Q & A’s on Agency Law

by David Bentley
of Bentley and Co. Solicitors

Q. I have read your previous comments with regards to sales targets, and am concerned
that you do not appreciate that many
pr incipals ef fect ively demand the
achievement of stipulated sales goals.
Whereas I understand your objection to
targets as a matter of principle, what am I to
do in practice, to overcome what, in reality, I
have to contend with?

A. The key here, and very simply, is that you should only ever agree to do what you can control the achievement of – if therefore you
are going to be agreeing that, no matter what, you will achieve £x or £y worth of sales in any given period and, moreover, you also agree
that if those specific sales levels are not achieved that your agency may then be terminated by your principal on the basis of
your effective admission that you have therefore fundamentally breached your contract (thereby disentitling you to any form
of compensation), then what you are agreeing to is clearly not therefore within your control.

Certainly, you can agree that you will do all that
you reasonably and realistically can do to
achieve a specific sales goal, but what I come
back to is that you should not go beyond that
and thereby potentially lose out on your
prospective entitlement to compensation or
an indemnity, because – and despite your
efforts to achieve whatever were the
s t ipulated goal s – any number of
circumstances beyond your control have
conspired to ensure that, ultimately, the
achievement of any particular magic sales
number proved impossible. On the basis of
what I have described above, you can see that
if a principal does not accept that all that you
can agree that you will definitely do is only
what you can control the achievement of, you
might conclude that that principal who is
nevertheless seeking to make it a contractual
obligation that, no matter what else transpires,
you will definitely achieve a particular sales
target, is in reality seeking to get for itself a
potential defence against ultimately having to
pay you any compensation/an indemnity on
termination, on the basis that you will have
breached your contractual obligations.
In answering your question, therefore, and as
to how to go about this in practice, my advice is
that (a) you should never agree to any
provision in any written contract, which
provision entitles the principal to terminate
your agency on the basis of your breach if any
specific sales level is not achieved, and (b) you
should otherwise (constructively, promptly
and in appropriate terms) respond in writing to
any communication from your principal with
regards to your supposedly having to achieve a
particular sales level no matter what
circumstances materialize, as you also want to
make sure that the principal cannot get your
agreement to such an obligation by effectively
securing your consensus, even though you do
not have a contract in writing or otherwise
have never agreed to such an obligation in any
written agreement.

Q. I had an agency terminated several weeks ago, but I am still to receive the
written confirmation which I was told would
be sent to me. I don’t think that the
Christmas holiday post has anything to do
with this, as termination was in November
2012, and I would at the very least have
expected an e-mail by now. As this principal
has a bit of a reputation for not confirming
anything important in writing, how should I
go about this?

A. My advice is that you should write to the principal, in appropriate terms, yourself – by
“appropriate terms” what I mean is that you
should write to the principal (a) referring to the
meeting which you had where you understood
that your agency was terminated, (b) seeking
clarification that what was your understanding
of what was communicated to you (i.e.:- that
your agency was terminated) was indeed
correct, and (c) making clear that if your
understanding is in fact incorrect (and so that
your agency has not after all been terminated)
that you are happy to continue as the
principal’s agent, and that you yourself have
not terminated the relationship, nor are you
seeking any such ending of the relationship.

You should be aware that principals who tend
not to put anything important in writing may
also be looking – in a termination situation
such as this – to either store up a potential
argument for down the line that you yourself
somehow terminated the contract (which very
likely would then prevent you from being able
to bring any claim for any form of
compensation), or otherwise to delay you in
bringing a compensation claim, to potentially a
point in time when it may be too late for you to
do so.

From your point of view, however, and quite
apart from anything else, you need to know if
you are still required to be selling on behalf of
this principal and acting as its agent, as if your
agency has not after all been terminated, then
it would then of course be your continuing
obligation to carry out your agency function as
normal, or otherwise potentially be in breach
of contract.

Q. My principal has always engaged my services on the basis of a series of fixed one
year term agreements, and I am concerned
that this would mean that when one day my
agency is eventually terminated, that the
amount of any entitlement which I would
then have to compensation would be
assessed on the basis of just the final year –
would that be correct?

A. No, this would not be correct – this issue has already been looked at by the Courts
(albeit some years ago, now) in the case of an
agent called Duncan Moore versus his principal
called Piretta (in 1999), where it was held that it
was not just the history of the most recent
contract period which was to be considered in
assessing the amount of (in that case:-) the
agent’s indemnity entitlement, but, instead,
the entire history of the relationship, thereby
treating all of the expired fixed term contracts
as an amalgamation of one overall agency
relationship. The above point of law as established by the
Courts in the Moore -v- Piretta case holds
good irrespective as to whether the agent’s
entitlement is to compensation or an
indemnity, and whereas it does not necessarily
mean that the agent will recover more by way
of compensation/ indemnity on termination
(i.e.:- the case of Ingmar GB Limited -v- Eaton
Leonard Technologies Inc (in 1999 and 2001)
demonstrated that even short lived agency
relationships can trigger substantial claims for
compensation),
it is nevertheless likely very much in the agent’s
favour that the principal will not be able to have
the Court restricted in the scope of what it is
allowed to consider following termination and
in terms to what the agent’s compensatory
entitlement may then be, to merely what was
achieved or happened in the final fixed term
period of the relationship.

