European Law?

One of the most common aspects in advising with regards to the Commercial Agents Regulations is managing the clearly held view that some agents have, which is that principals (supposedly) cannot (or, conversely, have to) do certain things on account of the fact that the agents are ….. ‘protected by European Law’. Whereas, to an extent, in particular instances, and vernacularly speaking, this statement (i.e.:- that agents are ‘protected by European Law’) may be generally correct, it is also at the same time equally generally a significantly inaccurate, misleading and very dangerous assumption to make, and that being for several important reasons, such as that:-

Firstly, each of the EU member states have in fact their own (and, in certain important regards, potentially quite different) laws in respect to the governance of the relationship as between principals and commercial agents, albeit that those individual laws are derived from a common EU Directive, and that that Directive sets out certain obligatory requirements as regards the individual countries’ relevant laws. This fact being the position, it follows that no two EU countries’ agency laws are necessarily at all the same (and may indeed contain some extremely important and significant differences), and so that, in the first instance, and where the agent has a foreign principal, it is necessary to establish which country’s laws actually govern the relationship, and how those laws may differ from what they might expect.

Secondly, and very, very importantly, and whereas the Commercial Agents Regulations (the ‘CAR’) do indeed provide the agents with various protections and rights, there are certain of those protections and rights which may actually be perfectly lawfully excluded or varied by agreement between the parties, and part of the problem there is that there is a high number of agents who may not realise either that they had these rights in the first instance and/or that those rights may have been largely excluded or varied in a written agreement, because those agents have not considered taking legal advice and/or imagine that it is always the case that where an agreement has not been signed that it cannot then be binding on them.

Some examples of the above are:-

Compensation/indemnity:- In our experience, certain agents wrongly imagine that they are automatically entitled to a compensatory payment on termination of their agency, irrespective as to whether the agency was lawfully and justifiably terminated on account of their [the agent’s] relevant breach of any obligation written into an agency contract. Here, therefore, is an example of the CAR in the first instance affording the agent statutory protective rights but, and at the same time, not restricting the principal from then being entitled to include in an agency contract certain obligatory functions on the part of the agent, which, depending on what those obligations are and their stated consequences, may potentially then entitle the principal not to have to make any (such) compensatory payment on termination, should the agent have breached.

Another example of where the CAR afford agents rights which the agent might assume are accordingly written in stone is the right to receive commissions post termination of the agency, where the related transaction was effectively in the pipeline as at the termination date – as to that, however, and although Regulation 8 sets that out as an agent’s entitlement, there is nothing in the legislation which precludes that entitlement being excluded by agreement between the parties, and many agents may not actually realise that agency contracts which they’ve agreed to be bound by effectively include such an effective opt-out.

A further example is the right (by Regulation 7) to receive commission in respect to all sales of goods to customers who are introduced by the agent to the principal for transactions of the same kind – however, and again, the CAR says nothing about Regulation 7 not being excludable by agreement between the parties, and so what may often happen (without perhaps the agent being aware of this) is that the agency agreement will provide that the agent will only ever receive commission on sales which he actually directly takes (which is obviously a significantly lesser entitlement, compared to being entitled to commission in respect to all sales of all products sold to customers whom the agent introduced for sales of products of a similar description).

Further to the above, and whereas there are other examples, there are (on the other hand) certain rights in favour of the agent which cannot be avoided by the principal in terms of being contracted out of or otherwise being obligatory (such as any attempt to entirely contract out of the application of the Regulations in an agency agreement and/or, and as another example, getting the agent to agree in an agreement prior to termination to accept an amount by way of compensation/an indemnity which is a lesser amount than the agent might otherwise have been entitled to). However, and as with all of these things, unless the agent is ever aware of the strength of his or her position (and the various specific points) the principal may ultimately succeed in getting around the legislation.

©  David Bentley

Bentley Agency Law Limited

 

7 Littlemoor Road, Pudsey, Leeds LS28 8AF

Tel: 0113 236 0550

Fax: 0113 236 2511

Email: db@bentleyandco-solicitors.com

www.bentleyandco-solicitors.com

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