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Tips on Contracts

If, during a probationary period or a fixed term contract the agent proves unacceptable and you wish to end the agreement at the end of the period, you must notify the agent of this in writing before the end of the period is up. Not doing so could leave you open to a claim. If you let it run over, then he/she is automatically regarded as having an indefinite contract with you.

The principal can exclude certain customers, nominated as 'house accounts', from the agent's responsibility. This must be done at the start of their appointment and should be stated in the contract. Unilateral changes in the contract later could form the basis of a claim against you.

Trade shows - when appointing your agent, negotiate that if he/she is not present when you do business with a customer in his territory that you only pay him half the commission.

Agreement must be reached with regard to how trade discounts, demanded by some larger retailers, should be handled. It is accepted practise that such discounts, agreed and approved by the principal should be split between the two parties. The agent should not be given the power to negotiate discounts.

The European Directive

This regulates the employment of agents and came into force in the UK in 1994. There are two types of clause that all cards publishers should be aware of which deal with the ending of a contract between principal and agent.

An indemnity clause entitling the agent to be paid one year's commission (one year's average commission over the last five years of their contract with you) on the termination of their employment, can protect both parties and provide a fair and equitable solution without the need for further legal redress.

If an indemnity clause is omitted the contract automatically defaults to a compensation clause, where the principal can be liable for two or more year's commission in compensation. However, there is a one year limit to claims under both clauses.

Always make sure that you have a proper legal agreement with your agent and that it fulfils both UK and EU requirements.

The high number of cases that have been settled out of court means that there is a lack of case law in this area.

The GCA's legal helpline (run by Steele and Co solicitors) will give 20 minutes of free legal advice on separate matters to members who are also entitled to a basic agent's contract from them for £175+VAT.