One of the things 2020 certainly did achieve was to put enormous stress on agent and school relations. The arctic blast of Covid simply froze the movement of money around our globe. There were debts on both sides, and the situation only deteriorated further as organisations throughout the student supply chain either closed for now or closed for good. But can we blame unfair contracts?
- What are unfair contracts?
- Agreements / Contracts and T&Cs – who knows which?
- What agents should look for in an agreement
- Is this the end of the friendly industry?
In all difficult times the spotlight is thrown on to the basis of a relationship – your internet service provider shrinks your download speed; you go look at the contract. Your car insurers put up the premium again, you go look at the agreement. Your government does the opposite of what it promised to do during the election, you go look at their manifesto. It has been just the same with agents and schools.
The big difference between lots of commercial relationships and the ones that predominantly exist in our industry is that our relationships don’t tend to be very commercial. We like the bonhomie and the friendship-based trading that exists. We love going to fairs and meeting our friends from around the world – eating, drinking and then mumbling something about commissions. We came from a cottage industry and we like the roses-round-the-door, Anne of Green Gables homeliness.
All well and good, until it goes wrong and boy, oh boy did it go wrong last year. Concerns led to complaints which, in turn, led to terminated relationships. One of the key features that stood out in this melee was the complaint of “unfair contracts”. This cri de coeur came from schools and agents and, to be honest, would leave people in other industries just plain puzzled.
Put simply – there is no such thing as unfair contracts. There may be a bad contract. There may be a disadvantageous contract. There may be the sort of contract that would make Al Capone proud, but there is no such thing as unfair contracts. If you think a contact that you have signed is “unfair” then really the issue lies with you and not the contract.
What is an unfair contract?
Short answer – nothing. But we need to back up a bit first.
Are you sure you mean contract? There seems to be a whole heap of confusion over terminology. Not surprising really for an industry that is still pretty uncommercial and yet is global with speakers of many languages. Let’s try and put some clarity in this fog of words
Terms and Conditions – we are all familiar with these – they are in everything from software to squash court bookings. Put simply they are the rules under which the owner of the product or service lets you and me use them. They are never negotiable and can only really ever be challenged in a legal context if they are found to be operating against national or supra-national laws.
You may perceive these as unfair contracts but then that is up to you whether you book those squash courts or not. No-one is forcing you to do so. You’ll often find these in the footer of a school’s website or, should they still have them, on the back page of a brochure or printed price list. Hunt for them – you need to know how you can use the thing you are going to buy. Ours may not be perfect but you are welcome to look https://www.ukenglish.org.uk/terms-and-conditions/
Agency Agreement – now this is where things get very interesting. Agreements probably are the most common form of written understanding between two businesses. They detail how you both agree to trade between each other. Key to this is, of course, the verb ‘agree’ – neither party can force ‘unfair’ conditions on the other party because you have to ‘agree’ People who claim an agreement is ‘unfair’ either didn’t bother to read the proposal: didn’t get external advice or didn’t bother to negotiate – or most likely, a combination of all three.
Let me tell you, having a poor agreement can become really, really expensive. Imagine you had set yourself up to deliver a course for hundreds of students, you had gone out and recruited those students and you were looking forward to 3 years’ worth of income based on providing those courses. Then, because you hadn’t carefully negotiated your agreement, your partner exercises a clause in that agreement and walks away with the students, the teachers and the next three years of income. Not ‘unfair’, perhaps not in the spirit of your relationship, but certainly not ‘unfair’.
The problem with cosy relationships is they can fall apart (why do you think people have prenups?) Could be nothing to do with you but say your friend who has a nice little school in Nice puts in a new CEO and the new CEO starts exercising clauses in the agreement that your friend would never have done so. All of a sudden it starts to threaten your business – what are you going to do – claim it as ‘unfair’?
Contract – People in the industry keep talking about contracts but most likely they should be referring to that document as a partner agreement. A contract is really a very specific type of agreement, and breaches of a contract would be enforceable by law. Contracts deal with matters such as delivery deadlines, quality standards, payment arrangements, penalty clauses, legal redress and enforcement. Contracts tend to describe things like the agreement to supply a hospital with PPE equipment, or a prison with training services. Again, they are negotiable and could not be seen as ‘unfair’ – any contract signed under duress would simply not stand legally.
Where do we go from here?
The industry needs to take a step back and see the events of 2020 as an opportunity to reset and put our relationships on a better footing.
First off, a better understanding of the nature of agency is key to understanding the commercial relationships. In the vast majority of cases in the international education industry agency exists where the principal (i.e., the school, college etc) agrees to work with another body (Individual or company) to facilitate the sale of their services in particular geographic location either because the principal is unable or unwilling to create their own sales network. In return for their services the agency will earn commission (irrespective of whether that is % commission on gross sales OR through some net pricing arrangement)
This point is important as here we can split our understanding of Terms and Conditions and Agreement as the agency is selling the service on behalf of the principal. The agency does so in the manner the two parties have agreed in their Agreement. As the agency is selling the principal’s services to an end customer, the principal’s Terms and Conditions apply to the end customer and not those of the agency.
However, if an agency says to their principal – “I want to buy from you 20 courses on Basic Epidemiology and I need you to deliver those in November 2021 for a price of €1,000 per course” then the agency presents those courses for sale as their own courses, then the agency terms and conditions would apply to the end customer.
In these circumstances the agency is not acting as an agency, they have become a distributor and are now the direct customer of the principal. These circumstances should be allowed for in the agency or partner agreement and should be dealt with by a specific contract.
Let’s start a fresh then by going back to our agency agreements and renegotiating, clarifying and rebuilding. The key features those agreements need to have are:
– Territory and whether there is exclusivity in that territory
– Courses and services that can and cannot be sold
– How the relationship can be terminated and what restrictions are in place after termination
– Payment to agency – this will include rates, manner and if remuneration varies on service/course
– Wording around intellectual property rights and use of marketing collateral and branding
– Any restrictions – e.g., on selling competing services
– The nature of the authority an agency has to act on behalf of the principal, e.g., can they commit the principal to any size of sale they like
– Understanding of commercially sensitive information and handling customer information
– White-labelling and distributor options
– And given recent events, perhaps most significant now is a complete understanding of promotion, sales and order fulfilment
It would be prudent for schools and agents to check their agreements for the above and then open discussions to get those points included if they cannot be found or resolved if they are not agreeable in their current form. Better to have this straightened out now than leave it to fortune – good or ill.
A great place to try and learn more about the agent /principal relationship is here at Law Donut: LawDonut – Agents and Distributors
Is the end of the cosy world of international education?
Not an end I would argue, but a significant step in the maturation of the industry. Let’s move away from the idea of unfair contracts. Having agreements in place that work for both is not a sign of failure. It is a very grown-up way of preventing it. As an industry we have a lot of evolving to do and now would seem the very best time to start.