Q & A’s on Agency Law

by David Bentley
of Bentley and Co. Solicitors

Q. I have read in previous columns that
there are very particular rules about how to
notify a principal that you intend pursuing a
claim for compensation, following a
termination – are these rules very
complicated, as I did write what I consider to
have been an appropriate “notification” but
am now concerned that it may have been
insufficient. Can you please advise?

A. What the law requires is that, within 12 months of
the date of termination of your agency, and in order to
preserve your entitlement to pursue a claim for
compensation/an indemnity, you have to have notified
the former principal concerned that you (as the agent)
actually intend pursuing your entitlement element of
your compensation claim, for a reduced amount of
restrictive covenant period.

Following on from the above, best practice is to state
your intention in writing (although there is nothing in
the Regulations themselves, as to that being an actual
requirement), and what you set out in your notification
also needs to be worded sufficiently clearly so as to
leave the recipient in no doubt as to your intentions (i.e.
– there is also nothing in the legislation setting out a
specific format of required wording).
To answer your question, therefore, and whereas (“no”)
the process of notifying of your intention to bring a
claim should not (in theory) be too complicated, the
fact is however that there are so many issues which
need to be properly and punctually addressed that
giving and achieving effective notification can
potentially be a problem in certain circumstances –
such as (as a few examples):-

Giving due consideration as to which Country’s
legislation applied to the relationship, and how to
word the notification where there may potentially
be more than one Country’s laws involved.
How should the notification be sent (and who
should it be addressed to)?
When is termination deemed to have taken place
and when should the statutory notification actually
be sent?
Who would be deemed as actually being the agent
for the purposes of giving the notification,
effectively? What to do when there may be any
doubt about who might be deemed as having been
the agent?

Q. I had an agency terminated in January
2014, and wrote a few weeks ago (after the
relationship ended) to notify the company
in question that I was intending to make a
claim for compensation, and to establish
what were their proposals in terms of what
they would pay me. In response, the
principal’s Managing Director has written
back and stated that his company is electing
the “indemnity” compensatory option, and
that they are prepared to offer me the
equivalent of six months average
commissions, as the amount that they
would pay me – is that correct?

A. No, this is not correct.

The Commercial Agents Regulations provide that the
parties to the relationship may elect that, following
termination, the agent may potentially be entitled to
either “compensation” or to “an indemnity” but where
that election has not been made – by agreement
between the parties, prior to termination and in writing
– then it is certainly not open to the principal to
unilaterally nominate “its preference”;
This is a nonsense, and you should respond to the
Managing Director, making clear your position. The
above is also topical on account of the recent decision
of the High Court in the case of Charles Shearman v
Hunter Boot Limited, which involved a determination
by the Court as to the effectiveness of a clause in writing
in an agreement which supposedly enabled the
principal to only have to pay the lesser of compensation
and an indemnity. The wording of that clause was –
however – struck out as being not what was intended by
the original EU Directive and the Regulations (and
therefore void), and so that the agent’s prospective
entitlement was (therefore, by default) to
compensation instead (i.e.:- as no effective election to
only pay an indemnity had been made by the parties).

Q. One of my principals has written to me
informing me that I am not devoting
sufficient time to selling its products, and
that, on account of that, it is considering
replacing me with another agent. What is my
position as regards this threat?

A. As a commercial agent, one of your fundamental
obligations under the 1993 legislation is to act towards
each principal that you represent, in good faith and in
their best interests. Notwithstanding this, unless however you have agreed
some specific minimum amounts of time which you
would devote to representative activities on behalf of
any particular principal, I would suggest that, just so
long as you can show that you are complying with all of
your statutory obligations (and can thus demonstrate
that – for example – you are maximizing all sales
opportunities), I cannot see that, fundamentally, you
can do more than that. I accordingly suggest that you
respond (in writing) to the principal, in (obviously)
courteous but assertive terms, highlighting all of the
efforts you are making and asking what exactly they are
concerned that you are not doing (in circumstances
where, as a self employed commercial agent, you also
have duties on behalf of other principals, too). If the
principal nevertheless terminates, you should promptly
pursue your consequential statutory claims.

Q. I have recently had an agency
terminated and the company in question
has promptly approached one of subagents
and offered them the opportunity to
cover the territory, in place of me. Can the
principal do this, and what rights might I
have to protect my position?

A. The answer to this is that, unless you agreed
with either or both of the other parties (i.e.:- the
principal and the sub agent) that, for an agreed
period following any termination of your agency,
that they would not work together, then you cannot
prevent this happening – i.e.:- there is nothing in the
Commercial Agents Regulations which bars their
relationship, and so that it was always going to have
been a matter of commercially tying this down (in a
written agreement), so as to have prevented it
potentially coming about in the first place.

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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