Q & A’s on Agency Law

by David Bentley
of Bentley and Co. Solicitors

Q. I contacted you a few years ago with
regards to my planned retirement at some
stage in the future, and we discussed at what
age, all other relevant factors being
considered, I might realistically be able to
retire and, in doing so, be eligible for
compensation/an indemnity. You may recall
that our conversation was for the time being
shelved on the basis of your view at that
stage that you did not consider that (and
with all relevant things taken into account)
my age was such that I would be able to
resign on those grounds and to be able to
claim my prospective statutory entitlement.
Following on from the above, I am writing to
let you know that my principal last week
terminated my agency, on the basis that it
considered that I was now “too old” to be
able to continue doing my job effectively,
and that therefore my contract will
terminate as at the end of October 2012.
Given your earlier view as to my age at that
point being insufficiently old to enable me
to resign and claim compensation, and in
circumstances where it is my principal which
has now terminated rather than my
resigning, do you now consider that I could
realistically make a claim?

A. The first point which you need to be clear
about is that my concern about your resigning
your own agency was that, ordinarily and save
for c e r t a i n s p e c i f i e d e x c e p t i on a l
circumstances, an agent who resigns his or her
own agency is not then entitled to any form of
compensation (i.e.:- including any indemnity).
Pursuant to Regulation 18(b)(ii), however, one
of those exceptional circumstances (where an
agent may thus be entitled to resign and still be
entitled to claim compensation/an indemnity)
is where the age of the agent is deemed such
that they cannot reasonably be required to
continue their function on behalf of their
principal. In the absence of being able to
satisfactorily establish that their circumstances
fit within the statutory exceptional grounds as
set out in Regulation 18(b)(ii), an agent would
likely not then receive anything at all by way of
any form of compensatory payment, in these
circumstances. The above said, if your principal has now
terminated your agency of its own volition,
and without there being any basis for saying
that you had breached your contract, then my
view would be that you would seemingly
definitely have the basis for now making a
claim – i.e.:- no longer would we be dealing
here with an assessment as to whether your
circumstances brought you within the scope
of the exceptional grounds set out in
Regulation 18(b)(ii), as your principal’s actions
in itself terminating your agency (and thus
saving you the decision as to whether and
when perhaps to resign) means that you would
in principle have a claim, and you should
definitely promptly pursue that.

Q. I have recently started to work on behalf
of a French company, which is new to the UK
market. As such, they have asked that I
operate in a specific way, which is different
to how I operate on behalf of the other
companies which I represent, such as that I
am being asked to hold stock in my own
business premises, and to invoice customers
directly, when I make a sale. In the light of
these arrangements, I am wondering
whether I would in fact be regarded as being
a sales agent, and therefore subject to the
protections afforded by the Commercial
Agents Regulations, or whether in fact I
would fall outside the scope of the
legislation – what is your advice, please?

A. In relation to some of the information set out
in your Question, I am particularly interested to
know in the first instance (and when you say
that you are being asked to hold stock, and that
you invoice customers directly) whether
therefore you buy in the products from the
French company, sell them on and then realise
your income not from a % sales commission,
but instead from the profit in terms of the
difference between the purchase and sale
I would also like to know whether there exists
any written agreement between yourself and
the French company and, if so, what that
provides for in setting out the basis of the
relationship, and how it is to operate.
Subject to the above and to whatever any
written agreement might provide for, the
bottom line is that if what you are describing as
being your relationship with this company is
that of a distributorship (and merely holding
stock belonging to another company is not
something of itself which determines that you
are not a commercial sales agent) that will not
be covered by the Commercial Agents
Regulations and so that, and as an example,
you would not therefore be entitled to receive
on termination any form of compensation.
There are various distinguishing factors as
between an agent and a distributor – however,
the key relevant aspect of the definition of a
“commercial agent” (as per Regulation 2(1)) is
someone who (or a partnership or other form
of corporate entity which) is “self employed”,
and has the “continuing authority to negotiate
the sale or purchase of goods on behalf of
another person [“the principal”], … or [the
continuing authority] to negotiate and
conclude the sale and purchase of goods on
behalf of and in the name of that principal”.

Q. My agency has recently been terminated,
and I am consequently now working a three
months notice period. As part of this, my
principal is asking that I liaise with my
replacement in the final month, in terms of
taking him around the area, showing him the
ropes and introducing him to my customers.
As however I will find this very difficult to do
(- many of my customers are personal
friends, who will wonder what is happening),
I am wanting to know whether I have to
comply with what I am being asked to do.

A. The answer to this is that, in order to preserve
y o u r p o t e n t i a l e n t i t l e m e n t t o
c omp e n s a t i o n / a n i n d emn i t y u p o n
termination, you absolutely must comply with
all ongoing contractual and statutory
obligations and, in this, you need to be clear
that any failure on your part to co-operate
could entitle your principal to terminate your
agency for a second time, during the actual
notice period itself – in other words, even
though at that point when your agency was
initially terminated it may not have been on
account of any breaches or defaults on your
part (and so that therefore you should
potent i a l l y be ent i t led to recei ve
compensation/an indemnity on the basis of
that), that does not at all prevent your principal
from terminating the notice period early on
the basis of your subsequent breach, thereby
losing you all and any rights which you might
otherwise have had to any form of
compensation, on termination.

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

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


Download PDF