Q’s and A’s on Agency Law – October 2012

The answer to your first question (i.e.:- as to whether or not you can assign your agencies) is that, subject to the respective consents of whichever principals are involved, you can indeed assign any or all of your agencies to your son, and, as I say, if the relevant parties to the individual agency are agreed, this can be done - make sure (however) that each “assignment” is validly recorded in a properly drawn up (three way) legal document (i.e.:- do not imagine that this is unnecessary because it is your son who is acquiring whichever agencies are being assigned, as you will need this formality to ensure that matters are properly documented with the various of your principals concerned). As regards how taking the above step would affect your prospective right to compensation or to any indemnity, the answer to that is that you cannot in practice both assign an agency and also have the possibility of being paid any form of compensation on your retirement, as, when an agent assigns an agency, he would then expect to receive an appropriate payment from the purchasing agent, and so that were the agent also to receive any form of compensation from the principal, it would thus be a case of the selling agent both having his cake and eating it (i.e.:- being paid a capital sum by the acquiring agent, as well as receiving compensation/an indemnity from the principal).

Based on the information set out in your question, the fact is that your principal has terminated the agency, and, assuming that you hadn’t breached your contract so as to disentitle you to make any claim, and assuming also all other relevant factors being in place, yes you appear to have a perfectly valid claim (at the very least to compensation/an indemnity, pursuant to the Regulations), and yes you should promptly (therefore) pursue it. If your principal hadn’t have terminated the contract, and was prepared for the agency to continue beyond your 65th birthday, then there are at least three other possibilities to consider:- Firstly, if it is a case that, whatever age you are personally, the contract however would be recognized by the law as being between the principal and any limited company vehicle which you have, and unless there is an appropriately worded clause to an opposite effect in any written agreement, you would not ordinarily be entitled to any compensation/indemnity whenever you (personally) retire, as no valid claim would arise in favour of the limited company agent, in these circumstances. Secondly, if you do have a written agreement with your principal and that contract provides for it terminating when you reach 65 then, and as with any other fixed term agreement, you can make a claim when you reach the age milestone, and treat the contract as having been validly terminated (- be very careful however about the timing of your decision to accept the expiry of any agency contract (so as to ensure that the contract is not otherwise deemed to have in fact continued by your actions), and also make very sure that you get the wording of your notice to the principal (accepting the end of the contract) legally correct, and we can obviously advise you in respect to that. Thirdly, and assuming that you personally are the agent (and are not recognized as being one of two or more agents in a partnership, the others of whom are not retiring), and you do not have any written agreement (and/or there is otherwise no written agreement containing the relevant fixed term wording which I have described in the previous paragraph), the position with agents retiring at 65 is that (alas) there is nothing in the Commercial Agents Regulations which confirms that 65 is definitely an age which entitles the agent to retire and claim compensation - whereas the Regulations do provide that the agent shall be entitled to claim compensation where he or she has terminated the relationship on grounds of age “in consequence of which” he (the agent) “cannot reasonably be required to continue his activities” establishing that the agent being 65 AND his relevant circumstances being such that, as a consequence of that, he “cannot reasonably be required” to continue acting as the principal’s agent is not a straightforward exercise, as it is not yet clear what would have to be required to be proven by way of relevant circumstances in order to validly establish that it was unreasonable to expect the agent, having reached the age of 65, to continue acting as the agent.

Whereas I shall of course need to see a copy of your agency agreement (including in order to determine as to whether your statutory financial right under Regulation 17 is to compensation or to an indemnity, with an indemnity being capped at a maximum of one year’s average annual commission earnings), I would also expect to additionally be making a claim on your behalf for “contractual damages” - i.e.:- for a sum of money (subject to any relevant mitigation factors and anything else applicable in assessing a contractual entitlement) representing what you would have earned over the balance of the three year fixed term (including, potentially, not only your right to the amount of the monthly retainer, but also your right to the additional commissions). The reason why I would take this approach is on account of the fact that whereas an entitlement to compensation/an indemnity is a “statutory” entitlement, an entitlement to be paid out the balance of a minimum contract term is a “contractual” right, the basis of which would be assessed entirely differently.

Obviously, I require sight of a copy of your contract with this principal, as, without seeing that, I cannot know whether what the principal is claiming to be the position, is correct or not. Subject to the above, the position is this:- Whereas Regulation 7 is that provision of the legislation which provides that an agent is entitled to commission on sales (concluded during the term of the agency contract) “where the transaction is concluded with a third party whom [the agent] previously acquired as a customer for transactions of the same kind” Regulation 7 is also one of the Regulations which can be excluded by agreement between the parties - if therefore what Clause 9 of your agency agreement amounts to is an effective exclusion and variation of Regulation 7 then that would be valid. Further points to think about with regards to the above:- Firstly, in my experience, this situation most commonly arises where the agent hasn’t taken any (or any proper) legal advice in respect to a contract which he has signed (and before he signed it), and is then obviously very disappointed to subsequently discover what the law may entitle the principal to legitimately do. Secondly, this sort of situation is always legally preventable on behalf of the agent - either the “offending” clause (before it is agreed to) is spotted and taken out, or some additional wording is added into the contract (to protect the agent) obligating the principal to pay proper compensation in these circumstances, if ever they should arise. Thirdly, if this sort of clause is included in your agency agreement (and, to an extent, irrespective as to whether the principal ever exercises its rights pursuant to the relevant provision), if your right on termination is to compensation, you can see how your principal having a right to pick off your best accounts, as and when it chooses to do so, and without having to pay you any commensurate compensation, may considerably adversely affect the deemed “value” of your agency pursuant to the principles laid down by the House of Lords in the Lonsdale case. Finally, if you do not have any written agreement with your principal (or if you do have a written agreement, but it does not have any entitlement in favour of the principal as there apparently is in this instance) and if you have not simply allowed your principal to fundamentally vary any element of your contract without paying you proper compensation (i.e.:- no adverse to you “custom and practice” has come about) then your position is likely to be fundamentally different, and so that you should very promptly take legal advice as soon as the principal threatens to make these unauthorized changes to your agency.

My answer to this is that I consider that your principal is being disingenuous, for at least the following reasons:- When you agreed the reduced amount of commission three months ago, that (as you explained it) was for reasons which were very different to what are the current set of circumstances, and did not set a negative precedent, from your perspective - the customer simply negotiated a reduced one off price and you had to accept that fact was not your principal’s fault (and so that you could not realistically insist on what would otherwise have been your full commission entitlement). In the present situation, however, you are being asked to accept a reduced commission payment where you are not at all obliged to do that (unless of course there exists any written agreement between you and your principal, containing a relevant provision to the contrary), and on account of reasons which are not justified from your point of view - certainly, your principal can come to you and ask you to accept a lower commission rate (and you may or may not decide to come to an arrangement that, for a limited period, you will agree to this, with back commission being repaid at a later date), but the crucial point to note here is that you are not obliged to agree to this, and that your principal certainly cannot force this on you. In summary, I think that your principal is attempting to force you to agree a change, and, in seeking to do so, is trying to align your previous agreement to accept a lower commission payment but where those earlier circumstances were entirely different.