How to review a commercial agency agreement under UK law

A commercial agent negotiates sales or purchases of goods on behalf of a principal, often for years. In Great Britain the Commercial Agents (Council Directive) Regulations 1993 give agents rights that the contract cannot take away, including a payment when the agency ends. This checklist covers when the Regulations apply, the clauses to check and how to review an agency agreement in Word with LexDraft.

Last checked: 18 October 2026. The law changes; check the current position before relying on this page.

The Regulations apply in England, Wales and Scotland. Northern Ireland has its own equivalent regulations, and agents working in EU countries are covered by local laws based on the same Directive.

Do the Regulations apply?

• Self-employed intermediary. The agent must be self-employed and have continuing authority to negotiate, or to negotiate and conclude, the sale or purchase of goods on behalf of the principal (regulation 2(1)). Distributors who buy and resell on their own account are not agents.
• Goods only. Agents selling services, such as advertising or software as a service, fall outside the Regulations. Mixed goods and services arrangements need care.
• Secondary activities. The Regulations do not apply to agents whose activities as commercial agents are secondary, under the tests in the Schedule.
• Territorial reach. Since the end of the Brexit transition period, the Regulations apply to the activities of agents in Great Britain.

Clause checklist

• Appointment. Territory, products, customer groups, exclusivity and any reserved accounts.
• Duties. Both parties must act dutifully and in good faith (regulations 3 and 4). The principal must give the agent necessary information and warn it if volumes are expected to fall significantly. These duties cannot be excluded (regulation 5).
• Commission. Which transactions earn commission, including repeat orders and orders from the agent's territory or customer group, when it becomes due, and the agent's right to a statement and to check the principal's books (regulations 7 to 12).
• Written terms. Each party is entitled on request to a signed written document setting out the terms (regulation 13).
• Notice periods. For an indefinite agency, the minimum notice is one month in the first year, two months in the second year and three months from the third year (regulation 15). The parties can agree longer periods, but the principal's notice period cannot be shorter than the agent's.
• Compensation or indemnity. On termination, including on the agent's death or retirement through age or illness, the agent is entitled to compensation unless the contract provides for an indemnity (regulation 17). Compensation is valued as the value of the agency business at termination (Lonsdale v Howard & Hallam Ltd [2007] UKHL 32). The indemnity is capped at one year's average remuneration over the previous five years. The agent loses the right if it does not notify the principal within one year of termination.
• No contracting out. The parties cannot derogate from regulations 17 and 18 to the agent's detriment before the agency ends (regulation 19).
• Restraint of trade. A post-termination restraint must be in writing, limited to the agent's territory or customer group and the goods covered by the agency, and last no more than two years (regulation 20). It must also be reasonable at common law.
• Competition law. A genuine agency, where the agent bears no significant commercial or financial risk, is usually outside the Chapter I prohibition in the Competition Act 1998. If the agent takes on real risk, restrictions such as resale price setting need a fresh look under the Vertical Agreements Block Exemption Order 2022 and the CMA guidance.
• Governing law. Choosing a non-UK law does not necessarily take an agent working in Great Britain outside the Regulations. Check the current position before relying on a foreign law clause.

Review the agency agreement in Word with LexDraft

1. Open the agency agreement in Word, open LexDraft from the Home tab and set the jurisdiction chip to UK: England & Wales (or UK: Scotland or UK: Northern Ireland if that is the governing law).
2. Run the quick checks. They are rule-based and run without AI, catching undefined or unused defined terms, broken cross-references, numbering gaps and inconsistent capitalisation.
3. LexDraft has four built-in playbooks (NDA, SaaS MSA, DPA and services agreement) and no dedicated commercial agency playbook, so run a general review against English law and use the checklist on this page to direct your own read. Findings are graded Critical, High, Medium or Low, and LexDraft flags standard terms that are missing.
4. Accept or reject each proposed redline. Accepted edits land as native Word tracked changes, ready for the other side.
5. Ask the Assistant to explain a clause in plain English or suggest wording for your side. Answers use UK spelling.
6. Look up any case you want to rely on in the Case law tab, then open the judgment on Find Case Law and read it yourself. UK judgments in LexDraft come from The National Archives' Find Case Law service, which only partially represents the activities of the courts and tribunals. Not every judgment or decision is included. Find Case Law does not include judgments from Scottish or Northern Irish courts or tribunals.

LexDraft does not give legal advice and does not summarise judgments. AI output can be wrong, so qualified counsel must check every redline before it goes out.

Common mistakes

• Calling the agent a "distributor" or "consultant" while giving it authority to negotiate sales for the principal. The label does not decide whether the Regulations apply.
• Stating that no compensation is payable on termination. That term is unenforceable to the extent it derogates from regulation 17.
• Notice periods that are shorter for the principal than for the agent.

This guide is general information, not legal advice. LexDraft does not give legal advice; qualified counsel must review every draft. LexDraft is not affiliated with or endorsed by The National Archives or any court. Spotted something out of date? Email support@lexdraft.ai and we will fix it.