Q & A’s on Agency Law

by David Bentley
of Bentley and Co. Solicitors

Q. As a self-employed sales agent, is there
any restriction on the number of agencies
which I can hold, at any one time?

A. Subject to anything which you might otherwise
have agreed with any of your principals, there is no legal
restriction, as such – i.e.:- the Commercial Agents
Regulations do not themselves stipulate that there is
any maximum number of agencies which an agent can
have, at any given point in time.
The above said, however, and what is crystal clear (and
what the Regulations do effectively provide) is that an
agent (a) on behalf of two or more principals, cannot
simultaneously sell products which are in competition
with each other, and (b) [the agent] would potentially
be in fundamental breach of his obligations towards his
principal (and thus be at risk of losing his agency,
without any entitlement to any notice, and
consequently also without any entitlement to any form
of compensation) where he has taken on too many
agencies with the consequence that he is then unable
to properly service them all.
Moreover in these circumstances, the agent would
additionally be running the risk that a principal could
also sue him in respect to its lost profits, reflecting the
opportunity lost to the principal by dint of the fact that
the agent effectively did not properly represent its
interests.

Q. One of my principals has been
experiencing a lot of late payers, and has
requested my assistance in, in effect,
being its debt collector. Am I obliged to
have to do this?

A. This is another issue which, as to its logical and
sensible answer, is in the first instance rooted in
Regulation 3(2)(c) (i.e.:- as quoted above, and relating
to what is a “reasonable” instruction which an agent
would have to comply with), but there must also be
some consideration given to (in advising you) as to
whether you have a written agreement with this
principal, which agreement might provide that this task
(of assisting in collecting debts) is an agreed obligation
on your part or, if you don’t have any written
agreement, whether there is a custom and practice
established whereby you have always carried out this
sort of function on behalf of your principal.
In either of these two scenarios, the answer to your
question may very well then be that you would be
contractually obliged to assist the principal in the debt
collecting function which you have described.
Following on from the above, if you are not (on the
other hand) subject to any relevant contractual
provision, I have to say that I personally take the view
that an agent is not at all obliged to have to act as a quasi
debt collector – certainly, and in some [exceptional]
instances, it may well be appropriate to assist your
principal (at its reasonable request) but, by and large,
and for most instances, my personal view is that this
sort of task is asking too much of the agent.

Q. I have been representing one of my
major principals for a dozen years or so,
and a new Managing Director has just
been appointed who (a) appears anti
agent, and (b) is telling me that I have no
contract with his company, and therefore
would have no rights if the Company were
to terminate my agency – what are your
comments please, as regards this position
which is being taken?

A. The attitude of the Managing Director in this
instance, and as you have described it, is (thankfully)
relatively unusual, and would reflect not only a degree
of ignorance as regards the law and the status of
commercial agents (- more as to which, see below), but
also, and as some might regard it, a bullying sort of
approach – how anyone can expect an agent to feel well
regarded by his or her principal in the face of these sorts
of comments is beyond me, but I suppose that there are
some principals who might prefer to operate in this sort
of way.

With regards to your actual question the position is, as
follows:-
There is nothing in the Commercial Agents Regulations
(or as laid down in any Court case) which provides that
the agent has to have a written agreement with the
principal concerned, in order to then be able to enforce
his, her or its rights pursuant to the law (e.g.:- upon
termination, and in appropriate circumstances, to the
relevant form of compensation) – indeed, as regards
the majority of agents whom I have acted for over the
years, they either have had no written agreement at all
or, at best, a very basic or informal letter of
appointment.This fact has not however – not to any
degree – hampered our progress, in seeking
compensation/an indemnity.
It follows from the above that what this Managing
Director has told you is completely wrong, and whereas
a straightforward and simple written agreement can be
of great benefit to both parties, you need always to be
very careful about (and before you agree to it) having
thoroughly and promptly checked and reviewed any
draft agency agreement which is ever presented to you
by your principal, either at the outset of the
relationship, or at any time subsequently.
As a PS to the above:- As regards any agreement which
is presented to you at the outset of the agency
relationship, you should not then commence any actual
agency activities until you are happy with and are
entirely in agreement with all of the terms which have
been proposed; moreover, as regards any agreement
which is presented to you part way through your
agency, and again, you should promptly take our advice
as soon as you receive the draft document, make the
principal aware (in writing) that, to the extent that the
contract proposes new terms, you do not intend to be
bound by those varied terms unless and until you sign
the contract, and (finally) be aware that you are not
obliged to have to agree to anything which is not a
reflection of the original terms of engagement

Q. My principal has recently taken on (as
an employee) a “Sales Manager”, which
person is visiting my accounts on a fairly
regular basis, and this is a source of
concern for me. Can I object to this, and
what should I do?

A. Unless it is a completely different scenario whereby,
without your agreement, your principal has (a)
appointed this “sales manager”, and (b) is now not
paying you in respect to sales to your customers
(assuming that your territory area is exclusive to you), or
is otherwise allowing this new manager to approach
your customers and negotiate sales with them before
you yourself get the opportunity to do so (and without
then paying you your normal commissions in respect to
all such resultant sales),
I doubt very much that you could object to this
situation, although I understand that this may
nevertheless be unsettling for you and seemingly
undermining of your efforts – there are various reasons
for my point of view:-
Firstly, and (I would reiterate that) as long as this is not
the completely different scenario which I have briefly
outlined above, and whereby your rights are potentially
being fundamentally undermined to the point where,
after certain steps are promptly taken by you, you may
then be entitled to treat your agency as having been
“constructively” terminated, your principal is generally
perfectly entitled to operate its business as it sees fit – in
other words, if it regarded a sales manager as being
potentially business enhancing then it would be entitled
to make such an appointment;
Secondly, and whereas a sales manager can appear to
be undermining of your position (and as I have already
pointed out), it could potentially be helpful to you in
some ways, and (in the most important of ways)
enabling you to achieve more sales.
At the end of the day, and in reality, the appointment of
sales managers can often be the precursor to a negative
situation from an agent’s point of view – however, what
I am wishing to highlight is that that need not
necessarily always be the case, and (also), unless a
burgeoning constructive termination situation is the
result, there is in any event not a lot that you can do by
way of validly objecting to any such appointment
(although you should monitor how the situation
progresses, and feed back to the principal – always in a
constructive and positive way – any problematic issues
which you perceive as arising).

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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