Commercial Agency Agreements and Restrictive Covenants…

by Alain Cohen
Director, Ashby Cohen Solicitors, London

The case of BCM Group PLC v
Visualmark Ltd & Anor highlighted
some important points regarding
commercial agents and restrictive
covenants.

In the case, the agent, a seller of office
equipment, disputed a restrictive covenant
in his contract which read as follows:
16.1 The agent agrees that the agent will
not following the termination of this
agreement for whatever cause:
16.2 Within the period of one year thereafter
carry on or be engaged in any business which
trades from an office situated within a radius
of 20 miles of the company’s trading address
and competes with the business of the
company as at the date of such termination.
16.3 Within a period of two years thereafter
the agent will not thereafter canvass,
approach or solicit the custom of (in respect
of any business which competes with the
business of the company as at the date of
such termination) any person, firm or
company who has, during a period of one
year prior to such termination been a
customer of the company.

It was this last clause that the Court was
asked to consider. The agent argued that it
was not enforceable, as the two-year
restriction period was too long and the
scope of the interests it was trying to protect
was too wide.
In deciding the case, the Court considered
each of these points in turn.
When considering the two year restrictive
period, the Court quickly found that this
measure was enforceable. Both parties had
originally agreed to it, and the Commercial
Agents Regulations specifically state that a
“restraint of trade clause shall be valid for not
more than two years after termination of
the agency contract”.
On the second point, however, the matter
was by no means as clear-cut. The Court
took into account previous case law that had
applied in similar situations between
employers and employees. In this context,
the covenant was certainly so strict as to be
unenforceable, as the agent could have
infringed the clause unknowingly, as he had
no way of knowing whether the people he
dealt with had been former customers of his
previous principal.

The Judge determined that it was unlikely
that an agent, who was not tied as strongly
to his principal as an employee is to an
employer, should have greater restrictions
placed on him than an employee could
expect in similar circumstances. It was
therefore ruled that the clause was
unenforceable.
The fact that the Court in this case was
willing to draw a parallel between agents and
employees should help to bring a welcome
degree of clarity to the question of what is
and what is not enforceable in a restrictive
covenant clause.

Ashby Cohen Solicitors Ltd
18 Hanover Street London W1S 1YN
Tel: 0207 408 1338 Fax: 0207 491 0414
Email: info@ashbycohen.co.uk
www.ashbycohen.co.uk

Disclaimer: This column does not contain legal advice and is for general
guidance only. Agentbase, Ashby Cohen and the writer accept no
liability in connection with the general guidance given in this column.

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