Commercial Agents Update 2010 (Part 2)

by Christopher Tayton Clarkslegal LLP

  1. When can a Principal avoid paying
    compensation following termination of a
    commercial agency agreement?

Regulation 18(a) states that a Principal is not
required to pay compensation where he has
terminated the agency agreement “because of
default attributable to the commercial agent
which would justify immediate termination of
the agency contract”
This applies where there has been a serious
breach of contract by the agent, known as a
repudiatory breach, which entitles the principal
to terminate the contract with immediate effect
This happened in Nigel Joinery Services v Ian Firth
Hardware (see above) where the agent
disobeyed the principal’s instructions to provide
weekly reports and to work exclusively for the
principal (subject to notifying the principal of
competing work).
Court decided this conduct, which amounted to
sustained and persistent breach of contract, was
a repudiatory breach of the contract, so
Regulation 18(a) applied.

2. Indemnity clarified by the European
Court of Justice (“ECJ”)

In a German case, Turgay Semen v Deutche
Tamoil GMBH, referred to the ECJ, the Court
made two findings which are relevant for
Commercial Agency Agreements which provide
for an indemnity to be paid on termination

When calculating the indemnity, unless
otherwise agreed by the parties, benefits
accruing to other parties in the principal’s
corporate group are not considered to be
benefits of the principal, so can be ignored
for the purpose of calculating the indemnity.

The Court cannot automatically limit the amount
of the indemnity to the amount of commission
lost by the agent after termination. In fact, there
is no indication that the English Courts were
contemplating this approach, but the
clarification is helpful nonetheless.

3. Notice of claim for compensation –
when does time start to run?

A crucial part of the Commercial Regulations that
all agents need to be aware of is that you lose
your right to compensation or an indemnity if
you fail to serve notice of your intention to make
a claim within one year of termination of your
agency agreement (Regulation 17(9)).
If you fail to comply with the notice requirements
in the Regulations you will lose your claim to an
indemnity or compensation however strong your
case may have been.
Generally, the best approach is to serve notice as
soon as possible so that there can be no doubt
that you have met the one year deadline.
Sometimes, however, the question of when
exactly the agency agreement comes to an end is
not entirely straightforward and, of course, it is
only once termination has happened that the
one year for giving notice starts to run under the
Regulations.
This was the issue the Court was required to
consider in Claramoda v Zoomphase Limited
(2010). The case involved an agent who sold a
range of women’s clothing and had been told by
her principal that the Spring/Summer 2007
season was to be the last season she would act as
commercial agent.
That season came to an end in October 2006, but
further commercial activity, including dealing
with customer concerns about orders and
discrepancies over paperwork continued until
January 2007.
The agent served notice in November 2007 (i.e.
more than a year after the end of the
Spring/Summer fashion season, but less than a
year after the other commercial activities came
to an end in January 2007).

The principal argued that the agent’s “authority
to negotiate sales”, which is a pre-requisite of
being a commercial agent under the Regulations,
came to an end when the Spring/Fashion 2007
season ended in October 2006, meaning the
commercial agency also ended on that date.
The Judge disagreed and decided that the
commercial activity that took place after the end
of the fashion season was indistinguishable from
the earlier activity, and therefore the agent
remained a commercial agent until January 2007
meaning her notice was within time.
Usually the termination date of an agency
agreement can be established easily from the
terms of the contract, but this case provides a
helpful reminder of the potential risks if you delay
serving notice of a claim.

CONTINUES IN NEXT ISSUE

Chris is a dispute resolution lawyer working out of
the firm’s Reading and London offices.
Chris has particular expertise in the Commercial
Agents Regulations (acting for both principals
and agents), advertising law and restrictive
covenants in employment contracts.
He also advises on IT and software related claim,
and is a member of the Society for Computers
and Law.

Head Office:
Thames Valley Office: One Forbury Square,
The Forbury, Reading RG1 3EB
Tel: 0118 9604691
www.clarkslegal.com

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

 

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