---

name: draft-agency-agreement
description: Use when asked to draft a commercial agency agreement appointing an agent to sell goods or services on a principal's behalf, particularly in MENA jurisdictions where statutory agent-protection regimes create significant termination indemnity exposure. Covers agent authority, commission, exclusivity, reporting, IP, termination compensation, and the critical decision of whether to structure as a registered commercial agency or an ordinary services contract.
license: MIT
metadata:
id: draft.agency-agreement
category: draft
practice_area: corporate
jurisdictions: [UAE, KSA, LB, EG, DIFC, ADGM, multi]
priority: P1
intent: [agency agreement, commercial agent, distributor, commission]
related: [draft-brokerage-agreement, draft-consulting-agreement, draft-boilerplate-clauses, draft-bilingual-ar-en-side-by-side]
source: Louis — HAQQ Legal AI (github.com/sboghossian/mini-claude-for-legal)
version: "1.0"

Draft — Commercial Agency Agreement

When to use this

Use this skill when a principal (manufacturer, service provider, or franchisor) appoints an agent to:

• Solicit orders or make sales on the principal's behalf in a defined territory.
• Represent the principal's brand and products with customers.
• Earn commission on transactions introduced or concluded.

Critical first question: Does the client want a registered commercial agency or an ordinary services agreement? These have profoundly different consequences in MENA jurisdictions — a registered commercial agency creates mandatory statutory protections for the agent that are expensive to terminate.

Required inputs

Input	Why it matters	Default if absent
Principal name and jurisdiction	Determines which law applies to the principal's side	Must ask
Agent name, nationality, jurisdiction	KSA and UAE require Saudi/UAE nationals for registered agencies	Must ask
Territory	Defines agent's exclusive scope; any sale outside territory is not commissionable	Ask; default to one country
Products / services in scope	Narrowing scope limits agent's claim on adjacent products	Ask
Commission rate and structure	Determines agent's economic interest	Ask; note common range 3–15%
Exclusivity (or not)	Exclusive agencies have stronger termination indemnity in most MENA laws	Ask
Term	Fixed-term vs indefinite; affects renewal and indemnity calculations	Ask
Governing law and dispute resolution	Onshore UAE vs DIFC vs KSA courts/arbitration	Must ask

Optional inputs

• Minimum performance targets (failure → termination trigger)
• Reporting format and frequency
• Marketing support obligations from principal
• Sub-agency rights (default: none)
• Non-compete scope post-termination

Document structure

1. Parties — full legal names, registration numbers, authorized signatories
2. Appointment — exclusive or non-exclusive; registered or unregistered; territory
3. Products/services scope — precise list; mechanism for adding new products
4. Agent's authority — solicitation authority only (no authority to contract on principal's behalf unless expressly granted by Power of Attorney)
5. Commission — rate; calculation base (net vs gross); payment timing; disputed commissions; commission on post-termination orders introduced during term
6. Performance obligations — minimum sales targets (if any); reporting; customer relationship management
7. Marketing and support — principal's obligation to supply samples, literature, training
8. Confidentiality and IP — agent does not acquire any IP rights; brand use guidelines
9. Non-competition — scope and duration post-termination (enforceability varies — see jurisdictional notes)
10. Term and renewal — initial term; auto-renewal mechanism; notice for non-renewal
11. Termination — for cause (material breach, insolvency); for convenience; consequences
12. Termination indemnity — see jurisdictional notes; often the most heavily negotiated clause
13. Governing law and dispute resolution
14. Boilerplate — see [[draft-boilerplate-clauses]]

Jurisdictional notes — termination indemnity (the critical risk)

UAE — Federal Decree-Law 3/2022 (Commercial Agencies Law)

• Registered commercial agents have mandatory statutory protection.
• Termination without cause (or non-renewal) triggers indemnity even if the contract is silent.
• Indemnity calculation: profits earned over life of agreement; disputed and often large.
• Non-registered arrangements: treated as ordinary contracts; agent has only contractual rights.
• Practical advice: if the principal does not want statutory exposure, structure the agreement as an ordinary services or distribution contract rather than registering as a commercial agency with the Ministry of Economy.

KSA — Royal Decree M/8 (1962, amended)

• Agent must be a Saudi national (individual) or Saudi-owned company.
• Commercial Agency Register with the Ministry of Commerce: mandatory for distribution/sales arrangements.
• Non-registration does not eliminate statutory protections — courts apply them anyway.
• Termination indemnity: courts award significant amounts; minimum one year's average commission is a common baseline.
• Sharia note: Interest on overdue commission is structurally awkward; use "delay compensation" language tied to actual loss.

Lebanon — Decree-Law 34/1967

• Commercial agents and representatives with exclusive arrangements have mandatory renewal rights and indemnity on termination.
• Indemnity = two years' average annual commission (minimum statutory baseline).
• Courts are pro-agent; contractual exclusions of indemnity are generally void.

Egypt — Law 120/1982

• Commercial agents registered with the Commercial Agents Registry.
• Termination indemnity: courts have wide discretion; typically one to two years' commission.

DIFC / ADGM

• Common-law principles apply; no statutory commercial agency protection.
• Termination governed by contract; agency principles from English law (apparent authority, secret profits, fiduciary duties).
• Much lower termination risk than onshore MENA jurisdictions.

Drafting standards

• Define "Commission" and "Net Sales Price" with precision — ambiguous definitions are the most common source of post-termination disputes.
• State explicitly whether the agent has authority to bind the principal in contract; if not, make clear in writing.
• For onshore UAE/KSA/LB: draft in Arabic (primary language) with English translation; Arabic controls.
• For DIFC/ADGM: English sufficient; Arabic not required.
• If using Tawqi3i (Lebanese e-signature notarization): see [[inst-tawqi3i-esignature-bridge]].

Common mistakes

• Calling it an "agency" when you want a service contract: use this label only deliberately in MENA; it triggers statutory protections.
• No minimum performance targets: without them, termination for underperformance is contestable.
• Vague territory definition: disputes arise over online sales, inbound customers from outside territory, customers with operations in multiple countries.
• Omitting post-termination commission tail: agent who introduces a deal before termination typically retains commission if the sale closes after termination — define this.
• Penalty clauses for late payment in KSA: draft as pre-estimate of loss, not penalty.

Related skills

• [[draft-brokerage-agreement]]
• [[draft-consulting-agreement]]
• [[draft-boilerplate-clauses]]
• [[draft-bilingual-ar-en-side-by-side]]