Commercial Agency Law Frequently Asked Questions

by Thom Vaughan
of EAD Solicitors LLP

Q. Retirement – I will turn 65 years old in March. I’m in a position where I want to finish with my agency. If I do so, will I still be entitled to payment of compensation for the customer base I have developed?

A. The Regulations tell us that a commercial
agent will still be entitled to compensation if he
terminates the agency contract “on grounds of …
age … in consequence of which he cannot
reasonably be required to continue his activities.
The next question is whether there is an age at
which any agent can look in the mirror after many
years of service and decide that he wants to bring
his agency agreement to an end. There is no
higher court decision to assist us on this point;
however, the case of Abbot -v- Condici Limited
and Another [2005] provides useful guidance and
is generally understood to represent the present
approach. The case concerns Mr Abbot who
retired at 65 and sought compensation. The
principal argued that he should not be entitled
because he was physically able to continue. They
argued that ‘age’ did not necessarily mean 65,
especially since there is no compulsory UK
retirement age and the typical retirement age
varies. The judge disagreed and found that if the
age in question is a reasonable retirement age
then the agent should be entitled to
compensation regardless of other factors. The
judge found that the age of 65, which Mr Abbot
chose, was “embedded as a retirement
milestone” and it was therefore reasonable for
him to end the agency when he did.

Q. Indemnity or compensation? – My agency contract has been terminated. Am I entitled to an indemnity or a compensation payment?

In the UK parties have a choice when drafting a
contract to elect for the indemnity provisions to
apply. Regulation 17(2) provides, ‘except where
the agency contract otherwise provides, the
commercial agent shall be entitled to be
compensated rather than indemnified’. If the
parties make no election within the contract, or
there is only a verbal agreement and the point is
not discussed, then the fall back position is that
compensation shall apply. The majority of cases
feature compensation entitlements.
The UK regulations are unique in the European
landscape in that they allow parties to choose
compensation or indemnity. All other countries,
save for France, provide for payment of an
indemnity.
Broadly speaking, there is no cap on
compensation payments, whereas the indemnity
regime is highly structured and a payment is
capped at the average of the past 5 years’
commission income or a one year average for any
lesser period.

Q. How long do I have to pursue my claim to compensation or indemnity?

A. The Regulations specify that a commercial
agent will lose his entitlement to the indemnity or
compensation “if within one year following
termination of his agency contract he has not
notified his principal that he intends pursuing his
entitlement”. This is a very simple but critical task.
Fail to give notice and any future claim will be
excluded.
Assuming that notice is given then you have a
period of 6 years from termination of the
agreement to issue court proceedings. Once
again, if you miss this deadline then your claim
will be time barred. Once court proceedings are
issued then the matter will progress in line with
the court’s directions. Typically, agency claims
can take anything from 1 week to 3 years to
resolve. It all depends on the willingness of the
parties to grasp the issues, take a reasonable view
of the value, and any difficulties that may be
faced, and negotiate settlement.

Q. My principal terminated my agency on 14 February. How much notice am I entitled to?

The Regulations specify that the period of notice
shall be-
(a)1 month for the first year of the contract;
(b)2 months for the second year commenced;
(c)3 months for the third year commenced and
for the subsequent years;
and the parties may not agree on any shorter
periods of notice.
Therefore, assuming that you have acted as agent
for more than 2 years then lawful notice will
expire on 31 May.
This is subject to the following points:
1. If you have contracted for a greater period of
notice, say, for instance, 6 months, then the
period of notice will expire on 31 August; and
2. If the parties have agreed that the period of
notice need not coincide with the end of a
calendar month, then notice would expire on 14
May and 14 August respectively.

It is important to remember that you are lawfully
entitled to “work your notice” rather than being
unceremoniously dumped at a moment’s notice,
unless, of course, you reach an accommodation
with the principal and are content to cease acting
with immediate effect.
Equally, you are obliged to continue acting
dutifully and in good faith for the entire notice
term – right until the very last day.
You may wish to agree a form of wording with
your principal for an announcement to be sent to
the trade; typically something courteous and
upbeat –
“Inky Pens Ltd wish to thank Mr Quill for all of his
hard work over the last 5 years. We will shortly
announce his successor and you can be assured
of our commitment to the same excellent levels
of service”.
Unless those sentiments simply don’t exist!

Q. Fixed term period expired but agency contract continuing – I have a written contract, which refers to a fixed 24 month term. Things are going well and that term has now expired. What is the contractual position now?

A. Regulation 14 deals with this point and
provides that “an agency contract for a fixed
period which continues to be performed by both
parties after that period has expired shall be
deemed to be converted into an agency contract
for an indefinite period.” Therefore your contract
will simply continue to run until either party
serves notice to terminate.
The standard periods referred to in Regulation 15
will apply (up to 3 months) or conversely if you
have committed to a greater period in the
contract (i.e. 6 months) then this will apply.
All of the other contractual terms will continue to
apply, for instance payment at 10% of invoiced
price (or whatever the rate is), and exclusivity in
relation to the Midlands (or some other) territory.

thom.vaughan@eadsolicitors.co.uk

Head Office: Prospect House,

Columbus Quay, Liverpool L3 4DB

Tel: 0151 735 1000
www.eadsolicitors.co.uk

Thom Vaughan

Disclaimer: This column does not contain legal advice and is for general
guidance only. Agentbase, EAD Solicitors and the writer accept no liability
in connection with the general guidance given in this column.
Please ensure that you obtain legal advice before acting in reliance upon
anything in this article. For example, please be clear that the answers given
in this column may not cover all possible angles, aspects, relevant
considerations and/or points of law and so that all or any information
which is given above needs in every instance to be referred for legal advice
for clarification and amplification, before being relied upon

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