Q & A’s on Agency Law

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 rt a i n s p e c ifi e d e x c e p ti 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 prices. 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 ti o n / a n i n d emn it 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 potenti a l l y be entitled 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 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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