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

The first point to establish with you is as to what your contract with this principal actually provides for - in other words, if your contract obliges you to have to provide all of this information, as you have described it, and to do so on a monthly basis, then that would be appear to be the end of the matter and the [unhappy] answer to your question. Aside however from what may be written into the contract as additional obligations, the UK Regulations would only otherwise have required as regards these sorts of duties that the agent comply with a principal’s “reasonable instructions” (Regulation 3(2)(c)), and whereas it may be arguable that some of the information which you are being asked to provide would perhaps (pursuant to just the Regulations) be regarded as (a) too detailed, and/or (b) being required too regularly of you (i.e.:- every month) to be categorized as being a “reasonable instruction”, if, and as I say, you have nevertheless contractually agreed that you will provide this level and detail of information, then you are obligated to comply.

Subject to what I also explain in the next paragraph, unless you have a superb contract with this principal, which entitles you to retain commission in these circumstances or you can otherwise rely upon past instances (i.e.:- custom and practice) where, with the principal’s full intent and awareness, you have not been required to repay back the commission in such similar circumstances, I would say that you would have to pay it back in this instance. The above said, the only other possibility I can foresee is to investigate whether it could be shown that the reason why the customer has refused to pay for the order is down to any default on the part of your principal - i.e.:- the customer has not paid and has no intention of doing so because the principal is at fault which relevant defaulting action/failure on the principal’s part has effectively lost this order (rather than just the breach or insolvency of the customer concerned). In that set of alternative circumstances, you may very well potentially then be able to rely on Regulation 11(1)(b), in seeking that you retain the commission payment after all.

Whereas it is correct that the Regulations offer agents substantial protection, the three key points are always these:- Firstly, not all of the Regulations are mandatory - in other words, it is quite possible for an agency agreement to exclude certain key aspects of the legislation which otherwise would benefit the agent (and that is one reason why a contract needs to be carefully reviewed, so as to determine what key aspects may have been excluded). Secondly, certain of the Regulations are capable of being varied to the agent’s disadvantage (which is another reason to know what you are agreeing to, and so as to understand what rights the principal is attempting to vary, and how); and Thirdly, many of the Regulations can be added to, in the principal’s favour, and so as to thereby water down the rights that the agent would otherwise have. For at least the above reasons, it is clearly therefore very important to have contracts looked over and whereas many agents quite rightly recognize the legislation to have afforded them rights and entitlements which were never there previously, many of those agents may wrongly imagine that this piece of legislation cannot be effectively re-worked to remove or substantially water down many of the rights that agents would otherwise benefit from.

Two points to make to you here:- Firstly, given that you are still under contract to your principal, and given therefore that you no doubt will be wanting to bring a claim for compensation at the end of the contract period, it is very important to continue complying with all of the principal’s reasonable requests until the conclusion of the notice period (as you may otherwise place in jeopardy what might be your straightforward entitlement to be paid to compensation/an indemnity if it can be shown that, between now and the end of that period of notice, the principal had grounds to terminate your appointment on a “forthwith” basis). Secondly, I would anyway say that providing this sort of information to your principal is very much something that would be expected of you - ordinarily, there is no “property” in any customers and your principal is merely asking you for information which enables it to protect the business which you have built up (and for which you have been paid) over the latter period of the relationship.

On the basis that the actual agent in the case of any relevant principal/agent relationship which you are involved with would be deemed as having been you as an individual (i.e.:- as opposed to you operating via a partnership or, say, as a limited company) then your Estate should most definitely be made aware of (subject to the statutory time limits) its entitlement to pursue the exact same rights as you would have pursued in a straightforward termination scenario, had you not deceased. If (however) you are not operating as an individual but via a partnership or as a limited company and one of those examples of alternatives is the vehicle that would be recognized as having been the agent instead then, absent any contractual provision happily entitling you to bring a claim, your Estate would be very unlikely to be successful in bringing a claim for compensation or an indemnity - I say “very unlikely” as perhaps one day there may come an authoritative Court decision which establishes that, no mater what the corporate vehicle was, what matters (instead) is the fact of the death of the “driving force” individual behind the agency. However, this is absolutely NOT the law just now, is probably never likely to be and may be regarded as potentially far fetched as a legal concept. As a footnote to the above, and because (1) adjudging when and in what circumstances a claim on death may arise, and because also (2) each individual vehicle arrangement/set up may need to be looked at on its own merits and so as to determine what it involves in terms of identifying who is the agent, it is always worth taking advice before making the assumption that no claim for compensation/an indemnity may arise.

