Q’s and A’s on Agency Law – July 2012

I can answer this reasonably succinctly:- The best position always is that you do have a written contract, but that that contract contains provisions which are (obviously) in your own interests - a contract in writing is thus always the best option, but the problem with any contract which an agent may be asked to sign by his principal (and which document has likely been drafted on its behalf by the principal’s own lawyer) is that that contract might very well be heavily weighted in the principal’s favour, and would thereby water down certain of the rights which you would otherwise have, pursuant to the Commercial Agents Regulations. You are correct when you say that the Commercial Agents Regulations do afford agents a good deal of protection, and also that that protection exists notwithstanding that the agent does not have any written contract. A detailed written contract therefore, and depending on what it contains, can either (a) (and as I say) deplete (or even take away completely) certain of the rights which the Regulations would otherwise provide for you, (b) enhance your statutory rights, considerably, or (c) be “neutral” in terms of neither enhancing nor diminishing your rights, but at least accurately record the terms of your appointment. Following on from the above, and in summary, all that certain of my Q’s and A’s last month were highlighting is that where an agent does have a written agreement, that document has to be considered in assessing any situation, as any one or more of its provisions may be relevant in determining my answer.

The first issue to establish is as to whether your principal is a limited company or not:- i.e.:- if your principal is not a limited company and the name change does not reflect any change in the ownership of the business, there is then no need to have any concerns with this - the name change would appear to have no effect whatsoever vis-à-vis your own position. Secondly (and assuming that we are in fact dealing here with a limited company), we need to establish whether the change in name is in respect to that limited corporate entity which is already your principal (i.e.:- that company merely changing its name at Companies House), or whether instead we are concerned here with an entirely new company having been established, and that your principal is attempting to assign your agency across from the old company to the new one. Following on from the above, the points to note (with regards to a change of name in respect to a limited company) include, as follows:- (And to reiterate:-) a limited company merely changing its name (and whether that be slightly or drastically) should be of zero effect from an agent’s point of view - i.e.:- if his agency before the name change was with that limited company which is registered at Companies House with company registration number 12345678 and, after the name change has been effected, is still with that limited company registered with registration number 12345678, then the change of name would appear not at all to be a point of issue or concern, from the agent’s point of view. Secondly (however) if the principal has actually and instead undergone some sort of corporate re-structuring, and, in doing so, has created a new limited company altogether and, as part of the restructuring process, has sought to unilaterally assign (without the agent’s knowledge or consent) the agent’s contract to a new company, that is another matter, and definitely something which requires urgent investigation and clarification. In part depending then on whether or not you had a written agreement with the principal and, if so, whether that agreement contained a provision enabling the principal to make such an assignment without your consent, your principal cannot transfer your agency to another entity, without you being a consenting party to that process.

The first point which you need to be clear about is that my concern about your resigning your own agency was that, ordinarily and save for certain specified exceptional circumstances, an agent who resigns his or her own agency is not then entitled to any form of compensation (i.e.:- including any indemnity). Pursuant to Regulation 18(b)(ii), however, one of those exceptional circumstances (where an agent may thus be entitled to resign and still be entitled to claim compensation/an indemnity) is where the age of the agent is deemed such that they cannot reasonably be required to continue their function on behalf of their principal. In the absence of being able to satisfactorily establish that their circumstances fit within the statutory exceptional grounds as set out in Regulation 18(b)(ii), an agent would likely not then receive anything at all by way of any form of compensatory payment, in these circumstances. The above said, if your principal has now terminated your agency of its own volition, and without there being any basis for saying that you had breached your contract, then my view would be that you would seemingly definitely have the basis for now making a claim - i.e.:- no longer would we be dealing here with an assessment as to whether your circumstances brought you within the scope of the exceptional grounds set out in Regulation 18(b)(ii), as your principal’s actions in itself terminating your agency (and thus saving you the decision as to whether and when perhaps to resign) means that you would in principle have a claim, and you should definitely promptly pursue that.

In relation to some of the information set out in your Question, I am particularly interested to know in the first instance (and when you say that you are being asked to hold stock, and that you invoice customers directly) whether therefore you buy in the products from the French company, sell them on and then realize your income not from a % sales commission, but instead from the profit in terms of the difference between the purchase and sale prices. I would also like to know whether there exists any written agreement between yourself and the French company and, if so, what that provides for in setting out the basis of the relationship, and how it is to operate. Subject to the above and to whatever any written agreement might provide for, the bottom line is that if what you are describing as being your relationship with this company is that of a distributorship (and merely holding stock belonging to another company is not something of itself which determines that you are not a commercial sales agent) that will not be covered by the Commercial Agents Regulations and so that, and as an example, you would not therefore be entitled to receive on termination any form of compensation. There are various distinguishing factors as between an agent and a distributor - however, the key relevant aspect of the definition of a “commercial agent” (as per Regulation 2(1)) is someone who (or a partnership or other form of corporate entity which) is “self employed”, and has the “continuing authority to negotiate the sale or purchase of goods on behalf of another person [“the principal”], … or [the continuing authority] to negotiate and conclude the sale and purchase of goods on behalf of and in the name of that principal”.

The answer to this is that, in order to preserve your potential entitlement to compensation/an indemnity upon termination, you absolutely must comply with all ongoing contractual and statutory obligations and, in this, you need to be clear that any failure on your part to co-operate could entitle your principal to terminate your agency for a second time, during the actual notice period itself - in other words, even though at that point when your agency was initially terminated it may not have been on account of any breaches or defaults on your part (and so that therefore you should potentially be entitled to receive compensation/an indemnity on the basis of that), that does not at all prevent your principal from terminating the notice period early on the basis of your subsequent breach, thereby losing you all and any rights which you might otherwise have had to any form of compensation, on termination.

As you say that you had a written contract with this principal, I would need to see a copy of that, and to establish what it provided for - for example, if it validly provides that Danish law governed your relationship with the principal then (with Denmark being an EU State, and the contract apparently validly specifying a binding choice of law) then that would ordinarily be the position (i.e.:- that Danish law would apply in this case) and it would not matter that (and as I am assuming might be the factual position here:-) you carried out your agency functions on behalf of this particular principal in the UK.