Q & A’s on Agency Law

by David Bentley
of Bentley and Co. Solicitors

Q. I have recently been offered an agency
by a competitor to one of my main
principals, and would like to know as to
whether, if I resigned my agency with the
current principal, I would be able to then
represent this new company; Also, how
much notice would I be required to give?

A. In order to be able to answer your question, I would
first of all need to know if you had any written
agreement with your current principal and, if you did, to
see a copy of that contract. The main reasons why I would need to see a copy of
any contract which you have with your principal is
(firstly) that that may set out how much notice of
termination (potentially over and above what would
otherwise be the minimum length of notice, as set
out in the Commercial Agents Regulations) you are
obliged to provide, and (secondly) I need to know if
you have agreed in any written contract to any post
termination “restrictive covenant” – i.e.:- for a
period of time, following the termination of your
agency, that you would not act in any way in
competition with your principal.
If you do not have any written agreement with your
current principal, then, and varying with however
long you have thus far been its agent (and assuming
that yours wasn’t a fixed term agency which hasn’t
yet become a contract for an indeterminate period),
the number of months’ notice to terminate which
you would have to provide (in writing) would be a
minimum of one month (where your agency has
lasted for up to 12 months), a minimum of two
months (where the agency had been ongoing for
more than a year, but for less than two years), and a
minimum of three months (where the agency has
lasted for more than two years).
An additional point to be aware of is that any notice
period ordinarily can only expire at the calendar end
of the relevant final month.
Where there is a written agreement in place, and
assuming that the period of notice which you as the
agent are supposed to afford your principal is no
greater than the period of notice which the principal
would have to provide to you (i.e.:- were it the
principal terminating instead of you), there might be
a provision in the contract to the effect that either
party, in order to terminate the relationship, has to
provide the other party with notice which is greater
than the statutory minimums as set out in the
legislation.
If however there is no such provision, and to answer
your question, the period of notice which you would
have to provide to your principal in order to
terminate your agency, and in the circumstances
which you describe, is as per the varying periods
which I have set out above (and which depend on
how long you have been the agent).

You must always of course be clear and bear in mind
that you cannot take on any competitive agency
whilst you are still the agent for the first principal
(i.e.:- before your notice period has properly
expired).
As I have pointed out, where there is a written
agreement in place and where that contains a valid
post termination “restrictive covenant”, the expiry
of whatever is the appropriate notice period may
not however then free you to immediately
thereafter start acting for a rival principal – please
note in this regard that if you do have a valid
restrictive covenant in your agreement but you
chose nevertheless to ignore its terms, your current
principal may then be entitled to (at the very least)
take out a Court injunction against you (preventing
you from continuing to represent the proposed new
rival company), which would then set in motion
what may be a very expensive set of circumstances
for you. Clearly, if you have agreed to any such
restrictive covenant, you need our advice before
you take any steps.
For your information, in order for a restrictive
covenant to be regarded as reasonable and
therefore potentially binding on you, the following
tests need to be passed:-
Firstly, any “restrictive covenant” has to be recorded
in writing – in other words, and as regards this type of
agreement, it has to be evidenced in a written
document;
Secondly, the covenant must only relate to the
specific geographical area in which the agent
represented the principal, and/or (if this is applicable
as being more relevant in the alternative:-) to the
group of customers which the agent sold on the
principal’s behalf to (i.e.:- and thus assuming that the
agent’s “area” was not defined by reference to an
actual geographical demarcation, but instead to a
named group of customers);
Thirdly, the covenant must only be in respect to the
kind of goods which the agent previously sold on
behalf of that principal (e.g.:- if the principal sells a
complete range of bathroom products but the
agent was only ever engaged to just sell taps on the
principal’s behalf, then the agent cannot be
restricted post termination of the agency from
selling ALL types of bathroom products);
Fourthly, the restriction can only be valid for a
maximum of two years post termination of the
agency; and
Finally, the restriction must also otherwise be
reasonable.
As a PS to the above answer as a whole, you will take
on board that an agent resigning his own agency
(but subject to certain exceptions) is not entitled to
any form of compensation.

Q. My principal is based in Scotland, and I
represent the South East of England, on its
behalf. This principal has recently required
that all of its agents around the UK attend
a sales meeting once each and every
quarter, at its offices near Edinburgh, and I
am wondering as to whether or not I
would be obliged to have to attend – I
have a number of other agencies to
operate, and there is also the cost factor to
take into consideration.

A. Assuming that you do not have any agreement
which specifically deals with this point, the answer to
this query is then rooted in Regulation 3(2)(c), which
provides, as follows:-

“[In performing his activities a commercial agent
must look after the interests of his principal and act
dutifully in good faith.]
(2) In particular, a commercial agent must …
(c) comply with reasonable instructions
given by his principal”
On the basis therefore of Regulation 3(2)(c), the test
to apply and the question to ask yourself is as to
whether or not your compliance with a request to
attend sales meetings in Edinburgh (on – I am
assuming – no more than this quarterly basis) would
be reasonable or not, and my clear view (based on
the limited information which you have provided
above) is that it would be an entirely reasonable
request to make of you.
It follows from the above that if my view was shared
by a Court and that you had decided not to cooperate
and to thus not comply with the Company’s
request of you (which, to reiterate, I am saying
appears to be reasonable, and to an extent
particularly bearing in mind that you were
presumably always aware that the Company’s Head
Office was based there), you run the risk of the
Company as a result of that terminating your
agency, and if (as I say) a Court took the view that
you had acted so unreasonably that your actions
justified an immediate termination of your agency,
you would additionally be at risk of not being
entitled not only to damages in lieu of any unfulfilled
notice period, and nor to any appropriate form of
compensation.

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

Download PDF