Q & A’s on Agency Law

by David Bentley of Bentley and Co. Solicitors

Q. An agency which we had was terminated on 18 September 2013, and whereas we were entitled to three months’ notice (as acknowledged by our principal), we were in fact asked to cease working on their behalf immediately, and informed that they’d pay us in lieu. In terms of us making a claim for compensation, we understand that we have to notify our former principal of our intention to bring such a claim before the first anniversary date of termination, but wanted to check as to whether that point of reference date was the date when we actually ceased representing the principal in question, or instead the date which was the end of the three months’ notice period?

A.  My answer to this is that you should most definitely regard the earlier of the two dates as being the relevant date as, following that date, you were no longer actually acting as a commercial agent for this principal. This said, if anyone else reading this answer to your question is now concerned that, in their individual instance, they may be out of time (i.e.:- too late to pursue a claim for compensation/an indemnity, on the basis of not having notified before the above referred to earlier date), I would say that you should nevertheless still at the very least serve notice of your intention to bring a claim before the first anniversary date of the expiry of the notice period, although you may find some very strong (and potentially irresistible) objection in terms of anyone acting for your principal, taking the point, and arguing that you had missed the boat.

Q. Where an agency is terminated and, shortly afterwards, a significant sale is concluded that you as the agent was instrumental in procuring, can the significance and impact of that (in terms of any entitlement to “pipeline transaction” commission, what would have been potential future commission, and otherwise what the transaction infers as to the hypothetical sales value of the agency) be taken into account in assessing the entitlement to compensation or an indemnity?

A. Yes, absolutely. I would major on it if I thought it could or might enhance value. First of all, and as you refer to it in your question, there is certainly the potential for being entitled to pipeline transaction commission in relation to the deal, with the usual assessment criteria as to entitlement applying. Secondly, and although (beyond any potential entitlement to pipeline transaction commission) you would not ordinarily be entitled to future commission on the relevant deal, the fact that there would be that income stream could potentially be very significant for the purposes of assessing the extent of any indemnity claim which you may have, and also, if appropriate instead, establishing the worth of a compensation claim.

Q. What is the process you would currently advise me to follow if I am presented with a draft contract by my principal, which does not reflect the terms of my agency, and which I do not wish to agree to?

A. What you absolutely should do is to promptly respond to your principal in writing, making very clear which clauses (which would otherwise vary the terms of your agency) you do not accept and so that at no point down the line can it ever be said that, by your silence, and even though you never actually signed the agreement, you nevertheless effectively accepted the terms by reason of the fact that you did nothing in response and continued as the principal’s agent. There is potentially a significant danger in not appropriately responding (and doing so promptly), as many principals may seek to argue that any agreement which was sent to you and which you did nothing about in terms of any response will be deemed to have been binding on you (even though and as I say, you didn’t actually sign the contract document).

Q. I am writing to you in connection with the old chestnut of sales targets, as I am finding that a couple of my principals are being very insistent in striving to impose upon me the compulsory achievement of sales targets. I am aware of your resistance to agreeing targets but can you offer me anything in terms of how I might contend with my principals’ pressure?

A. Setting aside the separate (but very important) issue about whether your principals have any legal basis to apply this pressure on you, and how you should respond generally, I would suggest two constructive alternative forms of wordings basis re sales targets, both of which (but depending always on what are the other provisions of the agreement) may assist you:- First of all, a provision which makes clear that you will merely endeavour to achieve any agreed sales targets [i.e.:- your obligation would then be that you will endeavour to achieve, rather than you WILL achieve the target]. Secondly, and again depending on other wording as to whether this would be effective, a clause which makes clear that any failure on your part to achieve any agreed sales target would not then constitute any form of breach on your part, save where such failure was entirely your fault [i.e.:- such failure is very unlikely ever going to be entirely your fault].

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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