Indeed, this is generally what I say in my articles - however, I also say that, in order to determine whether or not the principal does have the right to make these changes to the basis of its relationship with you, it is necessary to see whether there exists a written agreement between you and your principal and, if so, what that provides for in terms of giving the right to do this. In other words, whereas it is definitely ordinarily a forbidden act for a principal to unilaterally vary an agent’s rights under the terms of his agency, that manoeuvre can nevertheless be potentially lawfully achieved where there is an established right in favour of the principal to do so (whether that be via a written agreement or through custom and practice) and so the first aspect I would need to establish with you is the history and background of your agency, in order to see whether your principal does after all have the rights which you are obviously unhappy about.

If you do not have any written agreement with this French company and you will be operating on its behalf in the UK, then the UK Regulations will apply to and govern the relationship. Moreover, if you did have a written agreement with this French principal but that document is however silent as to which Country’s laws apply then, and again, UK law will still apply (i.e.:- on the basis that you are still covering this Country rather than France on the principal’s behalf). If (on the ether hand) you are going to be entering into a contract which is expressly stated as based on French law then you will need to take French legal advice and whereas the principle of paying compensation at all actually originated in France many years ago, the notion that all French legislation in respect to agents is fair would be naïve (i.e.:- in favour of agents) to take at face value.

I would say that (assuming that it is not a case of you being hindered in carrying out your function or that you are ultimately being undermined) your principal is likely perfectly entitled to do this, and that you will have to accept it - the principal will want to protect its business and that is why it will say that it wants to see customers with you, only in so far as is necessary to ensure that everything is being conducted as it should be, to maximize sales for the common good, and to look to make any necessary improvements. The above said, I fully accept your concern and that certain principals may disingenuously suggest that a Manager goes out with you in the way that you describe, although, unless you can readily show that (for example) the principal has some negative and destructive ulterior motive or that you are not going to get paid in respect to all sales that you would have expected to get paid on then, and like I say, I do not think that you can reasonably object.

If there are going to be two teams of agents where only one is actually necessary then, and in the strict sense of the word, it is clear that one team is technically going to be “redundant” - however, “redundancy” is not a recognized term for sales agents (i.e.:- in the sense of it giving rights in the same way that employees have) and you should not at all accept what your principal is saying to you in this regard (i.e.>- that you have no claims on termination), but instead most definitely pursue your rights on termination of your agency, in entirely the normal way.

Whereas every Country in the EU will have derived its own National law based on the original December 1986 Directive of the EU Council, there is no such thing as such as “European Law”. In other words, when you seek to rely on your rights against a principal, you are not relying on section x or y of any “European Law” but, instead, on Regulation a or b from the relevant piece of National legislation which an individual Country has passed as its law to reflect the original EU Council Directive - in the UK’s case:- the Commercial Agents (Council Directive) Regulations 1993. In answer to your question, therefore, you should not seek to rely on [non existent] European Law for the reason that I give, and, in the first instance, to establish which Country’s law will apply to the agency relationship you are referring to.

An agent being taken on a trial basis is an often much beloved tactic by some principals as a way (so they think) of circumventing the application of the Commercial Agents Regulations. However, this is not at all correct as the ending of a trial period is no different than the expiry of any other fixed term contract and the expiry of a fixed term contract absolutely does ordinarily result in appropriate compensation being paid (provided that the agent is careful to act in the required way vis-à-vis fixed term contracts expiring and the lead up period). In answer to your question, therefore, you absolutely should pursue your rights in the normal way and should not be deterred by the nonsense that you are being told by this principal.

The first point to establish with you is as to whether or not you had a written agreement with this principal and, if so, whether that agreement provided for an indemnity on termination (as opposed to:- compensation). The reason why it is important to in the first instance establish the above is that the two alternative methods of “compensating” an agent on termination agent are calculated in different ways, with an indemnity being capped at an average of the last 5 years earnings (or the average of the last however many years the agency was ongoing where that was for less than 5 years), which means that if your earnings would likely have been (much) more in years to come but your entitlement on termination is “only” to an indemnity then (and whereas the ongoing future benefit as you have described it may very likely establish your entitlement to the very maximum amount possible for an indemnity) you will not recover more than a year’s average earnings in terms of the indemnity payment. On the other hand, compensation is calculated in an altogether different way in that the value of the agency is calculated hypothetically as at the date of termination as an asset lost to you (and so that the future business which you explained that you had introduced may very well potentially be included as part of that valuation process), and what (in the words of Judge Bowers in the case of Barrett McKenzie -v- Estacada (UK) Limited (2001), and as endorsed by the Law Lords in Lonsdale) could be described in the following way:- “one is valuing the agency and its connections that have been established by the agent at the time at or immediately before termination, and it is really a question of compensating for the notional value of that agency in the open market ….” It is also of course quite possible, in addition to your alternate prospective right to either compensation or an indemnity, that you may have other potentially substantial rights arising from the termination of the agency as you describe it, and so that it is worth us exploring those with you, in order to determine what other claims may possibly be made.