Because an agent is only an intermediary, he or she is generally not a party to the contract between the principal and the principal's customer and will not have rights or obligations under it. For most purposes, the agent's acts are treated as those of his principal. The powers of an agent can be determined by the agreement between the two parties. The most common types of arrangement are:
- An exclusive agency agreement, where the agent has exclusive rights to represent the principal and the principal cannot appoint other agents to represent him. The exclusivity may be worldwide or be limited to particular territories.
- The sole agency agreement, where the principal is barred from appointing other agents (again on a worldwide or territorial basis) but is free to seek customers directly himself.
- The non-exclusive agency agreement, where the principal can appoint other agents and seek customers himself.
Some agents (who may fall into any of the three categories above), and are often known as commercial agents, are self-employed intermediaries who have continuing authority not just to negotiate but also to conclude the sale or purchase of the goods on behalf of the principal.
Agency agreements are regulated by the Commercial Agents Regulations 1993. The Regulations impact on most agency agreements whether written or oral. Principal's need to be sure that they have complied with the Regulations and relevant issues include:
- Who falls within the Regulations
- Which jurisdictions are covered by the Regulations (or by equivalent regulations)
- What duties are to be imposed on the parties by the Regulations
- Requirements under the Regulations regarding payments to the agent
- Requirements under the Regulations regarding notice to terminate
- The entitlement of the agent under the Regulations to compensation or indemnity and the ability of the principal to identify and agree the more favourable of these options
- The obligation to compensate or indemnify on the death of the agent
- Restraint of trade clauses
- UK and EC competition law issues