Commercial Transactions & Agreements

Commercial Agreements

Agency Agreements

Agency Agreements are arrangements whereby an agent concludes sales between a principal and customers, earning commission depending upon the volume of the goods sold. The agent does not buy the goods from the principal and re-sell them on to customers, but facilitates and arranges sales between the principal and the customer.  An agent is not responsible for the quality of the goods and any loss suffered due to non-payment for the goods is borne by the principal, however the success or failure of a particular product can to a large degree depend on the agent, as usually the promotion of the product is their responsibility.

The European Communities (Commercial Agents) Regulations 1994 (SI 33/1994) and 1997 (SI 31/1997) govern this area of law. The Regulation sets out the principal’s duties, agent’s duties, details on commission, non-competition rules, and term and termination laws. Importantly this Regulation provides for compensationCompensation
An amount awarded by a court or tribunal if your employer has treated you in a way that breaks employment law or breaches your contract, sometimes called damages payments to Agents upon the termination of an Agency.

The formulation of an agency agreement requires an in-depth knowledge of this area, and Morgan McManus Solicitors have years of experience preparing these specific types of agreements for the business client north or south of the border.

Distribution Agreements

For information on Distribution Agreements visit our page on Cross Border Distribution Agreements >>

Franchising

Franchising is a new form of business expansion strategy that creates a dynamic and competitive force. As consumers today are more brand aware and quality conscious franchising is becoming an attractive option for businesses. Franchising is almost exclusively a service orientated business and as Ireland’s economy becomes increasingly dominated by services, franchise companies will benefit accordingly. Franchising encompasses services from all sectors e.g. hotels, coffee shops, residential cleaning, catering businesses and so much more.

A franchising agreement includes a lot of intricate clauses including, initial start up costs, management service fees, royalty fees, advertising levy, training of staff conditions, duration, territory rights and performance clauses. Morgan McManus Solicitors will assist franchisors/franchisees in devising a franchising agreement suited to their needs.

Useful links

• www.irishfranchiseassociation.com

• www.whichfranchise.ie

Share Subscription Agreements

Share subscription agreements typically arise where a new investor subscribes to a new issue of shares in a company. This has the effect of diluting the existing shareholders shares.

Loan Notes

Loan Notes are effectively a form of IOU that a Company issues to “investors” who are prepared to loan money to the Company. The loan note usually carries a rate of interest higher than that which would be available for putting money on deposit. The loan note may provide that the interest be paid out periodically or it may accrue and roll up to be repaid on a particular date in the future when both principal and the accumulate interest will be repaid to the “investor”. Sometimes the loan notes will carry rights to allow the holders of loan notes to convert the loans into shares in the Company in question. 

Standard Trading Terms to Incorporate Retention of Title and Credit Terms

Retention of Title

Retention of title clauses are included in commercial agreements to protect businesses from the insolvency of another business with whom they have dealings with.

Retention of title is where a supplier retains the contractual right to take back the goods s/he supplies to protect him/herself from a purchasers insolvency. It is done by means of a clause inserted in a commercial contract. Under the clause, if properly drafted, the supplier retains title to the goods in question until paid, which means the goods are not properly owned by the purchaser. If the supplier is not paid, he has the right to take back his goods.

Retention of title clauses have become much more common and are used by most businesses to protect them from the insolvency of a purchaser and the losses which would be consequential to same. It helps protect the small creditor in particular who may be bumped down the line of creditors by priority creditors such as the Revenue, bank loans, and employees.

Normally, a retention of title claim will only be exercised when it is clear that the company is insolvent. This means that the supplier relying on the retention of title clause will inform the liquidator or receiver of his/her right and provide the liquidator with the back-up information to support the claim. This back up information will include a copy of the contract, invoices, a proof of delivery, any correspondence between the supplier and the insolvent company and proof that the bill remains outstanding. You should alert the company, its accountant or liquidator that you have a claim on the goods and that title remains with you. This enables the liquidator to ringfence those goods and make sure they are not sold.

It is important that there is a written retention of title clause which the purchaser has signed up to. Morgan McManus Solicitors can assist you to prepare unequivocal retention of title clauses.

Credit Terms

Credit terms are arrangements made for giving credit, for example, the amount of money, period of borrowing.

Cash flow is the very lifeblood of a business and therefore vital that businesses make explicit decisions relating to credit. Each business should consider whether it is doing everything it can to ensure that its customers are paying on time. Furthermore, the recovery of business debt can be frustrating, time consuming and often unsuccessful.  It is better to put in place proper procedures, which enable the early identification of potential bad debts.  Key to getting paid on time is having an effective credit management policy.

Before a company sets credit terms, there are a number of factors which need to be considered. One of the more important factors to consider is the level of profitability inherent in each sale.  Companies that have a low gross profit margin, such as livestock exporters, cannot afford significant bad debts, and thus they need to have a vigorous risk assessment regime in place.  Companies with high gross profit margins, such as software companies, can afford a more relaxed approach to risk assessment.  Another factor for a company to consider is if it has a “monopoly” product/service or a “commodity” type product/service.  Monopoly suppliers are in a better position to dictate terms and conditions of trade than a commodity supplier.  Other factors which need to be taken into consideration are invoicing, collection, and recovery.

It is important that all issues are covered and appropriate credit terms are included. Morgan MacManus Solicitors will work closely with your business to devise appropriate credit terms tailored specifically for your businesses needs.

Contact our office to arrange an appointment with one of our experienced Solicitors who will be able to advise you of any of the above issues in further detail.