Agency agreements and commission disputes

An agency agreement should identify what the agent may do on the principal's behalf and when commission is earned. Selling goods as a qualifying commercial agent can engage the Commercial Agents Regulations. The analysis differs from an ordinary services referral arrangement and should not rely on the agreement's title. ^[1]

Define territory, customers, authority to negotiate or conclude sales, reporting and the treatment of repeat orders. Check commission on cancellations, returns and orders completed after termination. Statutory rights may affect the negotiated position where the Regulations apply.

Establish whether the agent negotiates or merely refers

Describe the actual work, including authority to negotiate or conclude transactions, the products involved and the relationship with customers. A label such as consultant or introducer does not necessarily determine the legal analysis. Where the activity concerns goods and the relevant conditions are met, the Commercial Agents Regulations can affect rights and obligations. ^[1]

Keep services referral arrangements distinct and obtain advice on borderline or mixed activities. Explain whether the agent sets prices, accepts orders, collects payment or handles complaints. The principal needs to know what customers may reasonably understand the agent to be authorised to do, while the agent needs clear limits and a route for obtaining approval.

Define commission at the level of actual orders

State the trigger for entitlement and payment, including how cancellations, returns, discounts and unpaid customer invoices are handled. Identify whether repeat orders, direct sales and online purchases by introduced customers are included. Where statutory rights apply, the contract must be assessed within that framework rather than treated as the only source of entitlement.

Use an attribution record linking customers, introductions and orders. Agree how competing agents or pre-existing accounts are handled. A broad phrase such as commission on your sales may be unclear when the customer later orders through another channel. The evidence process should let both parties verify the calculation without disclosing unrelated sensitive information unnecessarily.

Make statements and disputes manageable

Specify the information accompanying commission statements and the process for raising a query. Keep order values, adjustments and payment dates traceable. Where a balance is disputed, identify the particular calculation rather than withholding every commission payment without explanation. Applicable late-payment rules may need consideration for qualifying sums. ^[3]

For an illustrative reporting problem, a principal deducts all customer returns in the current month without linking them to earlier commissioned orders. The agent cannot check whether the adjustment is correct. A statement showing the original order and relevant adjustment would allow a focused review and reduce recurring disagreement about the account.

Set commercial boundaries and support obligations

Define territory, customer groups, product lines and any exclusivity. State what marketing materials, training and pricing information the principal supplies. The agent should know which promises require approval and which materials may be used. If the product range changes, assess the effect on targets and commission rather than assuming the original arrangement remains commercially balanced.

Consider competing activities and confidentiality with appropriate legal advice. A restriction should be reviewed for its scope and applicable rules, including any statutory conditions where the Regulations apply. Do not assume that a broad post-termination ban is enforceable simply because it appears in a signed agreement.

Assess termination before sending notice

Review notice, outstanding orders and potential termination-payment rights under the applicable regime. A qualifying commercial agent may have rights beyond commission already invoiced. Do not promise a universal compensation amount or assume that changing the contract label removes the statutory framework. The facts and documents need individual assessment.

Prepare a closing schedule covering customer communications, materials, open orders and account reconciliation. Preserve evidence while discussions continue. If a settlement or amendment is signed for a company, check authority and relevant execution formalities. ^[2] The commercial agreement and its formal completion should be clear to both parties.

Read Distribution agreement essentials to compare distribution with agency. Commercial contract review can help review the agency document and commission mechanism, with specialist assessment of statutory rights and termination exposure where the activity may fall within the Regulations.

Reconcile disputed customer attribution

For a contested account, assemble the introduction date, communications, order history and any pre-existing customer relationship. Identify what the contract says and which statutory questions need advice. A customer being familiar to both parties does not resolve the commission position. The chronology should allow the dispute to be assessed order by order, including later direct sales, without relying on a broad assertion that one side owns the customer or deserves all resulting revenue indefinitely.

Illustrative scenario

A sales agent introduces a customer who places repeat orders directly with the supplier. The parties disagree about commission because the contract only refers to introduced sales. A clearer customer and order attribution rule would help, but the applicable statutory rights still need assessment before deciding the amount due.

Preparation checklist

• Identify whether the activity concerns goods or services.
• Record the authority actually given to the agent.
• Define commission triggers and evidence of attributed orders.
• Review notice and termination payment questions before ending the relationship.