Authority and the agent's role
An agent acts on behalf of a principal, and depending on the agreement and how the relationship is presented, the agent's statements and commitments can bind the company. Even when an agreement limits authority, a principal can sometimes be bound if it allowed customers to reasonably believe the agent had more. The agreement should therefore say clearly whether the agent can sign contracts, quote prices, or only solicit orders for the company's approval. An agent is different from a distributor, which buys products and resells them on its own account, and the choice between the two affects liability, tax, and control. Exclusivity, territory, and products covered should be defined precisely, since vague terms are a common source of commission disputes.
Commissions and records
Define when a commission is earned, whether at order, shipment, or payment, and how returns, cancellations, and house accounts are treated. New York has a statute protecting independent sales representatives paid by commission, which in many situations requires a written agreement and allows additional damages when earned commissions are willfully withheld. Keep detailed records of orders, customers introduced, and commission statements, and give the agent the reports the agreement promises. Agents should keep their own records of the customers they developed and the orders they generated. Disagreements over post-termination commissions are among the most frequent disputes, so address them expressly.
Ending the relationship and agents abroad
Termination terms should state the notice required, what commissions remain payable on orders placed before or after termination, and the return of materials and customer information. For agents outside the United States, local law may give the agent rights that the contract cannot easily remove; in the European Union, for example, commercial agents are often entitled to compensation when the relationship ends. Anti-corruption rules also apply to agents who deal with government customers, so due diligence on foreign agents matters. We draft and review agent agreements for principals and agents, and we handle disputes over authority, commissions, and termination.
