Whilst 11 years has now elapsed since their introduction, many businessmen are still unaware of their existence.

The effect of the Regulations is to provide Commercial Agents with substantial new rights.

A Commercial Agent is defined by the Regulations as meaning "a self-employed intermediary who has continuing authority to negotiate the sale or purchase of goods on behalf of another person (the "Principal"), or to negotiate and conclude the sale or purchase of goods on behalf of and in the name of that Principal....". In comprehensible terms, Commercial Agents sell or otherwise distribute another person's goods. This is achieved by either establishing and maintaining customer bases or by introducing those goods into their own existing customer bases.

Duties
Part 2 of the Regulations sets out the duties owed by a Commercial Agent to his Principal and the duties owed by a Principal to his Commercial Agent.

Remuneration
Part 3 of the Regulations provide for: - 1. The form and amount of remuneration in the absence of agreement; 2. The entitlement of the Agent to commission on transactions concluded during the Agency Contract; 3. The entitlement to commission on transactions concluded after the Agency Contract has terminated; 4. The apportionment of commission between new and previous Commercial Agents; 5. When the commission is due and the date for payment; 6. The extinction of the right to commission and a right by the Agent to periodic supply of information as to the commission due and the right of inspection of the Principals books.

Conclusion and Termination of the Agency Contract
From the Principal's point of view, the greatest area of concern is contained in Part 4 of the Regulations which deal with conclusion and termination of the Agency Contract.

Indemnity or Compensation
Regulation 17 provides that the Agent is entitled to indemnity or compensation on termination of the Agency Contract. The idea of indemnifying or compensating an Agent at the end of a validly terminated Contract is a new one in English Law and marks a radical change to Agency Law as we know it. The idea of compensating the Agent is an import from other European countries who have for some considerable time considered the Principal/Agent relationship as one akin to a partnership rather than that of employer/servant and the principle of compensation is akin to dissolving the assets and goodwill of that relationship upon the basis that the Principal may or will continue to benefit from the trade and custom negotiated and found by the Agent.

The level of an indemnity payment to an Agent is pegged at one year's average annual remuneration.

Insofar as compensation is concerned, this is unlimited but the Regulations provide that the Commercial Agent shall be entitled to compensation for [the loss] he suffers as a result of the termination of his relations with his Principal. In appropriate circumstances, an Agent could claim loss of commission up to retirement age. It should be noted that the Agent is entitled to indemnity or compensation in the event of his death (which would no doubt be pursued by his Executors) and on grounds of the age, infirmity or illness of the Agent in consequence of which he cannot reasonably be required to continue his activities.

It may be noted from the previous paragraph that compensation is payable even where the Principal has acted in good faith and is not in breach of his own obligations under the Agency Contract.

Whether you are a Principal or an Agent, the Regulations can provide benefits and burdens to the parties involved. The Regulations apply to all Agency Contracts which were in existence at 1st January 1994, and all subsequent Contracts. Notwithstanding the Regulations, there are many steps that both Principals and Agents can take in order to protect their position, both in respect of existing Contracts and proposed new Contracts.

If you are a Principal, we have a comprehensive package of measures to protect your interests and minimise your liabilities in the event of termination of the Contract. On the other hand, if you are an Agent, we have an equally comprehensive package of measures to protect your interests and maximise your benefits in the event of termination of the Contract.

We can also assist in the preparation and negotiation of Agency contracts either for Principals or for Agents. Our advice to you is that if you are a Principal or an Agent involved in a Commercial Agency Contract, existing or proposed, you should seek our advice immediately as to how your interests might be protected.