Q’s and A’s on Agency Law – June 2013

Whereas (for the purposes of establishing whether an agent is a “commercial agent” in the context of the Commercial Agents Regulations) labels may be indicative to an extent, it is ordinarily overwhelmingly what you actually do for the principal, and what function you carry out, that is the most telling factor. Moreover, given that (if the company concerned may not already be aware of the implications of taking on agents) you don’t want to unnecessarily alert your principal to what it (but not others) may take the view is the potential additional exit cost of engaging agents, and given also what I'm saying about labels not generally mattering, you perhaps would do well to not pass any comment at all about how the principal is labeling you, in this instance (as long as your selling role is crystal clearly set out).

Given that you say that it was verbally agreed that it was a one off when you were not to be paid commission some while ago (and, ideally, you most definitely ought to have sent a contemporaneous note at the time, confirming what exactly had been agreed), you most definitely should promptly now (i.e.:- immediately) take steps to remedy the situation:- What you should do in the first instance is to set out (in appropriate detail and language) the basis of your original agreement with the company, and so as to make clear that the account in question was never agreed to be a house account. You should then go on and explain that the occasion where you did agree to forego your commission entitlement was a one off, and that you therefore expect the Company (a) to immediately now pay to you all unpaid commission which ought to have been paid in respect to all relevant sales backdated to the last transaction when you were paid, and that that commission should be paid at the standard rate agreed, and also (b) that the Company to confirm in writing that, going forward, it will pay to you all commissions to which the Company is obligated to make payment in full, on time and without exception (unless otherwise agreed). The importance of acting quickly as per the above is that, now that you have found out about the situation, you don’t want any delay in taking appropriate action on your part to be inaccurately perceived as any form of waiver of your rights. Moreover, the significance of not taking any action at all is that failure to appropriately remedy this situation (and to so promptly) could have substantially adverse consequences from your point of view in terms of the agency going forward (i.e.:- the company may consequently be deemed as having the implied right to take further similar actions down the line, with impunity), and potentially significantly adverse consequences also at the time of termination of the agency (i.e.:- in terms of any compensation claim, this deemed right in the principal’s favour will likely adversely impact on the hypothetical sales value of your agency, and, in terms of any indemnity claim instead, you would obviously likely not have sales to that particular account taken into the equation when calculating ongoing benefit).

Potentially, yes (re your first question), but, more likely, you will see the benefit for yourself as regards future business this new customer places in the amount which you may be entitled to receive by way of any compensation/indemnity payment:- Following on from the above, the first point is this:- Pursuant to Regulation 8, (and unless you’ve agreed with your principal that Regulation 8 wouldn’t actually apply to your relationship), you should be entitled to receive (following termination of your agency) commission in respect to all and any sales which were (a) concluded within a reasonable period following that termination date, and (b) where such transactions were “mainly attributable” to your efforts (as opposed to anyone else’s), whilst you were still acting as the agent in this instance. Moreover, you may have a provision in any written agreement with your principal which enhances this basic statutory entitlement. In the context of your question, however, and as my second point, Regulation 8 will only go so far in getting you where you want to be, in that that provision only relates to actual transactions concluded within a reasonable period following termination, and whereas you might justifiably claim that this new customer would not be placing any business at all were it not for you and that (therefore) any business thus placed in the future should properly generate a commission entitlement in your favour, the Regulations do not stretch that far. The above said, I would (however) expect whatever is your potential compensation/indemnity entitlement on termination to reflect the ongoing value of the custom of this new business introduced, both in terms of the benefit to your principal (relevant in assessing the amount of any relevant indemnity entitlement) and also (and in the alternative) in terms of the benefit to any hypothetical purchaser of your agency (relevant in assessing the amount of any compensation payment). In view of this, I can therefore reassure you to an extent in saying that the good work which you did in introducing this new customer to your (former) principal may potentially thus be reflected in what you may receive by way of appropriate compensation.

If you don’t have any written agreement with the principal which contains any provision obliging you to buy samples, and if this has never been the custom and practice or anything which you have otherwise agreed to do, then you should most definitely take issue with this - i.e.:- it would ordinarily be unreasonable to expect you to have to buy samples, if that wasn’t the basis of what was agreed at the outset (or what has been agreed, subsequently). Moreover, to expect you to look to recoup some and/or any of your outlay when the samples have served their purpose, is also unreasonable - in my experience, most principals will provide samples (perhaps subject to some sort of deposit or bond), but the key is what was agreed between the parties, and the fact that it is unreasonable to expect an agent just to agree a different arrangement, out of the blue.

If the arrangements which are currently in place reflect what all parties agreed, then, at first sight, I don’t think that you are doing anything wrong. That said, however, you are obligated always to comply with any principal’s “reasonable instructions” (which may change from time to time) and so what must also be given due consideration, therefore, is as to whether or not, and notwithstanding what was previously agreed, what the dissatisfied principal is now asking of you is nevertheless reasonable, given the growth in its business, and the demands which it may be entitled to make, taking account of all of the circumstances. Whereas fundamentally I again come back to what was previously agreed (and so that you might say that you are not doing anything wrong in not deviating from that), I think it is also fair to reiterate that certain aspects to any relationship change over time, and that Regulation 3(2)(c) requires you to comply with reasonable instructions, whenever they may be given.

Whereas, based on what you are saying, it is possible that your principal had an ulterior motive in picking this fight with you, and also that you appear to have been provoked, it is (obviously) always best not to get drawn into this sort of mutual ranting as, in such circumstances, things can obviously be said (which can’t then be “unsaid”). However - and as to whether or not you were justifiably terminated “forthwith” and therefore maybe don’t have any right to bring a claim for compensation/an indemnity on the basis of that - my view is that (based on the limited information set out in your question) you certainly should bring a claim, and that you may very well have a potentially very decent case as, very often in these circumstances, trumped up claims of supposed fundamental breach by the agent don’t work (and it is perhaps obvious why it wouldn’t work in the principal’s favour, in this instance), and are seen for what they are. Incidentally, I would also like to learn more about what the principal had been doing in attempting to get certain accounts to become house accounts, and its other actions towards you, leading up to the decisive argument - that may also show you to have further potential claims, in this case.