An agency agreement is made between an agent and a principal and authorises the agent to work on the principal’s behalf. It is a particularly useful tool for the smaller business as it allows professionals such as lawyers, accountants or advertising agents to act on behalf of the company where the company does not have these positions filled in-house.
If the agreement does not specify how to terminate, then it can be ended by the giving of reasonable notice on either side. Where the Commercial Agents (Council Directive) Regulations 1993 apply, reasonable notice is defined as one month for the first year of the agreement, two months for the second year and three months for the third year onwards.
There is no requirement for an agency agreement to be in writing. However either party may request the agreement to be put into writing. If the principal requires a restraint of trade clause to be included, restricting the agent’s activities after the end of the agreement, this needs to be in writing.
An exclusive agency agreement is where the agent and principal agree that neither of them will make a similar agreement with the other’s competitors. For example, a wholesaler may agree with a salesman not to sell their product through anyone else in a particular area, or someone selling their house could agree not to advertise it with a rival agent.
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