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Agency Agreements

Many companies now use the services of another company to represent them as their agent on their company matters. To do this, the company has to make an agency agreement. In the case of a sales buying agency agreement, for instance, the contract will state that the agent is to act as the sales representative of the company whether or not it’s an exclusive relationship; the process for terminating the agreement; the manner of calculating commissions; and more.

Benefits and risks of an agency agreement

Generally, there are two parties involved in making an agency agreement. First, is the agent authorized to represent another person, the principal, to perform actions and decisions on behalf of the latter. There is a legal relationship created between these two parties when the principal assigns the representation to the agent.

Agencies these days have become the norm for companies because they eliminate the burden of having to deal directly with certain issues. An agency agreement, therefore, becomes an important document to understand when dealing with an agent who will conduct business and make decisions on your behalf in the course of time. An agent can be a vendor, lawyer, accountant, and so on.

  • The benefits
    An agency agreement template can offer numerous benefits, especially for small-business owners. Let’s face it, not all people have the right skills and knowledge needed to operate a business. It becomes essential to seek the services of a professional who would act as their representative and conduct business matters in a manner that’s more efficient.
    Having an agent can make things easier for the principal as this is a convenient way to handle certain business affairs. But the need for an agency agreement may also come up out of necessity.
    For instance, if the principal gets confronted with a legal issue, he would most likely need a qualified lawyer to represent him. If hiring such a lawyer is part of an exclusive agency agreement between the principal and the lawyer, then the latter has the authority to act on the principal’s behalf.
  • The risks
    As with any other type of agreement, an agency agreement also comes with risks. For one, having an agent to represent you in business dealings has its own drawbacks. Since the agent is the legal representative of the principal, any misconduct that the agent gets involved in will reflect on the principal.
    A simple example can illustrate this point. Being a representative of the principal, the agent can enter into a contract without the knowledge of the principal and thus, making the principal liable for all of the contract’s terms and conditions even if he hasn’t read it. Having given the agent the authority makes him hold the ultimate responsibility.
    In writing the agreement, therefore, the principal should indicate in the clearest terms and conditions while using outright language, the limitations of the liabilities. This protects the principal if the agent performs an illegal or unauthorized act.

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How to utilize an agency agreement?

A principal initiates the agency agreement; a principal who’s looking for an agent that would handle specific services for his business. The document serves as an information sheet that contains pertinent details about both parties, the principal and the agent. It also describes the kind of business the principal engages in.

The agency agreement template defines certain important characteristics of the agreement that will exist between the principal and agent. Such information includes the duration of the agency, fee information, and exactly why the principal required an agency.

The duration of the agency refers to the length of time that the principal needs the agent. The length may even refer to the principal allowing the agent to continue and complete the services or the service ending at a specified date.

After filling out all the relevant information supplied by both parties, the agreement is printed out, and both the parties sign it. Keep copies of the agreement on file for the duration of the agreement including a reasonable time period thereafter. Having this agreement outlines the expectations both of the principal and the agent before their agency relationship commences.

Factors to consider in agency agreements

Another definition of an agency agreement is the “relationship involving authority or capacity in a person, the agent, to create or affect legal relations between another person, and third parties.” Sounds more professional but still means the same thing. Generally, an agency comes into existence in the following ways:

  • through an agreement;
  • through operations of law; or
  • through ratification

There are different types of agencies and will require a different agency agreement as well. There will always be good agreements and bad ones. The bad ones are usually written by those who, in the throes of their excitement, have become blinded to the corruption of a number of agency agreements.

Let this be a warning to those who are about to enter into an agreement with agents. Keep these things in mind when you deal with agency agreements:

  • Payments
    All remittances should get paid through the author within thirty days of receipt by the agent. Expect some charges from the bank, especially on foreign payments. The more important point here is that the author must take charge of these payments if that is how the agreement defines it.
    As a standard practice, agents aren’t supposed to charge any additional costs. But many of these agents still include fees for certain activities like purchasing extra copies, photocopying for submission, etc. Again, the agreement should provide clarity on this matter, especially in terms of deductions and whether or not you obtain the approval of these charges.
    This may be a tricky subject but submissions are now made through emails, and huge postage charges have also desisted so there should be no reason for agents to make deductions for postal costs. Another item that you need to clarify in an exclusive agency agreement is the commission that’s taken by the agent.
    Rates can range from 10% – 20%. In most cases, the rate is 15% for all income or a different percentage rate for income which comes from different sales.
  • Submissions
    The principal should always receive notification for each submission. Although he may not have an approval for the submission, it usually is customary to get consulted about it. Any agreement made with the publisher must always get subjected to the author’s approval since he’s the signatory of each agreement unless he agrees otherwise.
  • It’s never a good idea to grant an agent power of attorney
    You should never delegate the signing of contracts to agents, even in cases where you’re out of town or the country where there’s a need for a power of attorney. Think twice before issuing a power of attorney as this document is a very powerful tool.
    Make sure that the agent is never granted the rights to a book. There have been instances when the author separated from his agent but the latter still holds the rights to the author’s book and undoing this predicament is a very difficult task, all because of a power of attorney.
    You can avoid this by denying the agent any rights over any unsold book or other kinds of rights like foreign translation rights or film rights to a book that an agent worked on, on the author’s behalf.
  • Termination
    There are many instances where the relationship between the author and agent do not work out and to get out of this situation, there needs to be a termination clause in the agency agreement. This clause usually carries with it a time frame notice which is generally between one to three months.
    Any contracts that the agent negotiated will remain in place. Also, he will receive the agreed-upon commissions for such contracts. The termination clause is a standard part that you should never take lightly. Also, remember that no agreement can get altered without the agent’s agreement.
  • Non-assignment
    Keep in mind that any agency is a business which can be either bought or sold. What happens and what would you feel if the agency representing you get sold to a third party? It might make you feel like you lost one of your “assets.”
    To make sure that this does not happen, include a non-assignment clause in your agency agreement. This means that if the agency get sold, it cannot assign your rights to the contract to the third party. Although this isn’t a standard clause, it’s nevertheless important since more agencies nowadays are getting sold or choose to join forces.

Looking for and finding the right agent to represent you on business matters could be a delight. That is as long as you feel happy and comfortable with them, both professionally and personally. Have the time to personally meet your agent and ask him any questions you wish even if they border on the inane.

Don’t rush on your selection. Take as much time as you need until you’re sure that you made the right choice. After completing the agency agreement, this could be the start of a very long-lasting business relationship.


PS. Sometimes all that’s needed is a form, document or tip that can solve problems or issues that repeat in your life or business. To save you from unnecessary legal costs by hiring lawyer(s), here are customizable smart templates/forms that you can use as often as you need; flexible enough to allow for changes without leaving you exposed.

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