ORDERS & SALES
5.1 The Agent shall ensure that all sales of the Products are made at the Principal’s list price from time to time in effect.
5.2 The Agent shall not offer any discount or impose any surcharge on the Principal’s list prices in any negotiations or sales without the prior written consent of the Principal.
5.3 No sales of the Products shall be made except on the Principal’s standard terms and conditions from time to time in force and the Agent shall ensure that those terms and conditions are accepted by every purchaser without amendment before any sale is made.
5.4 The Agent shall not offer any credit to purchasers without the prior written consent of the Principal.
5.5 The Agent shall promptly pass each order received from a purchaser to the Principal. When confirming the order, the Principal will give the Agent an anticipated delivery date. No sale shall be confirmed by the Agent to a purchaser until it receives a written confirmation of order from the Principal.
5.6 Payment for the Products shall be made by purchasers directly to the Principal. However, in the event of any payments being received by the Agent, they shall promptly be remitted to the Principal. The Agent shall maintain a bank account separate from its other business accounts in the Territory into which all amounts received by the Agent from purchasers of the Products shall be paid.
5.7 The Agent shall be entitled to commission on the sale of the Products in the Territory at the rates specified in Schedule 5. The Agent shall only become entitled to commission on sales where the full purchase price has been received by the Principal.
5.8 Alternative A
[Immediately after the end of each Quarter the Agent shall submit to the Principal a statement of sales completed during that Quarter showing the commissions due and the basis of calculation. Within 10 Working Days, the Principal shall confirm in writing to the Agent the commission payable. Payment of commission will be made by the Principal no later than the end of the calendar month following the calendar month to which the Agent’s statement relates. If the Principal does not agree with the Agent’s statement, it shall notify the Agent in writing and may withhold any disputed amounts until the dispute has been resolved in accordance with this Agreement. The Agent shall be entitled to see excerpts from the Principal’s books and papers solely in order to enable the Agent to verify the Principal’s calculation of commission.]
[Immediately after the end of each Quarter the Principal shall send the Agent a statement of sales completed during that Quarter showing the commissions due together with the basis upon which commission has been calculated. The Principal shall make payment no later than the end of the calendar month following the Quarter to which the Principal’s statement relates. The Agent shall be entitled to see excerpts from the Principal’s books and papers solely in order to enable the Agent to verify the Principal’s calculation of commission.]
5.9 If after a sale has been made, any refund is made by the Principal to a purchaser, the commission due to the Agent shall be subject to adjustment to take account of the refund.
6. PRINCIPAL’S GENERAL OBLIGATIONS
6.1 During this Agreement, the Principal shall:
6.1.1 provide the Agent with agreed quantities of advertising and promotional material with respect to the Products at its own cost;
6.1.2 keep the Agent supplied with up to date price lists and details of the Products and inform the Agent of any new Products or any changes to existing Products;
6.1.3 supply relevant technical data and information reasonably required by the Agent;
6.1.4 arrange for the training of agreed numbers of the Agent’s employees at the Principal’s premises with respect to marketing, after sales and maintenance of the Products. The Principal shall provide the training free of charge and the Agent shall be responsible for its employees’ travel and accommodation costs;
6.1.5 provide confirmation of all orders received as soon as reasonably practicable, together with the anticipated delivery date and promptly advise the Agent if for any reason the Principal is unwilling or unable to fulfil an order; and
6.1.6 arrange for delivery of the Products in accordance with all confirmed orders.
7. INTELLECTUAL PROPERTY
7.1 The Agent shall take any action which the Principal may reasonably request to protect the Principal’s IP Rights in the Territory at the expense of the Principal and shall promptly notify the Principal of any infringement or suspected infringement of any of the IP Rights.
7.2 The Agent shall not do or permit anything which might infringe or adversely affect the Principal’s IP Rights. In particular, the Agent shall not apply for registration of any trade name or other IP Rights of the Principal, nor shall the Agent use any name or mark similar to those of the Principal whether during or after the termination of this Agreement.
8.1 This Agreement may be terminated by the Principal:
8.1.1 if the Agent fails promptly to pay the Principal any sums due to it;
8.1.2 if the Agent commits any breach of this Agreement (unless the breach is capable of remedy and is remedied within 10 Working Days of a notice to that effect from the Principal); or
8.1.3 if the Agent becomes insolvent or goes into liquidation or has a receiver or manager appointed over any of its assets or makes a composition with any of its creditors or fails to meet its debts as they become due or any comparable event occurs in any jurisdiction; or
8.1.4 if (at any time after the first six months of this Agreement) the Agent fails to achieve the Minimum Sales Targets in any two Quarters; or
8.1.5 if any material change in the ownership or management of the Agent occurs which has not been notified in advance to and approved by the Principal.
