Manchester Solicitors

Freelance contracts

A key document a freelancer should have is a well drafted contract. It forms the legal relationship between a freelancer and a client, helps prevent disputes relating to payment, job specification or time limit.

The question of when the freelancer gets paid should be set out as evidently as possible in the contract. It is important to specify whether the agreement is for a fixed price or is on a “time and materials” basis.

The contract should indicate the basis of work and responsibilities involved, the time and method of payment, and the ownership of resources after termination. It is essential to have a ‘force majeure’ clause in place in case it is impossible to complete the job for reasons outside the freelancer’s control.

One of the disadvantages is that the freelancers are more likely to be sued than the employees when things go wrong. It is therefore prudent to cover the risks with the relevant insurance provider.

What is an agency relationship?

They come in many forms.  A well known type of agency arrangement is a sales agency agreement where the seller works purely on a commission basis.  An agency relationship will invariably consist of two or more parties, the principal and the agent.  The principal is the person or organisation which is being represented.  The agent is somebody who is given the legal authority to represent the principal and alter the position of the principal with respect to the law and third parties.

So as an example, in a very simple agency relationship, I might want to sell my car. As the owner of the car, I am the principal.   I might have an agent sell my car on my behalf.   When the agent sells the car and creates a contractual relationship between myself and the buyer of the car (the third party), the agent has modified both my position with respect to the law and the buyer.  If the car is not sold as described and/or has faults, that third party might have a claim against me.  If the agent did not exercise reasonable care and skill in selling the car, then I could potentially have a claim against him/her.

Why is agency law important?

Having an agency relationship can be beneficial for your business in a number of ways.  If you want your business to be represented in another country, but cannot justify the risk of not recovering the sunk costs of permanent establishment, then you can have an agent represent you.  Perhaps you do not want to take on employees, but you need extra help to connect your business to potential customers.  Again, agency relationships can help you achieve this.

Agency relationships are a very common feature of the business landscape and they play a vital role in increasing demand, creating profits and driving organic business growth.  It is not an overstatement to say that the commercial world as we know it could not exist without agency relationships and the law that governs it.

Right, so a solicitor is necessary then?

When concluding an agency agreement, you need to be exactly sure that you are getting what you want out of the relationship and are not taking on the agent as a regular employee.  The law is confusing because it can be difficult to understand when someone is an agent or employee or both, and even if they can be properly classified as an agent, one might need to ask what type of agent you are really dealing with.

In the example given in the first question, the agent has what is legally known as “actual authority”, meaning the agent has the authority to sell my car as agreed between me and him/her.  The buyer does not even need to know the agency relationship exists.  However, it could be the case that I tell the buyer that the agent has authority to sell my car (known as apparent authority), which can potentially create different legal consequences.

Another example, which will highlight how confusing agency law can be, is shop assistants.  Shop assistants are considered to be agents because they sell goods on behalf of the principal, but at the same time are also employees of the employer who is also at the same time most likely to be the principal.

Given their fluidity, agency relationships can change over time according to the surrounding circumstances of the relationship, so the agency agreement you originally concluded is capable of morphing into an altogether different beast.

In what ways can an agency solicitor help?

To make sure you are getting what you have bargained for and potentially limit the extent to which the relationship morphs, or possibly prevent that altogether, an agency solicitor can help you properly draft an agency agreement that properly defines:

• The agent’s territory
• Exclusivity i.e. does the agent solely represent you?
• Commission
• Restrictions on power of the agent to conclude transactions on your behalf
• Expenses – whether these are reimbursed and in what circumstances
• The circumstances in which the agreement will be breached
• How the agreement will be terminated

What is the distinction between employee and agent?

The distinction between the two is often fluid, making it difficult to exactly pinpoint who is what.  If the principal concludes a contract with an agent that gives him all or some of the rights and obligations of an employee, then the agency relationship might be seen as one that was originally intended to be a standard employment relationship.

Why should I care whether my agent is properly classed as an agent or employee?

You should care because you will not get what you intended, that is an agency relationship with all its associated benefits.  Naturally, you will also incur extra costs in the form of taxes and minimum wage guarantees.

I hear EU law plays a big role in agency law.  Could you tell me how?

Well, without wanting to be condescending, I am impressed you understand the importance of EU law with respect to agency agreements.   The Commercial Agency (Council Directive) Regulations 1993 gives agents certain rights more usually associated with employees.  This includes the right to receive a minimum amount of notice and the right to receive money akin to severance pay if the agreement is terminated.