Date of Termination of a Commercial Agency Agreement

by Alain Cohen
Director, Ashby Cohen Solicitors, London

The recent case of Claramoda v
Zoomphase has highlighted the
importance of having a clear
contract when entering into a
commercial agency agreement.

Zoomphase – a clothing supplier – for
conducting sales to shops. He had been the
sole agent for the supplier in the UK and
Ireland since 1998. The agency was
terminated at some point between October
2006 and January 2007 – the exact date of
termination was in dispute, and was a key
issue in the case, as the agent was seeking
compensation under the Commercial
Agents Regulations.
Under the regulations, a written claim for
indemnity or compensation must be made
within a year of the termination of the
agency agreement. Mr Claramoda put in his
request for compensation in November
2007.
The High Court determined that the
effective date of termination in the case was
January 2007, so the claim was within the
specified time limit.
Settling on this date was not a simple matter,
a s t h e r e w a s v e r y l i t t l e w r i t t e n
documentation covering both the initial
agency agreement and the termination
itself.

The agreement was very informal, and many
conditions had been left deliberately vague
in order to give both parties more leeway.
With regard to the termination, the date had
not been clearly stated because although
the supplier wanted to form its own inhouse
sales team, it still wanted to have the
option to use the agent for one more season
until their own team had been formed.
Although the main selling season had ended
in October 2006, commercial activity
between the two parties had continued
beyond that date. An email was sent to the
agent by the supplier in November regarding
order information, and customer queries
were forwarded on to the agent until
January 2007, showing that the agent still
had the authority to negotiate on the
supplier’s behalf up to that date.
While the agent was not actually negotiating
sales at this point, which is how the
Regulations define the role of an agent, the
Court ruled that he was still working on
behalf of the supplier, and so the agency
relationship was still in effect.
Paul Gershlick, a partner at the law firm
Matthew Arnold and Baldwin LLP, explained:
“This case highlights the importance of
agreeing everything clearly in writing. Even if
parties to a contract start off intending only
to have good relations, this does not always
turn out to be the case further down the line.
That’s when the value of a good contract is
noticed.
“There is a further reason for principals to
have contracts with their agents: under the
Commercial Agents Regulations, they may
be worse off if they don’t stipulate in writing
that the indemnity alternative applies rather
than compensation – agents could be able
to claim for more money on termination.”

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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