Is it a good idea for an agent to have a written agreement?

by David Bentley
of Bentley and Co. Solicitors
As it is difficult to envisage any
s i t u a t i o n w h e r e a g e n u i n e
agreement reached between two
or more parties shouldn’t be
properly recorded in writing, it can
therefore be said that the same
holds good and just as applicable in
a principal and commercial agent
scenario.

The recent case of Barnett Fashion Agency Limited
and Nigel Hall Menswear Limited reinforces that as
being correct, and (more than that, and crucially, this
April 2011 decision of the High Court) sets out
(amongst other things) the great importance of
ensuring that all and any agreed changes to whoever
are the parties to the commercial agency
relationship must be effectively achieved and
recorded, (again) in writing.
Following on from the above, and as most agents will
be aware, many commercial agency contracts in
practice take the form of a simple letter of
appointment, and whereas that generally has a
different appearance to a more formal contractual
document, that does not then mean that letters of
appointment aren’t of themselves binding on the
relevant parties or, in many instances, adequate.
There are in fact many considerations as regards this
issue of commercial agency written agreements,
and primary amongst those is being aware that (a) a
lack of any written agreement (formal or otherwise)
does not (in this Country, at least) of itself prevent an
agent from potentially being entitled, in appropriate
circumstances, to bring a claim for compensation (-
in fact, the majority of the many cases I have acted
in over the years have been where the agent hasn’t
had any formal written agreement), and that (b)
what agents must very promptly do is to get any
draft agreement which is presented to them by their
principals legally reviewed, and to get appropriately
detailed legal advice (from a specialist solicitor), in
writing. In this, and the reason why, in practice,
agents might otherwise be comparatively
immeasurably better off not to enter into a formal
written agreement at all with their principal, the
fundamental point to be very aware of is that
detailed written agreements drafted on behalf of
principals may (validly) contain any number of provisions the effect of which may be extremely
disadvantageous from the agent’s point of view, and
which (for example) include:- Adding to the agent’s
contractual obligations towards the principal, and
making clear that in the event of the agent’s failure
to achieve any of those additional obligations, the
agent may then lose his rights to any form of
compensation, on termination; varying the agent’s
in principle rights on termination to an indemnity (as
opposed to “compensation”); a clause excluding the
agent’s rights on termination to receive “pipeline
transaction” commission; clauses enabling the
principal to make changes to any of the contractual
arrangements, without having to obtain the agent’s
further agreement to that; and/or (as just another
example) the inclusion of a post termination
“restrictive covenant”.

As I say, there are innumerable considerations in
respect to this issue of written agency agreements,
and, as a brief check list of just some of those further
important points to bear in mind, I would highlight
the following, as examples:-

An agent is not obliged to have to sign a written
agreement which is presented to him part way
through the period of the agency, unless the draft
contract is an accurate reflection of terms and
conditions already agreed or otherwise sets out new
terms which he is now prepared to accept – in this,
principals will quite frequently only belatedly
become aware of the sorts of provisions which
could be to their significant advantage to be
included in an agency contract, and will then
attempt to bamboozle the agent with threats that
the agency will be terminated if the agent does not
accept those new terms. Whereas the principal may
always (on appropriate notice) terminate the
agency relationship if that is its choice, the point
however is that the agent wouldn’t lose whatever
rights he might otherwise have had as a result of
such a termination, merely on account of the fact
that he refused to sign a written agreement which
was not an accurate reflection of terms agreed.

Again, if a contract is presented to an agent after
he has already been acting on behalf of the principal,
the agent should promptly [i.e.:- as his first course of
action] send a written communication back to the
principal, making clear (amongst other things) that
he (the agent) should not and does not intend that
he be deemed to have somehow agreed to any of
the proposed changes (i.e.:- as set out in the draft
agreement) unless and until he actually at any point
in time signs and returns the relevant document.

Certain provisions of the Commercial Agents
Regulations may actually override what is otherwise
contained as a provision in an agency agreement,
and also visa versa – i.e.:- certain aspects of the
Regulations are capable of being varied for the
purposes of the agency, by provisions in a contract.

Agents (and principals) should also bear in mind
that whatever are the provisions of any written
agency agreement, those are potentially capable of
being varied by custom and practice.
Finally, I would add a brief word about a couple of
c o m m o n m i s c o n c e p t i o n s – f i r s t l y , t h e
misunderstanding that UK commercial agency law
cannot be contracted out of if the agent is based in
this Country – if (however) the principal is based in
another EU Country and the agent agrees that the
laws of that other EU Country are to govern the
agency relationship, then that other European
Country’s laws will generally apply instead, and even
more reasons then as to why legal advice should be
taken (as always) before the agency commences;
secondly, some agents will seek to argue later on
that they were “forced” into signing an agency
agreement, and that it is therefore not binding on
them – however, short of extreme circumstances
(which I personally have never come across), that is
not an argument which would likely succeed. The
message is to always (without any exception)
immediately take specialist legal advice in writing
before you agree (or could be deemed to have
agreed) to an agency agreement.

David Bentley is a Partner
with Bentley and Co.
Solicitors and specialises
in agency law.

7 Littlemoor Road,
Pudsey, Leeds, LS28 8AF
Tel: 0113 236 0550
www.bentleyandco-solicitors.com

Disclaimer: This column does not contain legal advice and is for general guidance only. Agentbase, Bentley and Co. 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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