An Agency Agreement is a legally binding contract used in England and Wales to establish a commercial agency relationship between a principal and an agent. Under such an agreement, the principal appoints the agent to promote, negotiate, and (where authorised) conclude sales of the principal's goods or services within a defined territory. The agent acts as an independent intermediary — not as an employee — and is typically remunerated by way of commission on sales achieved.

Commercial agency relationships in the United Kingdom are governed by the Commercial Agents (Council Directive) Regulations 1993 (SI 1993/3053), which implemented the European Council Directive 86/653/EEC into domestic law. Despite the UK's departure from the European Union on 31 January 2020, the Regulations remain in force as retained EU law under the European Union (Withdrawal) Act 2018 and continue to provide mandatory protections for commercial agents operating in England, Wales, Scotland, and Northern Ireland.

The Regulations impose a framework of rights and obligations that the parties cannot derogate from to the detriment of the agent. Key mandatory protections include: the duty of good faith owed by both the principal and the agent (regulations 3 and 4); the agent's entitlement to commission on transactions concluded during the term of the agency and, in certain cases, after termination (regulations 7 to 12); minimum notice periods for termination (regulation 15); and the agent's right to compensation or an indemnity upon termination (regulations 17 and 18). Any contractual provision that purports to exclude or restrict these mandatory rights is void under regulation 19.

Our UK Agency Agreement template is drafted for use by principals and agents operating under the laws of England and Wales. It provides a comprehensive framework covering appointment, territory, commission, payment terms, duties of both parties, term and termination, compensation on termination, non-compete restrictions, confidentiality, and data protection.

An Agency Agreement is appropriate whenever a business (the principal) wishes to appoint an intermediary (the agent) to promote, negotiate, or conclude sales of its goods within a defined geographical territory in England, Wales, or internationally. The agreement formalises the agency relationship and ensures that both parties understand their rights and obligations, particularly in light of the mandatory protections provided by the Commercial Agents (Council Directive) Regulations 1993.

Common situations in which a UK Agency Agreement is required include: a manufacturer appointing a sales agent to market its products in a specific region of the United Kingdom or overseas; an importer appointing a local agent to develop sales relationships with retailers or distributors; a technology company appointing an agent to sell software licences or hardware products within a territory; and a wholesaler appointing an agent to secure orders from commercial buyers.

It is particularly important to use a formal Agency Agreement when the agent will have continuing authority to negotiate sales on behalf of the principal, as this triggers the application of the Commercial Agents Regulations 1993 and their mandatory protections. Without a written agreement, the parties may face uncertainty about commission entitlements, notice periods, and the agent's right to compensation on termination — all of which are regulated by the Regulations and cannot be excluded to the agent's detriment.

An Agency Agreement should also be used when the principal wishes to appoint the agent on an exclusive basis within a territory, as the exclusivity of the appointment affects the agent's commission entitlements under regulation 7 of the Regulations. An exclusive agent is entitled to commission on all transactions concluded with customers within the territory during the period of the agency, regardless of whether the agent was directly involved in procuring the sale.

It is important to distinguish a commercial agency agreement from a distribution agreement. An agent negotiates or concludes sales on behalf of the principal and does not purchase the goods for resale. A distributor purchases goods from the supplier and resells them in its own name and on its own account. The Regulations apply only to commercial agents, not to distributors.

A well-drafted Agency Agreement for use in England and Wales should contain several essential provisions, many of which are mandatory under the Commercial Agents (Council Directive) Regulations 1993.

The appointment clause establishes the agency relationship and specifies whether the appointment is exclusive (sole agent in the territory) or non-exclusive. The distinction is important because, under regulation 7 of the Regulations, an exclusive agent is entitled to commission on all transactions within the territory during the agency period, even if the agent was not directly involved in securing the sale.

The territory clause defines the geographical area within which the agent has authority to act. A clearly defined territory reduces the risk of disputes about commission entitlements, particularly where the principal has multiple agents operating in different regions.

The products or services clause describes the goods or services that the agent is authorised to promote and sell. The Regulations apply only to agents who deal in goods (not services), so it is important to identify the subject matter clearly.

The commission clause is critical and must comply with the mandatory provisions of the Regulations. Under regulations 7 to 12, the agent is entitled to commission on: transactions concluded as a result of the agent's actions; transactions concluded with customers the agent has previously acquired for the same type of transaction; and (for exclusive agents) all transactions within the territory. The agreement should specify the commission rate, the calculation basis (net invoice value, gross value, or profit margin), and the circumstances in which commission becomes due.

The payment terms clause specifies when and how commission is paid. Regulation 12 requires the principal to provide the agent with a quarterly statement of commission due, and the agent has the right to inspect the principal's books to verify the calculation.

The term and termination clause must comply with the minimum notice periods prescribed by regulation 15: one month in the first year, two months in the second year, and three months in the third and subsequent years. These minimum periods cannot be reduced by agreement.

The compensation or indemnity on termination clause is one of the most significant provisions. Under regulation 17, the agent is entitled to either compensation or an indemnity when the agency is terminated. If the agreement is silent, compensation applies by default. The right to compensation or indemnity cannot be excluded by the parties (regulation 19), and the agent must claim within one year of termination (regulation 17(9)).

The non-compete clause, if included, must comply with regulation 20: it must be in writing, must relate to the territory and type of goods covered by the agency, and must not exceed two years. The governing law and jurisdiction clause should specify England and Wales.