The Principal (in a commercial agency)

What is a principal?

The principal is one of the parties to a commercial agency agreement. The principal is typically a manufacturing company that wants sales assistance to sell its goods. The commercial agent is the actor with whom the principal agrees, intending to facilitate the sale of the principal’s products in a specified geographical area. You can read more about agency agreements here.

As a principal, the agreement means that the commercial agent in question acts in your name and at your expense. This may, for example, be to promote the sale of your products and services.

What are the obligations of the principal?

Your obligations as a principal are defined in the Act on Commercial Agents, abbreviated HAGL in Danish. HAGL, section 5 states that you, as a principal, must, among other things, act loyally and reasonably towards the commercial agent. Thus, you have a duty to:

  • provide the commercial agent with the necessary material regarding the goods in question (typically samples, promotional material, etc.),
  • give the agent the information required for the performance of his duties,
  • notify the commercial agent within reasonable time of the acceptance or rejection of offers submitted by the commercial agent,
  • notify the commercial agent of the failure to comply with agreement mediated by the commercial agent,
  • inform the commercial agent within a reasonable time if a more significant fall in sales is expected than the commercial agent is able to foresee,
  • to not during give the commercial agent unreasonable instructions during the course of the cooperation,
  • upon request, provide the commercial agent with insight into the principal’s business books to verify the commission note

What happens if the agency agreement ends?

Upon termination of the agreement, the principal is frequently required to pay compensation to the agent if the agent has acquired new clients or a significant expansion of trade with the existing clientele. The relationship with these clients will continue to provide substantial benefits to the principal. The compensation can amount to a maximum of one year’s commission.

What should you pay special attention to as a principal?

For the outside world, the commercial agent is a representative of you as a principal. Therefore, it is, of course, imperative that the agency agreement regulates in what situations the agent may act on your behalf!

Advice from experienced lawyers

Are you in need of advice concerning an agency agreement? Then let Advokatgruppen’s lawyers in Horsens, Fredericia and Aarhus, help you draft your agency agreement. This way, you can make sure that your products are marketed and represented according to your wishes. Our skilled lawyers are always ready to help you. So do not hesitate to call +45 70 10 13 30.