Another way to approach termination is the “extension clause” of an agreement. In order to maintain flexibility, a representative may endeavour to shorten the duration of the contract, with the right to extend, for example, the durations of one year. In this way, an agent can avoid being locked into a long-term contract that can become financially unenforceable. The agreement should clearly define both the effective date and the date of termination of the agreement. Within the European Union, there is legislation to provide some protection to agents, in particular the right to compensation in certain circumstances when an agency is dismissed. The same is true in other parts of the world, and in some countries it is necessary for a foreign manufacturer to designate as an agent a person or company that is a national of the country in which the Agency will operate. Agents, especially the smaller ones, are well served through mediation and arbitration. These alternative dispute resolution techniques can lead to a long road to problem-solving in order to preserve the underlying relationship. More importantly, mediation and arbitration can significantly reduce legal fees, removing the inherent advantage that many large airlines have in a litigation environment because of their “deep pockets.” Officers should consider appropriate mediation or arbitration arrangements in their agreements. Many other provisions and issues may come into play in an agent agreement. Often, this depends on the problems encountered, the existence of an agreement between an agent and a master agent or between an agent and a forwarder. Other important points are: Most carrier agreements impose a potentially high fine if the contract is terminated by the agent before the end of the contract term. Often, officers understand the financial burden that could result from such provisions.
As a result, the agent may find too late (i.e. after signing the deal) that he is financially chained to an unprofitable deal, as an early termination of the contract would be even more costly. Plenipotentiaries should carefully examine each contractual language with termination penalties, so that they do not find themselves at the wrong end of aggressive collection. One of the main concerns is compensation. As a general rule, agent agreements require the agent to sell a certain volume of service per month for a flat fee. However, truly lucrative commission rates generally require a significant distribution volume or minimum commitment on the part of the agent.