The contract is not the whole agreement

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Why agency terms get written down here before anything is shown

Commercial agency is one of the few commercial relationships in English law where the parties are not free to agree whatever they like. The Commercial Agents Regulations apply to a self-employed intermediary with continuing authority to negotiate the sale or purchase of goods for a principal, and a number of the rights they confer on the agent cannot be derogated from to the agent's detriment. Either party may require a signed written statement of the agency terms. Notice cannot be shorter than one month in the first year, two in the second, three in the third and after. Commission falls due no later than the last day of the month following the quarter in which it was earned. Commission can be payable on an order concluded after the agency has ended, where the order is mainly attributable to the agent's work during it. And on termination the agent is entitled to an indemnity or to compensation.

That last entitlement is the one that produces the arguments, partly because the two forms are so different. An indemnity is capped at a year's remuneration averaged over the previous five. Compensation, which applies by default unless the contract expressly chooses indemnity, is not capped by the Regulations at all, and English law values it as what a hypothetical buyer would have paid for the agency at the date it ended. The entitlement also arises when a fixed term simply expires, when the principal dies, and in defined circumstances when the agent is the one who brings the relationship to an end. None of this is obscure, and all of it is cheaper to decide while drafting than to litigate afterwards.

There is one trap worth more than everything else on this page. The entitlement is lost if the agent does not tell the principal, within one year of termination, that they intend to pursue it. Agents lose real money to that provision every year, almost always for a sympathetic reason: they spent the first months hoping the relationship could be restored, and took advice too late. A restraint clause has a similar hard edge in the other direction, binding for two years at most whatever it says. So terms here are drawn up and signed before a single sample is shown, for both parties' benefit, and anyone who needs to know how the Regulations apply to their own situation is sent to a lawyer rather than given an answer from a website.