Q’s and A’s on Agency Law – May 2012

Whereas it is correct that Regulation 3(3) provides that you as the agent have to comply with your principal’s reasonable instructions, it is however not correct that, by virtue of that sub Regulation, and unless you have otherwise agreed contractually that you will achieve a minimum level of sales, you are nevertheless obliged to have to agree that you will achieve a minimum sales target. Moreover, you generally speaking should not ever agree that you will achieve a minimum level of sales as, in my experience, such agreements are invariably linked to any failure on your part then entitling the Company to terminate your agency “forthwith”, and your consequently not then being entitled to any form of compensation. Further with regards to the above, I am aware of course that principals usually argue that it is unrealistic of agents not to appreciate that targets are fundamentally necessary - however, the clear response to that is generally that whereas it is correct that targets might be set, they should never be set on the basis that any failure to achieve them equates to a right on the part of the principal to then be able to terminate an agency forthwith, and without the agent as a result of that bring entitled to any form of compensation. The upshot of the above is that (and as I say) agents should always take expert advice before agreeing to any minimum sales target obligation and, where none exists, should always again promptly take expert advice about how to go about promptly and effectively responding to any attempt to nevertheless introduce them as binding obligations.

Technically, and at least as far as the negotiations regarding a settlement are concerned, there appears in your situation currently not to be any offer to settle on the table. This is because you appear to have effectively rejected the principal’s offer of £15,000, and also because, by doing so, the principal is ordinarily not then bound to at the very least reinstate that offer, you having not accepted it. The point should also be made that if ever an offer to settle is made to you, that that offer is then open to being withdrawn if it isn’t accepted by you, beforehand. To reiterate the position therefore it is that whenever a principal makes you an offer to settle your claim (and whereas, in practice, many higher offers may subsequently potentially be made, and whereas also many principals (in my experience) tend maybe not to make their best settlement offers initially), if you reject an offer and make a counter-offer, at least five consequences may then follow:- Firstly, the principal may agree with your counter offer, in which case the matter would apparently then settle. Secondly, the principal may reject your counter offer, but put to you an offer which was (at least) higher than its previous offer (which then constitutes progress). Thirdly, the principal may reject your counter offer but reinstate its previous offer (perhaps at the same time stressing that that is its best offer). Fourthly, not only may the principal reject your counter offer, and for whatever reason, it may put to you an offer which was less than its previous offer. Fifthly, the principal may simply withdraw from negotiations altogether. Whereas in my experience of dealing with this in practice, the first three above options are generally overwhelmingly the most common, there is always an inherent risk in negotiating, and you need to be clear about that. The above said, if your case is sound enough, you have the security of knowing that you should ultimately still be able to bring a claim through litigation, although (a) it is obviously potentially far better to settle any dispute without litigation, and (b) just because the principal appears currently to have withdrawn from negotiations, that is not to say that that situation cannot be reversed, and it brought back to the negotiating table.

In my experience, and before they terminate an agency, principals are more often than not aware of the Commercial Agents Regulations (and an agent’s right on termination ordinarily to pursue a claim for compensation or an indemnity, but subject always to certain hurdles needing to be overcome) and, that being so, will have been advised that one important hurdle is the agent being able to establish that his agency was not terminated on account of his fundamental breach of contract. This being so, a principal may terminate an agency claiming justification on the basis of the agent’s alleged breach, and, in doing so, may attempt to make issues out of nothing, to either deter the agent from pursuing a claim for compensation and/or to establish at an early stage its defence. Following on from the above, and until I have established with you the various facts, I cannot say what is the position in your case, although you should (a) bear in mind that there are important deadlines which apply in notifying of your intention to bring a claim, and (b) I certainly would not at this stage advise you to not pursue any claim, on the mere basis of what the principal has written to you.

