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Ask The Expert

Dear Expert Eye,

What are master agents’ responsibilities to subagents and vice versa?

From Anonymous

Dear Anonymous,

In most cases, the responsibilities owed between a master agent and a subagent will depend upon the relationship and agreement that exist between the parties. In my experience, most master agent-subagent relationships are not that of an actual agency [as defined in the Restatement of the Law (2d) of Agency, whereby generally stated, the agents (in this case, the subagent) activity is controlled by the principal (the master agent) and the agent is able to bind the principal to an obligation owed to a third party.] In a true agency relationship there are a host of obligations owed between the principal and the agent, and I will not comment upon those responsibilities in this Expert Eye answer.

Most subagents are considered to be independent contractors, and the responsibilities owed between the parties will be those that were agreed upon at the formation of the relationship. Generally speaking, the parties can agree to any set of responsibilities owed to each other so long as these obligations do not violate the law or would not be against public policy.

If there is a written contract, then the rights and obligations of each party will be exactly as set forth in the contract even if there are other verbal agreements. Most written contracts have a merger/integration clause stating that the entire agreement between the parties is what is written in the contract. Therefore, it is important for the parties to make certain that anything that has been discussed and agreed upon has also been written in the contract. Putting all verbal contracts into writing also is recommended highly in order to avoid misunderstandings as to what exactly are the responsibilities of the parties.

In the standard Sales Agency Agreement, most master agents try to limit the obligations owed to the subagent to only that of paying commissions for qualified sales. However, subagents should try to negotiate more responsibilities of the master agent as well as have these obligations written into the contract. Examples of these responsibilities might include the provision of timely and accurate sales/provisioning activity reports, the timely provision of notices of changes to products, services and commission percentages, an agreement to maintain as confidential any confidential information provided by the subagent, and any other term that might be important or crucial to the business of the subagent.

The typical responsibilities owed by the subagent to the master agent are the obligation to use either best or commercially reasonable efforts to market the products and services, the provision of accurate order forms, an agreement not to misrepresent the products or services, an agreement not to solicit or move customers, an agreement not to actively solicit the employees or subagents of the master agent, the obligation to maintain as confidential any confidential information of the master agent and an agreement to service customers.

With respect to either parties obligation to provide reports, notices or other items, it is very important to give exact time requirements in the contract, i.e. thirty (30) days prior written notice.

In conclusion, it is important for the parties to negotiate and understand their exact responsibilities, and to set forth those obligations exactly as agreed to in writing. Do not fall victim to the concept that something can be dealt with later. This Expert Eye answer is quite general due to the general nature of the question, and you should not hesitate to contact an attorney when dealing with your own sales agency agreements- a little legal help at the beginning can save you a lot of money and hassle in the future.




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