| 
Agency agreements in the UK: what businesses must get right
Richard Riley
Appointing a commercial agent can assist a business to enter new markets and can accelerate growth but only if the legal foundations are sound.
UK agency relationships are subject to specific rules that can create unexpected liabilities if overlooked.
Richard Riley, Partner and Head of Commercial at Bermans, explains the essentials and highlights the risks of proceeding without a robust written Agency agreement.
What is an agency agreement?
An agency agreement is a contract where a business (the principal) authorises an agent to act on its behalf to promote the sale of goods (which may include negotiating and entering into contracts on the principal’s behalf) in a defined territory.
In the UK, most agency agreements involving self‑employed agents are governed by the Commercial Agents (Council Directive) Regulations 1993 (the “Regulations”).
The Regulations provide statutory protections for agents, including:
- the right to commission on qualifying sales.
- minimum notice periods for termination; and
- compensation or indemnity on exit, depending on how the contract is drafted.
Understanding where your relationship does and does not fall within the scope of the Regulations (for example, the Regulations do not apply to agents promoting the supply of services) is critical before you appoint an agent.
What to include in a commercial agent contract
A well‑drafted agreement will reduce ambiguity, prevent disputes, and protect margins. The following points should be considered:
- Scope of authority
Define precisely what the agent can do (e.g. marketing activities only vs authority to conclude contracts), which products/markets are in scope, pricing parameters, and any pre‑approval thresholds. - Territory and exclusivity
Clarify whether the agent is exclusive, sole, or non‑exclusive in the relevant country or region. - Commission framework
Set out rates, when commission is earned, how it’s calculated (net/gross, discounts/returns), reporting obligations, payment timings, and post‑termination commission rules. - Performance standards
KPIs, activity levels, marketing spend, brand standards, and reporting obligations. - Compliance, brand and IP
Confidentiality, data protection, anti‑bribery/AML, and use of trade marks and marketing assets. - Audit rights and information
Access to books/records to validate commission and compliance. - Term and termination
Duration of the agreement, notice periods, consequences of material breach, and consequences of termination (hand‑back of materials, pipeline handover, ongoing commission). - Post‑termination restrictions
Non‑compete and non‑solicitation provisions should be limited and proportionate and go no further than is necessary to protect legitimate business interests of the principal. - Compensation or indemnity on exit
Decide—and document—whether the contract provides for the agent to receive compensation (which is the default if the agreement is silent on the matter) or an indemnity under the Regulations. This choice can materially change your exit cost.
Bermans’ Commercial team regularly advises on distribution and agency agreements, as well as broader commercial contracts, so we can ensure the right balance of protection and commercial practicality.
Risks of appointing an agent without a contract
Operating informally or on “heads of terms” leaves key issues open to dispute or to be governed by statute—often in the agent’s favour:
- Authority risk: Without clear limits to an agent’s authority, agents may bind you to pricing or terms you did not intend.
- Vicarious liability: You could be held liable for the agent’s acts – clear obligations and restrictions should be placed on the agent to reduce the risk of this occuring.
- Commission disputes: If details are not clearly set out, expect disagreements over when commission is earned, on what basis, and who “owns” the customer.
- Forum and governing law gaps: Without express clauses, you may face unfavourable jurisdictions or procedural uncertainty.
When agency agreements make commercial sense
Agency agreements can be the right approach when you want to:
- Enter new markets quickly without establishing a local entity or hiring employees;
- Leverage specialist networks (e.g., sector‑specific or international channels);
- Maintain tight control over brand, pricing and key terms while outsourcing frontline sales effort.
With the right structure in place, utilising a commercial agent offers flexibility and cost‑efficiency—but only when supported by a clear, compliant agreement.
Practical tips before you appoint an agent
- Map the sales journey: Decide where authority starts and stops; reserve strategic accounts.
- Model exit costs: Sense‑check the financial impact of compensation vs indemnity over the likely lifecycle.
- Tighten information flow: Build in CRM reporting, pipeline transparency and audit rights.
- Plan for change: Price reviews, product changes, territory updates and transition assistance on termination.
- Get local nuance right: If you’re appointing outside England & Wales, check whether local commercial agency rules bite.
How Bermans can help
Our Commercial lawyers draft and negotiate UK and cross‑border agency and distribution agreements, advise on the Regulations, and help principal businesses avoid liability traps while keeping deals commercially workable. Speak to us for:
- the drafting of new agreements;
- audits of existing agent frameworks and commission plans;
- restructuring or termination strategies (including notice and compensation/indemnity risk);
- disputes over commission, territory, or post‑termination activity.
To get in touch with Richard Riley:
E: richard.riley@bermans.co.uk
T: 0161 827 4612