Issues on Commercial Agency Agreement - Essay Example

The Agreement The Agreement is designed for use by the manufacturer or supplier of a product who wishes to appoint an agent to sell it in a particular area, in this case United Kingdom.' The products of the company are Children's wear and perhaps accessories and other relevant stationaries of the same product line.' There may be trade names and other items of what are called intellectual property associated with the product and the Agreement deals with these as well. The Agent will then be paid a commission based on the sales set as 10% of the total Net Income of each quarter and upon completion of the Agreement, they will also receive additional 8% compensation on the total year's Net Income. The Agreement had a basic structure to it and it will still almost certainly require modification to suit the particular situation.' It had been kept as straightforward as possible with a view to it being relatively short. The intended parties to the Agreement will no doubt have meetings first to discuss the terms for the appointment.' It is suggested that they reach some "Heads of Terms" first and that those are then transferred over to the Agreement. It is likely that the terms agreed by the parties and set out in the Agreement will be covered by the Commercial Agents (Council Directive) Regulations 1993 (Brown, 2006), as amended.' These Regulations deal with the rights and liabilities of parties who have entered into a commercial agency, and deal with such matters as the remuneration to be paid,' the period of notice to be given and the entitlement of the agent in some cases to compensation on the agency being terminated. The parties The full names of the Principal and Agent are given at the beginning.' Since there is more than one, then all names should be given. Clause 1 - Definitions The definitions are completed and it may be necessary to add blanks for others to specify. The "Territory" should be defined by reference to a geographical area such as a county.' "1.3 TERRITORY: shall mean those countries / accounts set out in the Distribution Agreement." Clause 2 - Establishment of Agreement The Establishment of Agreement covers activities or services that Cockatoo SA provides during the development stage of the partnership. The proposal and development agreements may be carried out by Cockatoo SA directly, or by Consultants and Contractors employed by Cockatoo SA. The Products provided includes the Children's wear provided by the company. The establishment of the agreement is based on Cockatoo SA's provisions, managing and marketing strategies of the selling of the Product. Where the Reseller at this point also intends to undertake meetings and deliberations with its consultants for the possible offer from Cockatoo SA to provide for the Customers demand as reflected on the terms necessary. In addition, the parties may have other terms to agree about this.' It is obviously unlikely that the Agent would agree to the Principal having complete freedom to sell in competition with the Agent. Clause 4 - Terms of Agreement The agreement provides for reasonable and proper costs (including costs of risks not contracted out, insured or covered through the Regulations) to be passed through to the Partnership on an emerging cost basis. If reselling constraints or other concerns mean that the Investor requires greater certainty over costs, it may be possible to offer a fixed price as proposed in the Agreement. However, it is not possible to fix some elements, such as the costs of store enhancements, and a fixed price at this stage will not mean that the costs of the Manufacturing can be fixed. The Principal will have to draw up an account in order to calculate the Commission.' It may be appropriate to add further provisions here as to how the account is to be prepared. Capitalised terms used in these guidance notes are defined in the agreement. This clause includes general provisions as to consents including the fact that Cockatoo SA retains sole discretion in relation to its directives on the Reseller. In carrying out the Services for the Customer, Cockatoo SA will have a range of obligations towards its chosen partner, in this situation the Reseller, apart from its customers. In addition, its chose Reseller will be contracting directly with Cockatoo SA and as such has direct liability to them for payment and other contracted obligations. It is therefore important that costs and liabilities are appropriately identified and addressed in the agreement. The Investor's Obligation set out the benchmark obligations and others may be necessary.' In particular, Cockatoo SA will want to make sure that the Reseller supports the Cockatoo SA so that Cockatoo SA maximises the Commission.' This is obviously also in the interest of the Principal, but it is best to make it clear, and so there are provisions relating to supply, quality and so on. The reseller should not be under any personal liability for the Product and so there is an indemnity in clause 4.3. It should also be remembered that, in addition to the Reseller's obligations towards its Customer and Cockatoo SA itself, it also has obligations as operator of the distribution outlet to such issues as safety, operational continuity, land rights and other legal/regulatory requirements. The clause sets out the conditions under which Cockatoo SA supplies goods from its product line to the Reseller and warrants its accuracy. The Reseller is required to provide information and instructions to Cockatoo SA in a diligent and professional manner with regards to its needs for selling, such as store facilities, modes of payment, employee seminars, compensation and customer related issues. Upon the termination the Agreement will continue until it ends and so clause 6 deals with how the appointment can come to an end.' In other words, the appointment is not for a fixed duration. It is unlikely that the parties would want this though it is possible. Clause 7 sets out what happens when the Agreement comes to an end.' However, the Agreement does not deal with compensation for the agent but, as mentioned above, within the UK, and elsewhere in EU, there are regulations which may give the agent the right to claim compensation. The Agreement should be signed by the parties and dated as soon as they have finalised all the terms.' In particular, they will have agreed a commencement date when the agency is to start and so both parties may find it helpful to have the Agreement dated in advance of that date so that plans can be made. The Agreement should be prepared in duplicate with each copy being executed at the end by all the parties.' Each party then keeps one copy. EXIBIT 1.1 PROPOSED AGREEMENT THIS PROPOSED AGREEMENT is made on the 19th day of April 2009 BETWEEN Cockatoo SA; United Kingdom, ("first joint venturer") AND Reseller; United Kingdom, ("second joint venturer") hereinafter called the Parties. WHEREAS: The first joint venturer carries