Intermediaries v. Commercial Agents

Published on:
November 6, 2022

The distinction between an intermediary and a commercial agent is significant as it can influence the rights, obligations and liabilities of the parties and intermediary involved in a transaction.

An intermediary is a person who acts as a link between people to try and bring about an agreement. An intermediary’s sole purpose is to relay messages that they have received between the contracting parties. Whereas an agent has the authority to enter into binding agreements. This distinction can however become less distinct when an agent also has the authority to conduit between their principal (the party they are acting on behalf of) and a third party (a party the principal is conducting business with).

A commercial agent will have:

  • Substantial knowledge of the subject matter of the transaction;
  • Provide advice to the parties in respect of whom they should transact with and the transaction terms;
  • Entered a relationship with a party in which it is reasonable for that party to repose trust and confidence in them.

The importance of the distinction

The significance of the distinction between the two was recently made in a High Court judgement in RSW International v Purple Surgical Manufacturing. In this case, the core issue was whether there was a binding agreement between the parties for the supply of face masks. To determine whether there was an agreement, the role of the intermediary in the transaction was essential, as was deciphering whether they were solely an intermediary or an agent.

This distinction is significant because:

  • Agents are expected to have more authority than intermediaries, for example, to enter into binding agreements on behalf of their principal;
  • Agents often have greater legal protection than intermediaries;
  • Agents frequently have more duties than intermediaries.

How duties to principals vary

Duties owed to principals also vary depending on whether it is an intermediary or agent acting.

It is a long-established legal principle that an agent owes fiduciary duties to their principal. This fiduciary duty requires the agent to put the interests of the principal ahead of their own or those of a third party.

The Commercial Agents Regulations defines a commercial agent as being a self-employed intermediary who has continuing authority to negotiate the sale or purchase of goods on behalf of their principal.

An agent, for example, will owe to the principal:

  • Common law duties – to obey the lawful instructions of the principal;
  • Fiduciary duties – which require the agent to put the interests of the principal ahead of their own or those of a third party;
  • Any duties imposed on commercial agents under the Commercial Agents Regulations, namely, to act dutifully and in good faith.

The distinction between intermediary and commercial agent is therefore highly significant to a transaction as it alters any rights and obligations of the parties involved.

Please contact our team for advice


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