To understand the regulation of commercial agency agreements in the U.S., it is helpful to remember the interplay between federal and state statutory and common law in the U.S. legal system. Under the U.S. Constitution, all power not specifically reserved for the federal government resides with the states. Federal law has exclusive jurisdiction only over certain types of cases (e.g., those involving federal laws, controversies between states and cases involving foreign governments), and share jurisdiction with the state courts in certain other areas (e.g., cases involving parties that reside in different states). In the vast majority of cases, however, state law has exclusive jurisdiction.
Commercial agency is regulated at the state level rather than by U.S. federal law. Almost two-thirds of the U.S. states have adopted specific legislation for commercial agency relationships with non-employees. Most state statutes regulating commercial agency relate to the relationship between a principal and an agent that solicits orders for the purchase of the principal’s products, mainly in wholesale rather than retail transactions (although state law often has special rules for agency relationships with respect to real estate transactions and insurance policies).
A second, overarching theme of note to understand the regulation of commercial agency agreements in the U.S. is the primary importance of the doctrine of freedom of contract under state law jurisprudence. As the doctrine’s title suggests, as a matter of policy, courts interpreting a contract generally will seek to respect its terms. Exceptions exist where public policy requires otherwise (e.g., in the consumer or investor context, in cases of adherence contracts or where unconscionable terms are found to exist). As a result, state law generally contains few mandatory, substantive terms that are superimposed on the relationship between principal and agent in an agency arrangement. State laws on agency mainly address commissioned agency, and, where in force, are primarily aimed at ensuring that the principal timely pays the agent the commissions that are owed by imposing liability on the principal for a multiple (often two to four times) of unpaid commissions, as well as for reimbursement of the agent’s attorneys’ fees and costs incurred in collecting the unpaid amount. Other states further require that agency agreements satisfy certain formalities, including that they be in writing (under the so-called “Statute of Frauds” in force in most states) and that they contain specified information (i.e., how earned commissions will be calculated). A minority of states further impose substantive requirements, such as a minimum notice period for termination, the obligation to pay commissions on certain post-term shipments or those in process at expiration or termination of the agency agreement.
 As Messrs. Kuhn and Sardi are licensed to practice law in the State of New York, this article provides information on agency matters with a focus on the law of the State of New York. Information as to the laws of other states is based on general research and experience with those states only.