Q & A’s on Agency Law

by David Bentley
of Bentley and Co. Solicitors

Q. My principal is not paying my company’s commission entitlement in a timely manner,
and I would like to know what rights we may
have as a consequence of this?

A. Settlement on time by a principal of commission payment obligations is one of the most sacrosanct
obligations that the principal will have, and cannot be
overlooked or compromised. In this, Regulation 10 of
the Commercial Agents Regulations makes clear what
are the “long stop” latest payment dates (if no earlier
payment timescales have otherwise been agreed
between the parties), and if a principal ignores its
contractual obligations to you or otherwise the
provisions of Regulation 10 then, and depending on all
other relevant circumstances, the agent may very well
then have the right to regard the principal’s actions as
being tantamount to a “repudiatory” breach, potentially
entitling him [the agent] to accept such breach as
terminating the agency altogether, and to as a result
claim compensation/an indemnity.

In the circumstances, you need to:-

Establish the dates by when, under the terms of
your contract with your principal, payment ought
to have been made to you, and/or otherwise (and
if relevant) that the delays in the making of the
payments fall foul of the statutory deadlines as set
out in Regulation 10; and:-

Promptly send an appropriately worded e-mail to
your principal, setting out your legal rights and
entitlements, and making clear what you require
to happen.

Finally, do not ever just allow any pattern of your
principal making payment to you late, without you
having appropriately protected your position.

Q. We recently (18 months ago) took on a new agency, with our company representing
this principal in an agreed territory area of
the UK. In our first year, we introduced a
dozen or so key accounts, and, at the same
time, established a significant level of
turnover, from a standing start.

A. Further to the above, the principal has now stated to us
that two of the customers whom we have introduced
should become house accounts, on the basis that, as a
consequence of that happening, the customers could
be offered better terms and would likely then purchase
Can our principal require us to cooperate in this?

Assuming that (a) you’ve not entered into any past
agreement with this principal the effect of which would
entitle it to “cherry pick” worthwhile accounts in this
way (i.e.:- to become house accounts), or (b) there
hasn’t in the past been any relevant “custom and
practice” (creating any sort of precedent), the principal
cannot unilaterally convert any account of yours into a
house account without your agreement, with the quid
pro quo for your consensus being the payment to you
of appropriate compensation. As with my answer to the
previous question, if the principal proceeds to make this
change nevertheless and notwithstanding, the key from
your point of view is in promptly addressing the issue in
writing, registering your objection and setting out your
legal reasoning for that, and stipulating a very short (but
reasonable) timescale for the principal to confirm that it
will not after all proceed with its actions, in fundamental
breach of the terms of your contract.

Further to the above, it may also be that (in your written
objection) you should refer to Regulation 7(1)(b), which
entitles an agent to be paid commission where (absent
any agreement to the contrary) the relevant transaction
was “concluded with a third party whom the agent
previously acquired as a customer for transactions of
the same kind”.

Finally, the comment from your principal that it needs
to make the accounts in question “House Accounts” in
order then to be able to offer them better terms should
be a complete irrelevance from your point of view.

Q. I had an agency which has now terminated, and in respect to which I’d
agreed a restrictive covenant which was
stipulated to apply for a period of 18 months
post termination, thereby preventing me
from competing with my principal. As
however I have now moved from the UK to
live in France (but am continuing as an agent,
albeit in obviously different territory areas)
will the restrictive covenant still apply?

A. First of all, the terms of the restrictive covenant would need to be looked at to establish that it was worded and structured in such a way so as to comply
with the requirements of the Commercial Agents
Regulations (Regulation 20), and thus capable of
binding you at all.

Secondly, and assuming that the covenant was worded
appropriately so as to be potentially valid, the main
point here must be that if you never actually operated in
France on behalf of the relevant former principal, then
the covenant could not restrict you from now operating
there (in France) (i.e.:- in whatever business and in
whatever capacity you decided, and on behalf of whatever other company) as one of the fundamental
tenets of the rules regarding the enforceability of post
termination restrictive covenants is that, in order to be
valid, they have to relate to the territory area that the
agent had previously represented the former principal
concerned in.

Q. My principal is saying to myself and to my fellow agents that it wishes to reorganise
our respective territory areas (i.e.:- make
them smaller) as it is wanting part of those
areas to be covered by sales representatives.
It is also saying that it is entitled to do this as
the Commercial Agents Regulations contain
provisions entitling it to make “reasonable”
amendments to the terms of the contract,
provided that we are afforded proper notice.
Is this correct?

A. On the basis of my assumption that you do not have any agreement with this principal which contains
provisions entitling it just to make these sorts of
unilateral changes at its discretion, my answer to your
question is a simple “no”. If your principal wishes to
make changes to any fundamental aspect of its
relationship with you then, whereas that is its
prerogative, it has also to face the potential
consequences of its actions, including paying
appropriate compensation to you. In this instance,
therefore, you need to quickly take further advice which
advice would likely be that you should very promptly
make clear in writing your objections to what is being
proposed, and setting out what the principal needs to
do in terms of withdrawing these proposals. You would
also need to effectively reserve your rights.

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

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