Q’s and A’s on Agency Law – DOUBLE LENGTH combined for months of July 2014 and August 2014

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.

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.

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.

The first thing to understand is as to whether what you are being asked to sign reflects terms in respect to your agency which are already agreed - if the draft contract does merely contain terms which are already agreed then, since you are simply being asked to sign an accurate written record of those terms, you would be obliged to do so. On the other hand, if the draft agreement does not reflect terms already understood and agreed as between you and the principal, you would be entirely at liberty to refuse to sign. Obviously, the difficulty here is that you have said that the principal has threatened to terminate your agency if you do not accept the terms of the proposed agreement, but it is very important that you understand that, if you refused to sign a written agreement which never reflected the current terms of your agency then the fact of that does not preclude you from being entitled to claim compensation/an indemnity, in the normal way, if the principal did ultimately go ahead and terminate you because you did not sign. At the end of the day, it is going to be a question therefore as to whether you are better taking your chances that the principal will not after all terminate if you do not sign the document (but, if it does, that you potentially at least will be perfectly entitled to as a consequence of that claim compensation) or, on the other hand, you entering into the agreement, potentially then falling foul of one of the nasty fundamental obligation provisions and having the agency terminated on a forthwith basis with then no entitlement to any compensation.

If I am to assume that your claim is to compensation as opposed to an indemnity (and I make this assumption on the basis that you say that you didn't have any written agreement with this principal), then as to whether or not you opened x or y number of accounts is not necessarily at all relevant in assessing the quantum of your claim for compensation - the value or worth of the claim is reflective of the amount which a hypothetical purchaser would have paid to acquire the agency and, reflective of potentially a very high agency value, you may very well instead have sustained and maintained business for the principal which business might otherwise have gone to competitors, and/or you may have been very successful in increasing business from existing customers, and these (other) factors are potentially very important in terms of establishing the value of your agency. The above said, keep in mind that if the termination of your agency entitled you instead to an indemnity that the factors which would then determine the value of that claim would be distinctly different in terms of the relevant considerations, including the fact that the number of customers introduced would be much more of a front-line valid (although NOT the only important) consideration.

What you absolutely should do is to promptly respond to your principal in writing, making very clear which clauses (which would otherwise vary the terms of your agency) you do not accept and so that at no point down the line can it ever be said that, by your silence, and even though you never actually signed the agreement, you nevertheless effectively accepted the terms by reason of the fact that you did nothing in response and continued as the principal's agent. There is potentially a significant danger in not appropriately responding (and doing so promptly), as many principals may seek to argue that any agreement which was sent to you and which you did nothing about in terms of any response will be deemed to have been binding on you (even though and as I say, you didn’t actually sign the contract document).

First of all, in the event that you happen to have a written agreement with this company in Australia then you need to establish as to whether it stipulates that the laws of Australia (or of any particular State in Australia) apply to and govern the relationship. In that situation, and whereas that would not of itself preclude the application also of the UK Commercial Agents Regulations (see below), if however you are going to be agreeing to the application of another Country's laws then you must be very clear as to what those laws will entail from your point of view, as if you were to ever to breach any relevant terms, and you having agreed to another Country's legal system as being the contractual frame of reference, that could potentially ultimately scupper what would otherwise have been your potential entitlement to compensation pursuant to English law. Secondly, and the above made clear, if you have entered into an agreement which is stated to be subject to Australian law then, because Australia is not another member State of the EU, and assuming you satisfy all relevant criteria and can overcome the necessary hurdles, the UK Agency Regulations would also apply (including in the event of a termination), thus potentially entitling you to make a claim for compensation. Finally, if you do not have any written contract with this Australian principal then, on the assumption that (for example) you are carrying out your agency function in this Country, the Regulations will in principle similarly apply.

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.

My answer to this is that you should most definitely regard the earlier of the two dates as being the relevant date as, following that date, you were no longer actually acting as a commercial agent for this principal. This said, if anyone else reading this answer to your question is now concerned that, in their individual instance, they may be out of time (i.e.:- too late to pursue a claim for compensation/an indemnity, on the basis of not having notified before the above referred to earlier date), I would say that you should nevertheless still at the very least serve notice of your intention to bring a claim before the first anniversary date of the expiry of the notice period, although you may find some very strong (and potentially irresistible) objection in terms of anyone acting for your principal, taking the point, and arguing that you had missed the boat.

Yes, absolutely. I would major on it if I thought it could or might enhance value. First of all, and as you refer to it in your question, there is certainly the potential for being entitled to pipeline transaction commission in relation to the deal, with the usual assessment criteria as to entitlement applying. Secondly, and although (beyond any potential entitlement to pipeline transaction commission) you would not ordinarily be entitled to future commission on the relevant deal, the fact that there would be that income stream could potentially be very significant for the purposes of assessing the extent of any indemnity claim which you may have, and also, if appropriate instead, establishing the worth of a compensation claim.

In a word:- "no" - first of all, I would suggest that 18 months is a very long "trial period" but it isn't about how long that initial period is supposed to be, in any event - all agencies potentially involve the obligation of the principal having to pay compensation/an indemnity and the fact that what the principal is saying to you doesn't hold any water is that, upon expiry, all fixed term contracts (which is what a trial basis arrangement effectively is) potentially likewise involve an obligation to potentially have to pay compensation/an indemnity.

Setting aside the separate (but very important) issue about whether your principals have any legal basis to apply this pressure on you, and how you should respond generally, I would suggest two constructive alternative forms of wordings basis re sales targets, both of which (but depending always on what are the other provisions of the agreement) may assist you:- First of all, a provision which makes clear that you will merely endeavour to achieve any agreed sales targets [i.e.:- your obligation would then be that you will endeavour to achieve, rather than you WILL achieve the target]. Secondly, and again depending on other wording as to whether this would be effective, a clause which makes clear that any failure on your part to achieve any agreed sales target would not then constitute any form of breach on your part, save where such failure was entirely your fault [i.e.:- such failure is very unlikely ever going to be entirely your fault].