Commercial Agency

In order to qualify as a commercial agent, you must:

• be self-employed;
• have continuing authority to act on behalf of the other party; and
• have authority to negotiate the sale and purchase of goods or negotiate and conclude such transactions for the principal.

Commercial agents are usually paid a commission on sales achieved, are not a party to the sales contract and are not a distributor.  It is important to determine if you are a “commercial agent” because if you are, you will benefit from the significant protection of The Commercial Agents (Council Directive) Regulations 1994 and 1997, with regard to a principal’s conduct and behaviour towards you and protection from being dismissed without due compensation.

The Regulations apply to all commercial agents in Ireland, where Irish law applies. Therefore, if you are a commercial agent in Ireland (an agent) or if you engage commercial agents in Ireland (a principal), the Regulations will apply to you. It is difficult to avoid the applications of the Regulations where a relationship of commercial agency exists.

A commercial agent will have the authority of his principal to negotiate sales or purchases in the principal’s name, so the commercial agent will not be a party to the sales contract with the customer.  Further, because the commercial agent contracts in the principal’s name, the commercial agent would not take possession or control of the principal’s goods and would not take part in the delivery of goods from the principal to the customer.  By comparison, a distributor would usually take possession of goods and then deal with re-selling or distributing them on to customers, usually by contracting in its own name.

In a franchise relationship, the franchisee contracts on its own behalf and in its own name but will often pay a percentage or proportion of its turnover to the franchisor.  This percentage or proportion is usually in exchange for the use of the franchisor’s name, goodwill or products, so is quite different to a commercial agency relationship.

A sole agency is when the principal is not able to appoint any other commercial agents to act on its behalf in a specified territory (where the sole agent is authorised to act) but the principal is able to seek customers and to negotiate sales directly for itself.

An exclusive agency is when the agent has the exclusive right to represent the principal in a territory and the principal is prohibited from trying to seek customers and to negotiate sales directly for itself.

A non-exclusive agency is when the principal is free to appoint other commercial agents in the same territory and also, seek customers and sales/transactions itself.

The Regulations are important to both principals and agents in confirming their respective rights and obligations and also providing for what should happen, in the event that the commercial agency relationship is terminated or otherwise comes to an end.  If you are an agent, you may have the right to bring a claim for compensation under the Regulations should the principal terminate your commercial agency.  Likewise, if you are a principal, you may be able to rely on certain provisions of the Regulations to either deflect or reduce your liability to a terminated or outgoing commercial agent.

Generally speaking, a commercial agent must look after the interests of his principal and act both dutifully and in good faith.  Specifically, the commercial agent must make proper efforts to negotiate and conclude transactions, must communicate all necessary information he has to his principal and must comply with any reasonable instruction given by his principal.  In addition, the agent must comply with the terms of the agency agreement in place with the principal, whether it be by way of written or verbal contract.

A principal must act both dutifully and in good faith in his relations with his commercial agent.  This includes providing the commercial agent with the necessary documentation concerning any goods, obtain whatever information is necessary for the agent to perform the agency agreement, inform the agent if a significantly lower than usual volume of transactions is expected and inform the agent of his acceptance or rejection of any transaction procured by the agent.  A principal must provide the agent with a statement of commission due to the agent and must pay the agent “reasonable remuneration”, in the absence of any agreement in relation to a specific level of remuneration.  In addition, the agent must comply with the terms of the agency agreement in place with the principal, whether it be by way of written or verbal contract.