A sale but no commission?
Regulation 7 of the Commercial Agents Regulations provides:-
- (1) A commercial agent shall be entitled to commission on commercial transactions concluded during the period covered by the agency contract –
(a) where the transaction has been concluded as a result of his action; or
(b) where the transaction is concluded with a third party whom he has previously acquired as a customer for transactions of the same kind.
(2) A commercial agent shall also be entitled to commission on transactions concluded during the period covered by the agency contract where he has an exclusive right to a specific geographical area or to a specific group of customers and where the transaction has been entered into with a customer belonging to that area or group.
Apart from in respect to the value of their claims for compensation or indemnity arising following termination of their agencies, one of the most frequent questions otherwise asked of us by agents is as to their entitlement to be paid commission in various scenarios, and in situations where the principal concerned appears not to be cooperating. With regards to this, Regulation 7 is very much in point:-
Notwithstanding that the above provisions seem straightforward enough in terms of what they appear to mean, the extent of an agent’s entitlement to receive commission pursuant to Regulation 7 can nevertheless be watered down or varied depending on what is written into any contract (or what is otherwise established as agreed through custom and practice). For example, and notwithstanding Regulation 7(1) (b), the parties might reach agreement that certain accounts introduced by the agent are actually and instead to be treated as ‘house accounts’ (thereby disentitling the agent to any commission at all in respect to all or any relevant sales, or perhaps only entitling the agent to a reduced amount of commission).
A further example of how an agent’s rights and entitlements might be different compared to what would otherwise appear to be the position as set out in Regulation 7, is where it has been agreed that an agent is only in fact entitled to commission in respect to relevant sales which he or she has directly taken him or herself.
On account of (if nothing else) the above, it should be clear that it is always extremely important to understand the terms of any agency contract, and to ensure that what is written down reflects what has been agreed – an example checklist of points would be (but also take our specialist and more specific legal advice beforehand) :-
- Obviously, very carefully check your contract before you sign it – does it specifically state that your appointment is to be ‘exclusive’, and does it actually define what ‘exclusive’ is intended to mean for the purposes of the agency? For example, does the contract define ‘exclusivity’ by reference to a geographical area or to a group of customers, and is it made clear that that definition can only be varied by agreement between you and the principal (i.e.- and not just by the principal, acting unilaterally)?
- Never assume that what you may have been verbally told or had understood would be the given situation as regards the basis for calculating any particular commission entitlement is necessarily then accurately reflected in the written agency agreement document – in this regard, keep in mind that, ordinarily, and except (for example) where there is evidence of a valid variation, what is set out in the written agreement is ultimately the sole point of reference (and the contract is also likely to itself reinforce that by stating that anything not set out in it, and which might have been agreed beforehand, is not applicable or is effectively superseded).
- If you have objections to the terms of any draft contract which has been presented to you on account of an issue related to what is stated to be your commission entitlement (and so that you are not actually intending to sign the agreement document), then promptly make clear in writing and in appropriate detail what your specific objections are. In other words, don’t simply not sign the contract and leave matters at that. [This advice of setting out your position and objections in writing applies notwithstanding whatever might be the various reasons as to why you are not intending to sign any draft contract which has been presented to you by the principal and where the document does not reflect terms agreed, or otherwise does not reflect other terms which you are prepared to accept].
- If you’re entitled to a commission payment in any particular instance but (for whatever (one-off or very special) reason) are not proposing to pursue that entitlement, promptly write to the principal and make clear (in an appropriate form of words) that your decision to not press for your entitlement on that particular occasion isn’t intended to set any form of precedent, nor otherwise intended to vary the agreement. Conversely, if you are not willing to accept the fact of non-payment of commission in a particular instance, then similarly promptly assert your claim in writing (and take legal advice).
- Keep also foremost in mind statutory limitation periods for unpaid commission entitlements – meaning the time period relevant to whichever Country’s laws govern the contract, beyond which period if actual legal proceedings have not been effectively commenced prior to then it would ordinarily thereafter be too late to bring a claim for the historic unpaid commissions in question (and no matter how worthy your claims might otherwise have been).
Finally, it is often the case also that agents don’t actually have any agreements in writing at all, and so that it is then a matter of establishing what evidently has been agreed through studying the history of the relationship, and determining what amounts by way of commission may be due by applying the provisions of Regulation 7 in the same way.
© David Bentley, Bentley Agency Law Limited, Bentley & Co Solicitors 7 Littlemoor Road, Pudsey, Leeds, LS28 8AF
T: – 0113 236 0550 e-mail:- firstname.lastname@example.org.
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Please ensure that you obtain legal advice before acting in reliance upon anything in this article, particularly since each individual’s circumstances may necessitate a unique approach, and also on account of the fact that the law may of course at any time change. Furthermore, please be very clear that the answers given in this column may not cover or otherwise refer to all possible angles, aspects, relevant information 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.