Commercial Agents Regulations 1993: What still matters and how to manage the risks

Despite being on the statute book for more than 30 years, the Commercial Agents (Council Directive) Regulations 1993 (“CARs”) continue to shape UK business relationships between principals and self employed sales intermediaries, and, after a government review, they remain in force without amendment.

Who is a “commercial agent” and what is in scope?

In accordance with the CARs, a commercial agent is a self employed intermediary with continuing authority to negotiate the sale or purchase of goods on behalf of a principal (and, in some cases, to conclude contracts in the principal’s name). Services are outside the CARs’ scope.

Goods vs services (digital products)

In Kompaktwerk GmbH v LivePerson Netherlands B.V. [2024] EWHC 2278 (Comm), the High Court held that a time limited software as a service (SaaS) subscription was not a good. Instead, the Court determined that SaaS was a service, so the CARs did not apply. The Court emphasised there is no permanent divestment of ownership and the “heart of the product” is hosted access, not goods transferred to a customer.

Do you need a written agency contract?

The CARs apply even without a written agreement; however, either party can request a signed written statement of the agency terms, and any waiver of that right is void. In practice, written terms reduce scope for dispute.

Core protections for agents

• Fair remuneration and commission: where the contract is silent, CARs imply default rules for remuneration and commission, including circumstances in which commission is due on transactions concluded after termination
• Minimum notice for termination: for open ended agreements, the minimum notice is one month in year one, two months in year two, and three months from year three onwards. Longer periods may be agreed, but the principal’s notice cannot be shorter than the agent’s
• Termination payments – indemnity or compensation: on termination, an agent is ordinarily entitled to compensation (the default) or, if expressly agreed, an indemnity. Compensation reflects the value of the agency lost to a hypothetical purchaser at termination. Indemnity reflects the ongoing benefit the principal enjoys from customers the agent introduced or developed and is typically capped at around one year’s average commission. Agents must notify their intention to claim within one year of termination

Duties – it’s not one sided

The CARs imply good faith and information sharing duties on both sides. Agents must protect their principal’s interests, make proper efforts to negotiate or conclude instructed transactions, and follow reasonable instructions. Principals must provide necessary documentation about the goods, supply information the agent needs to perform their duties, and inform the agent promptly about acceptance, refusal or non execution of transactions.