What is the difference between an agent and a distributor?
An agent finds customers for the principal, who sells to them directly and pays the agent commission. A distributor buys the products and resells them on its own account.
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Commercial agency agreement (England and Wales)
A commercial agency agreement appoints an agent to find customers or negotiate sales for a business in return for commission. Where the agent negotiates the sale of goods, the Commercial Agents (Council Directive) Regulations 1993 give the agent rights that cannot be excluded, including minimum notice and a payment when the agency ends.
When you need one
Use one when you appoint a self-employed sales agent, or when you are the agent. Agents who buy and resell products themselves are distributors, not agents.
What it should contain
Appointment
Products, territory and whether the appointment is exclusive.
Authority
Whether the agent can only negotiate or can also sign contracts.
Commission
Rate, basis and when it is earned and paid.
Duties
Duties of good faith on both sides, as the Regulations require for goods agents.
Termination
Notice periods no shorter than the statutory minimums.
Payment on termination
Indemnity or compensation for a goods agent.
Points specific to England and Wales
- The Commercial Agents (Council Directive) Regulations 1993 apply in Great Britain to self-employed agents with continuing authority to negotiate the sale or purchase of goods. An indemnity is capped at one year's average commission; compensation, the default, is not capped.
Different rules can apply elsewhere in the UK: see the Scotland version of this guide.
Common mistakes
- Forgetting that a goods agent is entitled to indemnity or compensation when the agency ends — compensation applies by default and is uncapped.
- Notice periods shorter than the Regulations allow.
- Post-termination restraints longer than two years.
See a specimen commercial agency agreement — a short illustration of the structure and key clauses, laid out as the app produces them.
Quick answers
Can a principal avoid paying compensation to an agent?
Not for a goods agent covered by the Regulations, except in limited cases such as termination for the agent's serious breach. Choosing an indemnity instead caps the amount.
Draft your commercial agency agreement now
Be Contract Wise's powerful, carefully prepared drafting tools turn a short set of plain-English questions into a commercial agency agreement under the law of England and Wales, laid out to a professional standard, with an explanation of every clause. Simple or complex, export to Word or PDF.
Start drafting — freeBrowse all guidesReviewed 2026-09-24. General legal information about the law of England and Wales, not legal advice.