The Mysterious World of Commercial Agents

Richard Parr

Richard Parr

The phrase “commercial agents” didn’t make a substantive appearance in everyday language until as recently as 1993 – always assuming, of course, that it’s appropriate to think of 1993 as being “recent”.  Before then we talked of “travelling salesmen”.

Quite apart from the linguistic differences I can think of one other difference between the phrases “travelling salesmen” and “commercial agents” – namely that jokes have been told (in the past) about the former, but in my experience have never been told about the latter.  But don’t conclude that the subject of commercial agents is inherently dull.  If your business involves paying other people to go out and get orders for your goods, then whether you are in the habit of engaging commercial agents or, instead, using employed sales staff, the world of commercial agents should be of interest to you – and there is rather more to it than first meets the eye.

This is intended to be the first of a series of four articles which briefly explore the world of commercial agents (from a legal perspective) and draw comparisons with the law relating to employees.  At the end of the series, and depending upon the priorities of your business, you might want to consider appointing a commercial agent as an alternative to engaging an employee – or vice versa.

When lawyers talk about “commercial agents” they are referring to the Commercial Agents (Council Directive) Regulations 1993 (“Regulations”), which came into force on 1 January 1994.  The Regulations give effect to the EU Council Directive 86/653/EEC.

The Regulations define a commercial agent as:

a self‑employed intermediary who has continuing authority to negotiate the sale …. of goods on behalf of his principal, or to negotiate and conclude the sale …. of goods on behalf of or in the name of that principal”.

In other words, the Regulations apply to self‑employed people (confusingly, this also includes limited companies) who sell goods for commission.  The Regulations don’t apply to distributors who, generally speaking, purchase goods and then resell them.

Prior to 1993 there was no specific body of legislation in the UK relating to commercial agents; before that time we had self‑employed travelling salesmen who sold their principal’s goods to customers and received a commission.  A travelling salesman’s right to sell those goods could be terminated by giving the agreed amount of notice (or reasonable notice if none was specified or agreed) and there was no entitlement to any damages or compensation as a consequence of termination.

By contrast, a body of law had built up within other European jurisdictions (principally Germany and France) which gave protection to commercial agents (as we should describe them in a European context), firstly by giving the commercial agents an entitlement to a minimum amount of notice and, secondly by giving a commercial agent an entitlement to some sort of financial compensation on termination – to reflect the fact (if this was the case) that the agent had built up a customer base of which his former principal would now take the benefit.  The move to harmonise European law relating to commercial agents led to the Directive and, in due course, the Regulations.

The history lesson ends at this point and, with it, the first of our four short articles.  In the next article we will look at the subject of terminating a commercial agency and contrast this with an outline of the law relating to the dismissal of employees.

Richard Parr
Employment Department
0113 227 9246

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