An agency contract is an agreement between a manufacture (the principal) and his agent, who represents the principal, and who buys and sells the principal’s goods. This contract has some points.

An agency contract

An agency contract is an agreement between a manufacture (the principal) and his agent, who represents the principal, and who buys and sells the principal’s goods. This contract has some points.

The first point is the place where the agent will work and what he will sell. He can represent a sole and exclusive agency. It means the agent acts for one manufacturer only and won’t sell similar products offered by competitors. And also the agent can sell competing lines along with the principal’s goods.

The second point is length of contract. Agency agreements are usually concluded for the terms of 3 or 5 years. It can be renegotiable, provided the both sides are happy with the arrangement.

Then it’s necessary to choose the type of agent. There are some of them. The first type is a commission agent who sells the goods and gets commission. His commission isn’t high. The second type is a consignment agent. He sells the goods in his name and for his principal account like a commission agent. Also he pays duties and taxes as well as for obtaining the import licence if necessary and often for advertising and for keeping the goods in a consignment warehouse and gets high commission accordingly. Besides a consignment agent may have to provide technical and after-sales service. The third type is a del credere agent. He is employed by his principal on condition that the agent bears all the risk of non-payment by customers. In return for bearing that risk, the agent receives an extra commission. And the last type is an importer wholesaler. He imports goods, holds stock and resells products to retailers. When he imports goods, he has a discount on them, but then he has some risks, because sometimes he can’t sell the goods. And also his commission is quite high.

So commission depends on the type of agent. Commission agents get the lowest commission. If an agent wants to have higher commission he can be a del credere agent or a consignment agent.

The next point of an agency contract is the duties of an agent and his principal. The agent is usually responsible for invoicing customers and for credit control. Also he sends copies of all invoices to his principal. The principal sends a statement to him. And the commission will be based on it. The principal transfers money to the agent’s account. Advertising and sales promotion will be shared between the agent and his principal. The agent will bear office expenses and will be responsible for after-sales service. The principal will be responsible for warehousing costs and he will send spare parts and accessories for the machines to the agent.

It’s essential to insert into agency statement that whatever cause of the termination, no compensation will be paid by the principal to the agent. The contract can be broken down because the sales are below target, after-sales service is bad and there are a lot of complaints from customers.

Дата добавления: 2015-11-04