Setting aside as to whether or not, as a matter of the Commercial Agents Regulations, and/or otherwise as a matter of the terms of any written or unwritten contract (including, therefore, based on any relevant custom and practice) you were entitled to be paid the commission you were disagreeing about, having a heated altercation with a principal, especially in front of customers, is not at all a good thing. Obviously, and at this stage, I don’t know the full details of what transpired and also the exact circumstances, but, and as I say, this is a situation which should never be allowed to happen, and may be regarded by many people as being (at the very least) unprofessional. Following on from the above and in advising you as to whether or not what has transpired will negatively impact on any claim which you might otherwise have to any form of compensation as a result of the agency being terminated, this will largely depend on how serious precisely were your actions (in the context of - as I say - all of the relevant background and facts, and what was said to you/by you), and whether or not those actions could be viewed as having seriously undermined the basis of your contract, and thus amounted to a fundamental breach. Whereas this is not a parallel case (and any case like this is going to depend as to its outcome as to what exactly were the relevant facts), in the case of Stephen Gledhill -v- Bentley Designs (UK) Limited [in 2010] (where the agent - and amongst other actions - had left a message on the MD’s mobile saying that he [the MD] was “a horrible, despicable little man”, and “a horrible little sh*t” and then he (the agent) avoided proffering any apology to the MD, having been given an opportunity to do so) the Judge ruled that the agent was correctly terminated without any entitlement to notice (and without therefore any entitlement to any compensation), on the basis that Mr Gledhill’s conduct had amounted to “a course of conduct calculated, or at the very least likely, to destroy or seriously damage the relationship of confidence and trust” between himself and the principal. In reaching this decision, the Court considered a number of other decided Court cases, in looking at (for example) whether words spoken in the heat of the moment always led to a conclusion that they were such that a relationship could not continue; whether the content and the context of what had been said and done may amount to a repudiatory breach of contract; and whether an apology may lead to the conclusion that the conduct was not repudiatory but that that was only likely to be the position where the words were spoken in heat and haste and the apology is heartfelt and sincere. In summary, I would stress that an analysis and a correct answer to your question depends on assessment of all relevant facts, although you will at least get a clear impression as to the potential seriousness of this sort of situation, from the above.

No, and Regulation 5 would not operate to render invalid any additional obligations which you may have agreed to take on, with your principal - in this, please note, as follows:- The basic duties of an agent towards his principal are (indeed) set out in Regulation 3 of the Commercial Agents Regulations. However, that does not preclude a principal from attempting to get your agreement to additional obligations, which are generally then recorded in a written agreement, and that is one of the fundamental reasons why it is always so very important to get draft agency agreements (which you are being asked to enter into) promptly thoroughly expertly reviewed, and that you then promptly communicate to your principal in writing your objections to whatever are the terms which you cannot accept. Your reference to Regulation 5 is important - where relevant to your question, what Regulation 5 stipulates is that the agent’s obligations to the principal as set out in Regulation 3 (i.e.:- the obligations to (in summary):- make proper efforts to negotiate and, where appropriate, conclude sales; to communicate available information; and, thirdly, to comply with all reasonable instructions given by the principal) cannot be avoided by the agent, and so that Regulation 5 does not achieve for you what you appear to want it to (i.e.:- to enable you to shake off the contractual obligations which you appear to owe to your principal which are in addition to those obligations which you owe pursuant to Regulation 3), and instead deals with something separate in effectively stipulating that whatever else you may have agreed with your principal that you will achieve or do on its behalf, you must also honour your obligations, pursuant to Regulation 3.

The first comment to make is that it may (actually instead) be an indemnity that you would potentially be entitled to at the termination of the agency (i.e.:- as opposed to compensation), and that would depend on whether there is a relevant provision in the contract to which you have alluded in your question. The above point aside, and in answering your actual question, there is nothing which precludes an agent from pursuing a claim for (as appropriate:-) compensation or an indemnity on expiry of a fixed term contract, and, indeed, we have successfully managed to negotiate settlements for agents over the years, in just these circumstances. In this, the 2003 case of Tigana Limited -v- Decoro Limited is and was very helpful in setting out the position, in that the Judge in that case stated:- “As a matter of interpretation of the Agency Regulations by reference to their intrinsic terms; as a matter of interpretation of the Agency Regulations by reference to their (and the Directive’s) perceived purpose and policy; and on consideration of the [relevant case] authorities, the answer to the question is clear .… Regulation 17 is capable of applying, and does apply, on the expiry of the Sales agreement by effluxion of time”. The above all said, great care must be taken by any agent intending to pursue a Regulation 17 claim upon expiry of a fixed term contract (and our advice should accordingly be sought sufficiently in advance of the scheduled expiry date) - this is primarily because Regulation 14 makes clear that a fixed term contract will automatically (instead) continue in becoming a contract for an indefinite period (and so that a claim pursuant to Regulation 17 would not at that point be possible), if its terms are continued to be performed by both parties after that date which had been scheduled as being the expiry date.