Q & A’s on Agency Law

Q. Are principals required to provide notice
in writing, when terminating an agency? – I
have recently had an agency terminated
only verbally, with an assurance that that
decision would also be communicated to
me, in writing. Three weeks on, however, and
I haven’t received anything, and I am
beginning to wonder what is my position.

A. The answer is that a decision to terminate an
agency is neither required to be given nor confirmed
in writing, although it is clearly much better (in the
sense of at least the agent knowing then where he
stands) if it is.

You do need therefore to chase this up (and, if still
unsuccessful in prompting anything forthcoming in
writing from the principal, and at the same time
being very careful not to in any way thereby suggest
that you are yourself terminating the relationship, to
thus send an appropriately worded communication
to your principal, seeking clarification).
The reasons for all of this include the following:-

If your agency hasn’t been terminated for certain
(i.e.- in clear terms, in writing), you won’t then know
whether you are supposed still – as normal (and
perhaps until the end of any notice period) – to be
operating on the principal’s behalf.
This confusion potentially then leads to the crucial
further problem which is that you wrongly take the
decision just to down tools with immediate effect
(based on your forced misunderstanding that you
were not required to be doing anything further, on
the principal’s behalf), and so that you may then lay
yourself open (assuming that your agency hadn’t
after all been terminated) to your contract
subsequently indeed being terminated and on
ironical account of your now fundamental breach of
your obligations in that you had wrongly ceased
acting as the agent altogether when – but for your
confusion – you would most definitely instead have
been continuing, as normal.
Secondly, if you don’t know for sure the date when
your agency supposedly terminated, you won’t then
know what is the relevant first anniversary date of
termination for the purposes of within a year of that
termination date notifying of your intention to
pursue a claim for compensation/an indemnity,
pursuant to Regulation 17(9).

If applicable to your circumstances, you also won’t
then know what is the date when time starts running
down with regards to any post termination
restrictive covenant, and nor (on the other hand) will
you know when you will be able to take on an agency
with any competitive principal or with any other
agency which your taking on might otherwise have
constituted a breach of your obligations, pursuant
to the terms of your contract.

Finally, if within a reasonable period of time you still
haven’t heard from your principal in respect to
confirmation of what you had understood to be the
termination of your agency then (and as I have
already pointed out) at the same time as being very
careful not to use any language which fatally
suggests that you are yourself terminating (rather
than the principal), you should write to the company
in question (sending the relevant communication by
e-mail, fax and by signed for post):- (1) asking what
is the position as regards your status, (2) setting out
what you had understood was the position (and
making clear that you are happy to remain as agent if
your understanding is incorrect, but that you
obviously need to know the situation), and (3)
stipulating a reasonable period within which you
require the clarity response. If still – however – no
reply (or any satisfactory reply), you ought promptly
to take further legal advice.

Q. I recently had an agency terminated but
have been fortunate enough to land on my
feet in the sense that I have secured a
replacement agency to take effect with a
competitor, at the end of my three months
notice period. In respect to this, I am
however in fact having difficulty in properly
continuing my role on behalf of my current
principal, in that the nature of what I sell are
“slow burning” projects which, although they
may invariably take some time to come to
fruition, are potentially very lucrative when
they do materialize . Specifically, what I want
to know is to what extent I can hold back
leads during the notice period (i.e.:- for
ultimately passing on for the benefit of my
new principal), and/or to what extent can I
effectively look to source new business for
my new principal, during what is only in any
event just obviously a token notice period
on behalf of my current principal?

A. The answer to your Question is that – and very
simply – you must remain loyal to your current
principal, until the contract terminates (with your
potentially also owing obligations post termination,
depending on what was agreed). You have in fact to
be very careful about being professional in this, in
that if your current principal later discoverers that,
during your notice period, you have effectively been
diverting or squirreling away business for the benefit
of a new (and competitive) principal, you may lay
yourself open to potentially being sued by the
current principal in respect to its loss of profit for the
business which you have prevented it from getting,
and also for any other longer term adverse
consequences.

A couple of additional points to make:-
Firstly, I assume that, in your agency agreement with
your current principal (assuming there to be one in
writing), you don’t have any valid post termination
“restrictive covenant”, the effect of which may be to
validly prevent you from taking up this new
competitive agency appointment straightaway,
after the expiry of the notice period.
Secondly, in the event that you may have any
entitlement to any form of compensation/or an
indemnity on termination of the current agency
(which may or may not prove difficult to establish,
given that you propose going to work on behalf of a
competitive company), if the current principal
becomes aware of your taking business away from
it, it may very likely be entitled to then immediately
curtail the notice period, thereby losing you
whatever entitlement you may have had to
appropriate compensation, in any event.

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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