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

As always, what is first of all necessary to establish is whether or not there is any written agreement in place in this case and, if so, whether that agreement makes any reference to this particular issue. If there is no written agreement between you and your principal or, if there is a contract in writing, but it makes no reference to the point, it then becomes a matter of deciding whether what you are being asked to do is reasonable or not, given all of the facts and circumstances. Following on from the above, and as is obvious, an agent's role does not ordinarily comprise debt collecting, and so it follows that, in many circumstances, it would not therefore be at all reasonable to require the agent to go out and perform that function. It further follows therefore that, in those many circumstances, and without then being in breach of contract, the agent would be perfectly entitled to decline the principal's request, on the basis that it was unreasonable. The above explained, many agents may nevertheless be prepared to carry out any number of additional roles on behalf of their various principals (i.e.:- roles which are over and above the role of being a “sales agent”), all for the purpose of maintaining good relations and, as they see it, preserving the investment which they have made in their agencies. As far as it goes, that may be all well and good, save to make the point that an agent’s role (for it to be recognized as one which falls within the scope of the Commercial Agents Regulations) has to be predominantly that of actually acting as a commercial sales agent, and (secondly) if any additional functions are to be carried out, the agent must make clear to the principal that this is not something which falls within his obligations, and that the principal should not therefore regard it as forming part of the agent’s functions going forward, pursuant to the terms of his agency.

It is not at all uncommon for agents to he paid a retainer (plus, usually, commission), and it is certainly incorrect to say therefore that the fact of that of itself means that the agent then falls outside the scope of the Commercial Agents Regulations - indeed, if it was that straightforward to exclude the application of the legislation in that way, then you can predict that principals would routinely be paying their agents, on the basis of, to whatever extent, a retainer. Following on from the above, what your principal is arguing is basically incorrect, although there are certainly cases where, on account of (for example) a combination of various factors, a supposed "agent" might not be regarded as being a commercial agent for the purposes of the legislation, and therefore not entitled to any form of compensation, on termination. Finally, it is worth making the point that Regulation 2(2) defines “Commission” as “any part of the remuneration of a commercial agent which varies with the number or value of business transactions”, and that (for example) Regulation 17(4) (in the context of dealing with an agent’s entitlement to an indemnity) refers not (merely) to “Commission” but to “remuneration”.

Unless you have a written contract which requires you either to have to comply with any request from your principal (and that would certainly be a bad provision to have agreed to), and/or you specifically agreed that you would take on an assistant, then you are certainly not ordinarily obliged to have to do this, unless, in all of the circumstances, it could be said to be deemed to be a “reasonable” request that you do so (and with which sort of requests you have always then to comply, pursuant to Regulation 3(2)(c)). For such a request to thus be deemed “reasonable”, I can only envisage a scenario such as (for example) that your principal (reasonably) considers that you otherwise appear unable to properly service all of your contractual obligations (as, maybe, your area is proving too wide for you, or that you otherwise appear unable to handle all of the volume of business which you are or could be undertaking), and so that it is then not unreasonable that, and in order that you are then able to carry out all of your functions and to properly exploit all of the selling opportunities in your territory area, that you do employ or engage an assistant. Subject to the above, the main issue is that, being self employed (but subject always to the relevant provisions of the Regulations), you are entitled to decide how to operate your business, and that would include taking any decision as to whether to engage any assistant. That said, clearly another overriding factor is that (and as I say) you must be able to properly undertake all of the functions which you have agreed to do, and so that, as is often the ultimate position, you have to make and take decisions on balance.

Unless you have agreed otherwise (i.e.:- you have previously agreed with this principal that you would not take on any other agencies unless it had given its prior consent), the answer to your question would appear to be "no", provided however also, that:- Firstly, any other agency would not involve you in undertaking any competitive activities; and:- Secondly, you have the resources to be able to properly and adequately carry out your agency functions - i.e.:- it could not realistically be said that you are or (by taking on any other agencies) you would be overstretching your resources to the point that you were not then properly able to carry out your role effectively (in which case whereas the principal may still not be able to “compel” as such you not to take on any other agencies, you would nevertheless be putting yourself in a position where the principal may potentially then be able to terminate your appointment without maybe any obligation to have to compensate you, and that being on the basis that (for example) you have breached your obligations by being unable (through having insufficient resources) to carry out your functions, on its behalf.

First of all, it is correct to say that the Regulations indeed do not prevent an agreement being reached between a principal and an agent, to the effect that the agent shall be entitled to a period of notice to terminate the agency, which period of notice is greater (but not lesser) than the statutory minimum periods, which are set out in Regulation 15. That therefore you apparently have the benefit of this sort of contractual provision should be perfectly valid (in your favour), and can only ordinarily be effectively overridden if your principal has grounds to terminate your agency forthwith, on the basis of your serious breach of contract. Secondly (and subject to you not having accepted the principal’s offer), and depending on whether your agreement provides for an indemnity, you should also be potentially entitled on termination to appropriate compensation, and such entitlement would be in addition to (a) your notice entitlement (see my comments above), (b) any entitlement to “pipeline transaction” commission, and (c) the payment of any commissions which are otherwise due to you. Following on from the above, what the principal is saying to you as regards your notice entitlement effectively canceling out your entitlement to compensation/an indemnity is wrong (i.e.:- you would not thereby be “double counting”), and there is nothing in the legislation which says (for example) that where an agent (and as you appear to have done) has been able to negotiate for himself an enhanced notice period entitlement that that then negatively impacts (let alone cancels out) whatever may be the additional right to compensation or an indemnity, and so you should continue to stand your ground with your principal, and to actively pursue your rights in this matter. As a final point to make to you I would just add that it is obviously good that your principal is not attempting to not afford you your full contractual notice entitlement, and to argue that you have breached any of your contractual obligations - I say that this is good as if the principal down the line wants to defend your claim in respect to compensation/an indemnity on the basis that you supposedly breached any of the terms of your contract, the fact that you can show that your agency was never terminated on the basis of any such supposed breach may then beg a very difficult question for the principal, as to why it didn’t terminate your agency without any notice at all.

A. The answer to this is “no” - it takes two people to make an agreement and therefore ordinarily two to vary it, so unless you had have had any sort of agreement with this principal which recorded yours and its agreement that your entitlement on termination was to an indemnity as opposed to compensation, or unless you had otherwise have had an agreement whereby the principal could decide this issue unilaterally (and you say in your Question that you had in fact no form of written agreement), then your principal cannot determine what if anything it is to pay to you, and to thus decide as to whether to pay you an indemnity, or compensation. An additional point to make to the above is that it will obviously vary from case to case as to whether in actual fact it is better that you would receive an indemnity as opposed to compensation but, as I say, it is certainly not correct that your principal can act in this way.