Agents are intermediaries that sell goods or services on one’s behalf in return for commission. For this purpose, the Sales Agency Agreement is crafted to lay down the rights and obligations of each party.
The agreement specifies
The agents' payment structures (commissions, percentage of profits, etc.) for selling the product(s)
For acting on behalf of the Principal and/or
For performing sales functions as laid down in the agreement
Key considerations in appointing an agent in South Africa are:
• One needs to appoint an agent who knows market well.
• One needs to consider national distribution.
Duties
Agent's duties include:
• Act on behalf of and be subject to the control of the principal
• Act within the scope of authority or power delegated by the principal
• Discharge his or her duties with appropriate care and diligence
• Avoid conflict between his or her personal interests and those of the principal, and
• Promptly hand over to the principal all monies collected on principal's behalf.
Principal's duties include:
• Compensate the agent as agreed.
• Indemnify him against claims, liabilities and expenses incurred in discharging duties assigned by the principal.
Agency agreements can also contain additional terms
• Sale of residential property
• Sale of rural land
• Leasing of residential or rural property
• Management of residential property or rural land
• Management of strata or community title land
• Sale of business
• Buyer’s agency
Oral agreement not beneficial
Oral agreement is not beneficial for the both principal and the agent. There is no legal requirement that it must be in written form. It is made to sell the products in return of commission. Agent always acts on the behalf of the principal. An agent may be either an employee or self-employed.
What should it cover?
It is essential that it must be a clearly written document, and cover the following bare minimum elements:
• The territory that the agent is responsible for.
• The exclusivity of the territory for the agent.
• The agent's payment structure (i.e. commission on sales)
• The Principle's responsibilities toward the agreement
• The rights to premature end of the relationship
• Compensation in the event of a premature end to the relationship
Non-compete Clause
One of the most common clauses in an agency agreement is the "non-compete" clause that the Principle often puts there to prohibit the Agent from entering into similar agreements with competitors. The non-compete may be either for the duration of the contract or be tied to a specific task, project, or period.
Remuneration
Provisions in respect of remuneration
How the agent is to be remunerated
Where the agency agreement does not provide for this
The circumstances where the agent is entitled to be paid after the termination of the agreement
Requirements that the principal provide regular statements of the amount of commission due to the agent
Termination of Agency agreement
The law in this area sets
The necessary notice periods required before termination
Compensation for damage to be provided to the agent on the termination of the agreement
Compensation where the agent dies.
South African law recognizes the following grounds for setting aside a contract:
misrepresentation;
duress;
undue influence; and
commercial bribery
Sales Agency Contract contains the following provision:
1. Definitions and Interpretation
2. Appointment of Agent
3. Method of Sale
4. Intellectual Property
5. Principal’s Obligations
6. Financial Provisions
7. Confidentiality
8. Force Majeure
9. Term and Termination
10. Post-Termination Compensation
11. Exclusion of Compensation
12. Relationship of the Parties
13. Nature of the Agreement
14. Severance
15. Notices
16. Law and Jurisdiction
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