8.2 The Agent may terminate this Agreement if:
8.2.1 the Principal become insolvent or goes into liquidation or has a receiver or manager appointed over any of its assets or fails to meet any of its debts as they become due or any comparable event occurs in any jurisdiction; or
8.2.2 the Principal commits a material breach of this Agreement (unless the breach is capable of remedy and is remedied within 10 Working Days of a notice to that effect from the Agent).
8.3 Upon termination of this Agreement:
8.3.1 the Agent and the Principal shall fulfil their commitments with respect to any orders which have been confirmed but not yet concluded;
8.3.2 the Agent shall either destroy or return to the Principal (whichever the Principal requests) all sales literature, price lists and other documents supplied to it by the Principal;
8.3.3 the Agent shall dispose of all the Products, samples and other items in its possession in accordance with the Principal’s instructions;
8.3.4 the Agent shall cease to hold itself out as the agent of the Principal and shall cease using any of the Principal’s trade names and other IP Rights.
8.3.5 the Agent shall be entitled to commission on all orders which have been submitted to the Principal before the termination date even if the orders are only confirmed after termination, subject to the Principal receiving payment in full from the purchasers.
9. NON COMPETITION
9.1 The Agent shall not during this Agreement and for [12 months] after its termination , whether on his own account or on behalf of any third party, as agent, employee or in any other capacity sell, market or promote or advise or assist in the marketing or sale of any products in the Territory which are similar to or in competition with any of the Products or offer any such products for sale to any third party who was, during the period of this Agreement, a purchaser of Products in the Territory or who had any dealings with the Agent concerning the potential purchase of Products.
10.1 Unless required by any governmental agency, public authority or court of competent jurisdiction, the Agent shall not disclose to any third party the terms of this Agreement or any confidential, trade secret or proprietary information of the Principal.
10.2 The Agent acknowledges that all information relating to the Principal’s business shall be treated as confidential information for the purposes of this Agreement except to the extent that such information is or becomes generally available to the public through no fault of the Agent.
10.3 The obligations in this Clause will survive the expiry or termination of this Agreement
11.1 Indemnity: The Agent shall keep the Principal indemnified against all claims, liabilities, costs and proceedings arising out of (a) any breach of the Agreement by the Agent and (b) any misrepresentation or negligent or wrongful act or omission of the Agent or of anyone under its control whether in relation to the Products or otherwise.
11.2 Assignment: The Agent shall not assign to a third party any of its interests in this Agreement without the Principal’s prior written consent.
11.3 Subcontracting: The Agent shall not without the Principal’s prior written consent appoint any sub-agent for the sale of the Products, such consent to be granted or withheld at the Principal’s absolute discretion. The Agent shall, in any event, be wholly responsible for any act or omission of any sub-agent.
11.4 Notices: All notices shall be in writing and sent by registered airmail or delivered by hand or by facsimile to the address of the recipient shown in this Agreement (or any new address of which written notice has been given under this clause). Notice sent by airmail shall be treated as delivered 5 Working Days after it is posted. Notice delivered by hand or facsimile shall be treated as delivered on the date of delivery or transmission unless that day is not a Working Day, in which case delivery shall be treated as occurring on the next Working Day.
11.5 Entire Agreement: This Agreement contains the entire agreement between the Principal and the Agent and supersedes all previous agreements, correspondence and understandings between them.
11.6 Waiver: The failure by a party to enforce any provision of this Agreement shall not be treated as a waiver of that provision, nor shall it affect the right of that party subsequently to enforce that provision.
11.7 Severability: If any part of this Agreement is held by a court to be unenforceable or invalid, the remaining provisions of the Agreement will continue in effect.
11.8 Language: The ruling language of this Agreement is English.
11.9 Resolution of Disputes: The parties will endeavour to resolve any dispute by direct negotiation between them, acting in good faith, and each of them will give consideration to a proposal from the other that the dispute be referred to mediation. If the dispute is not resolved by negotiation or mediation, it will be finally resolved by arbitration in accordance with the UNCITRAL Rules in force at the time of the dispute. There will be 3 arbitrators and the arbitration shall take place in a neutral country, either agreed by the parties or determined by the arbitrators. The arbitrators’ decision will be enforceable in any competent court.
11.10 Governing Law: The law governing the interpretation of this Agreement shall be [English law] [and the English courts shall have [non-]exclusive jurisdiction in relation to any disputes arising in connection with this Agreement].
SIGNED BY: __________________________________
For & on behalf of Principal
in the presence of: _______________________________
SIGNED BY: __________________________________
For & on behalf of Agent
in the presence of: _______________________________
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This appointment of an agent is designed to be compatible with EU law and has recently been updated.
This version is written from the point of view of the manufacturer or supplier – the principal. For a bias in favour of the agent please see our template A102.
If you are working in China you may also want to consider the Chinese translation of this template, C101.
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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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