Basic tips in negotiating the agency contract
In this article we are going to expose some of the basic recommendations, useful to take into consideration in the negotiation of an agency contract and before signing of the agreement.
The agency contract will govern some fundamental issues in the professional relationship between the commercial agent and the employer, we will review the essentials that must be reflected in the contract, and those circumstances that the parties they must not forget to include in the writing of the text.
We point out, due to their importance, the following:
Agent remuneration system
To avoid future problems, it is recommended that the agent’s remuneration system be perfectly defined in the contract, without allowing for double interpretations
It is desirable that all remuneration conditions be set out in writing, as this is the most sensitive matter and susceptible to generating conflicts between the parties while the agency relationship lasts.
The Agency Contract Law allows agreeing on a fixed, variable or mixed remuneration. The most common is that the perception of amounts is subject to a commission system, regardless of whether the perception of a fixed amount is also contemplated, so that the agent will receive a higher remuneration based on the volume of business that he is able to achieve. . It is also common to condition an increase in remuneration to the achievement of certain objectives.
It is recommended to establish a calculation system that is as simple as possible. When the remuneration criteria refers to more complex equations, or to the application of billing tables, it is convenient to include such criteria in the contract itself, even if it is as an annex.
The duration of the relationship between the agent and the entrepreneur
If you want to limit the duration of the relationship between the agent and the employer, both can establish the termination date in the contract. It must be taken into account that if the parties do not indicate an expiration date in the contract, the contract will be understood as indefinite.
The permanent contract will bind the parties until one of them requests its termination. The Agency Contract Law establishes in these cases that prior notice must be at least one month per year of validity, with a maximum of 6 months.
See the article Causes for termination in the agency contract where we explain the causes that end the relationship between the agent and the employer.
Sale of products or services
Unless otherwise agreed, the agent will get clients for the businessman, and he will be the one who makes the sale of the product or service that is being marketed, and bills the client directly.< /p>
However, it may be contemplated in the contract that the agent make the sale on behalf of the entrepreneur. If this is the will of the parties, it must be expressly indicated in the text of the agreement.
Control of accounting data
Since the remuneration of the agent is usually subject to a commission system, the parties must agree in the contract the controls of the business accounting to verify the volume of billing. So that both parties have permanent access to that information.
Exclusivity
The parties are allowed to agree on exclusivity agreements. Exclusivity can affect different areas.
If the entrepreneur wants to ensure that the agent will use all his efforts to market his product, he must impose in the contract a commitment of exclusivity of the agent for the agent who does not may agree other agency relationships with other businessmen.
The agent can require the entrepreneur a commitment of geographic exclusivity, so that no other agent can market the product or service in question in the region where apply the agreed exclusivity.
Subagency
The subagency consists of the agent being able to delegate their sales work to other agents. In principle, this power is vetoed for the agent if he does not have the authorization of the employer.
Therefore, if it is in the interest of the agent that the sub-agency be allowed, he must make sure that the corresponding authorization is included in the agency contract.
Performance area
The parties must state in the contract the geographical area where the agent can carry out his sales work . It is up to the parties to increase or reduce the field of action.
Previous client portfolio
Both the employer and the agent may be interested in the contract including as an annex a list or explanation of the client portfolio that both parties have.
In the article Compensation for Terminating the agency contract We explained that once the agency relationship is terminated, the agent will be entitled to compensation for clientele.
This compensation will be calculated based on the new clients provided by the agent or the increase in sales experienced in the clients that the employer already had and thanks to the agent’s actions.< /p>
To avoid future conflicts, the agency contract should establish a representative photograph of the business situation when the agency relationship begins. This includes both the identification of the clients that the agent is going to provide at the beginning, as well as billing information that the entrepreneur obtains from his clients before beginning the agency relationship.
In this way it will be easier to apply the commission system on the real increase in business that the agent’s performance has meant for the businessman, and to quantify the compensation for clients in the future.
Prior advice
As we have seen, there are several essential aspects that must be considered and agreed before signing an agency contract, it is advisable to have adequate information and preferably to obtain the corresponding legal advice by lawyers who are experts in commercial law.
We provide more information in the article 10 fundamental aspects of the agency contract.