on the following business: Cockatoo SA; French Manufacturer for upmarket children's wear. In the following territory: Europe AND The second joint venturer carries on the following business: Reseller In the following territory: Europe WHEREAS Cockatoo SA is a French limited liability partnership which desires to incorporate and invest in new French Company, referred to herein as "RESELLER" which will resell the children's wears manufactured by the investor in the United Kingdom only; Whereas, the Parties wish to enter into this agreement wish to define their respective roles and responsibilities and thus successfully satisfy the objectives of the partnership; and Whereas, the Parties have selected _____________________________ to serve as the Cockatoo SA Administrator (Administrator) for the Cockatoo SA and wish to authorize that organization to perform certain functions, specifically including executing the Agreement and thereby binding all the Parties to the terms and conditions of that award; IN CONSIDERATION of the terms, conditions and covenants hereinafter set forth, the Parties agree as follows: Article 1. Definitions and Interpretations In this Agreement, the following terms have the following meanings (terms defined in the singular to include the plural and vice versa): 1.1 "DISTRIBUTION AGREEMENT" shall mean the Exclusive Distribution Agreement executed on April 20, 2009 between Cockatoo SA and reseller. 1.2 "RESELLER" shall mean the company which is incorporated by Investor pursuant to the terms and conditions of this Agreement. 1.3 "TERRITORY" shall mean those countries / accounts set out in the Distribution Agreement. 1.4 "COCKATOO SA PRODUCT AND SERVICES" shall mean those products and services developed or licensed by Cockatoo SA and provided by Cockatoo SA from time to time and which are distributed by the reseller in the Territory pursuant to the Terms and Conditions of the Distribution Agreement. 1.5 "DUTY BREACH" shall mean a breach of any material obligation under this Agreement (including, but not limited to, Regulations 3 and 4 of the Commercial Agents (Council Directive) Regulations1993), any Subsidiary Agreement, which remains uncured for a period of at least thirty (30)'days after receipt of notice of such breach, provided, that if such breach can be cured but is not reasonably capable of being cured within such thirty (30)-day period, such longer period of time as is necessary to cure such breach but in no event in excess of a total of seventy-five (75)'days. A failure to make a capital contribution shall not be considered a Duty Breach. Article 2. Establishment of Agreement 2.1 Date. On April 20 2009, (the "closing date") the Parties will cause the first joint venturer to appoint as Exclusive Reseller in the United Kingdom the second joint venturer and thus acquire the second joint venturer's business as a going concern. 2.2 Places of Business. Reseller may only locate its place or places of business at any place or places in and only in the United Kingdom set forth by Cockatoo SA in the initial Agreement. Reseller's initial principal place of business shall be at (Unit Number, Street Number, Suburb) United Kingdom. 2.3 Purpose. The principal purposes of the Partnership shall be to resell Manufactured Children's Wear Investments for Cockatoo or their Subsidiaries to acquire, own, manage, operate, finance, mortgage, encumber, exchange, sell, repair, dispose or otherwise deal with. The business and purpose of the partnership shall be limited to its principal purposes, unless determined by the Investor itself. Article 3. Terms of Agreement 3.1 Term. The term of this Agreement (the "Term") commenced on the date hereof and shall continue until the winding up of each Partnership but in no event beyond the twelfth (12th) month of the date hereof, regarded also as the end of contract, unless this Agreement is terminated sooner in accordance with the provisions of this Agreement. The initial investment period under this Agreement will be two (2)'years (the "Initial Term"), unless this Agreement is terminated sooner in accordance with the provisions of this Agreement. 3.1.1 That in quarterly periods from the date of the commencement of this agreement the RESELLER is entitled to 10% commission based on prices of which the products are sold. 3.1.2 That upon the termination of the agreement, regarded also as the end of the contract, RESELLER is entitled 8% of the Net Income of the products being distributed by their company. 3.1.3 That in case the termination has occurred prior to the end of the contract; COCKATOO SA is entitled to 10% damages due to earlier termination. 3.1.4 That the RESELLER is allowed to renewing this contract and should give COCKATOO SA a one month notice. 3.2 Business will be conducted under the name of Cockatoo SA; therefore Cockatoo SA will set resale prices for their products as set prior to this agreement and shall be the basis of pricing for distribution of the reseller; in addition it is held against the reseller the duty of specifying these prices to the buyers. 3.3 The reseller may only distribute in the United Kingdom. 3.4 Liability. The RESELLER acknowledges that it shall be responsible for any loss, cost, damage, claim, or other charge that arises out of or is caused by the actions of that Party or its employees or agents. The RESELLER shall be liable for any loss, cost, damage, claim, or other charge that arises out of or is caused by the actions of any other Party or its employees or agents. Joint and several liability will not attach to the RESELLER; no Party is responsible for the actions of any other Party, but is only responsible for those tasks assigned to it and to which it agrees in the statement of work contained in the Proposal such as the following: 3.4.1 A minimum target unit of sales is required from the RESELLER in consequence to the termination of this agreement; 3.4.2 The RESELLER has agreed to distribute a variety of products from COCKATOO SA in accordance to this agreement; 3.4.3 The RESELLER has agreed on distributing only COCKATOO SA's product line to the General Public and is held liable for the damages this may incur upon disregard. 3.5 "Force Majeure. No Party shall be liable, in respect to any delay in completion of work hereunder or of the non-performance of any term or condition of this JVA directly or indirectly resulting from delays by Acts of God; acts of the public enemy; strikes; lockouts; epidemic and riots; power failure; water shortage or adverse weather conditions; or other causes beyond the control of the Parties. In the event of any of the foregoing, the time for performance shall be equitably and immediately adjusted, and in no event shall any Party be liable for any consequential or incidental damages from its performance or non-performance of any term or condition of this JVA. The Parties shall resume the completion of work under this JVA as soon as possible subsequent to any delay due to force majeure." Read More