Q. My main principal has terminated my
agency, and is demanding that I promptly
send back to the Company’s head office all
items belonging to it which I have in my
possession, such as samples and catalogues.
As however the principal owes me a
substantial amount by way of unpaid
commission, and as also I am wanting to put
pressure on it to quickly negotiate with me a
satisfactory compensation settlement, I am
intending to hold on to these various items –
do you agree with that?

A. No, absolutely not:- First of all, you cannot
hold property as your “hostage” which
property belongs to your principal, in order to
lever (as you hope) a satisfactory commercial
solution to another issue – the two matters are
entirely different and, quite apart from
anything else, you may ultimately be breaking a
criminal law, by – without your principal’s
permission – holding on to property which
belongs to it, and not you.

Secondly, please be aware that it may be the
case, and despite a notice of termination
having been served, that your agency contract
is still ongoing (i.e.:- the notice terminating the
agency may have stipulated an actual finish
date some way off, several weeks down the
line (and notwithstanding that you may not
actually be required to be doing anything, in
that interim period)).

That potentially being the case, by your
improperly refusing to return items of property
belonging to your principal, you may thereby
place yourself in repudiatory breach of
contract, thereby removing what might
otherwise have been a perfectly good and
u n d e n i a b l e c l a im for a p p rop r i a t e
compensation, as a consequence of the
termination.

Thirdly, there are various legitimate means to
place huge pressure on a defaulting principal to
promptly pay you commissions which are
owed and, ultimately, and depending on the
circumstances, it may be appropriate to – for
example – threaten the commencement of
winding up proceedings, by initiating a
statutory demand process. As I say, you will
have sufficient lawful potential remedies in
your armory, to not have to worry about
potentially breaking the law, instead.

Q. On account of the economic climate,
and in an attempt to secure better terms,
one of my largest customers has begun to
trade directly with one of my principals,
thereby squeezing me out of the picture,
and my losing out on a substantial sum of
commission, each month. My principal has
been quite open in informing me about this,
but has also communicated the position to
me very matter of factly, suggesting that I
really can do very little about it – what is your
advice?

A. First of all, I would need to establish with
you as to whether you have a written
agreement with this particular principal and, if
so, whether that contract provides for this
specific occurrence – i.e.:- does its wording
entitle the principal to effectively convert an or
any account into a house account and, (again)
if so, what may then be any consequential
entitlements written into the agreement, if the
principal were indeed to do that.

If there isn’t in fact any written contract with
this principal, the next fundamental point to
establish with you is as to whether or not the
principal has taken this sort of action in the
past and, if it has done so, whether you
effectively reserved your position in that
previous instance as regards any future
attempts to act in a similar way, and how
overall that previous situation resolved itself.
Ultimately, if there is no entitlement on the
part of a principal (whether on the basis of
terms in a contract, or otherwise established by
custom and practice) to act in the way in which
you have described, then (a) (without your
agreement) the principal simply cannot do
what you have described (and you giving your
agreement can effectively take the form of you
not doing anything or not doing enough
(and/or quickly enough) in response to what’s
happened), (b) you need therefore to object
effectively and (as I say) very quickly, and (c)
ensure that, whatever else happens, and very
obviously, that the issue is resolved
satisfactorily from your point of view (which
broad statement on my part covers a very wide

range of possibilities, such as – and depending
on the circumstances – you continuing as the
agent but receiving a significant sum by way of
compensation for the loss of this account to
(as another example of what may transpire:-)
your agency constructively terminating, by
dint of the principal’s actions).

Q. For a number of years, I have been selling
on behalf of various principals to one
particular customer which customer has
now become the most dominant force in its
industry. This being the position, and the
fact also of the strength of the relationship
which I have had with this customer, it has
now approached me to give up my various
agencies, and to work on its behalf as its
exclusive buying agent, and to be paid a
commission based on my success in doing
that, and in achieving certain goals. My
question is, as a buying agent, would I still be
covered by the Commercial Agents
Regulations?

A. (All other things being equal:-) yes, as the
definition of “commercial agent” for the
purposes of the 1993 Regulations is:- “a self
employed intermediary who has continuing
authority to negotiate the sale or purchase of
goods on behalf of another person (the
“principal”), or to negotiate and conclude the
sale or purchase of goods on behalf of and in
the name of that principal”, and so that it is
clear from this that a buying as opposed to a
selling function by an agent is an activity which
is properly covered by the legislation, and so
that (for example), in the event of any
termination of his agency down the line, a
“buying” agent has the possibility of seeking
compensation/an indemnity in the same way
that a “selling” agent does. This all said, I have
not frequently come across an agent who buys
on behalf of another party, as opposed to
selling, but based on what I have stated above,
there is clearly the possibility that such agents
have the same protections as selling agents.

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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