Q’s and A’s on Agency Law – July 2013

The answer is that a decision to terminate an agency is neither required to be given nor confirmed in writing, although it is clearly much better (in the sense of at least the agent knowing then where he stands) if it is. You do need therefore to chase this up (and, if still unsuccessful in prompting anything forthcoming in writing from the principal, and at the same time being very careful not to in any way thereby suggest that you are yourself terminating the relationship, to thus send an appropriately worded communication to your principal, seeking clarification). The reasons for all of this include the following:- If your agency hasn’t been terminated for certain (i.e.- in clear terms, in writing), you won’t then know whether you are supposed still - as normal (and perhaps until the end of any notice period) - to be operating on the principal’s behalf. This confusion potentially then leads to the crucial further problem which is that you wrongly take the decision just to down tools with immediate effect (based on your forced misunderstanding that you were not required to be doing anything further, on the principal’s behalf), and so that you may then lay yourself open (assuming that your agency hadn’t after all been terminated) to your contract subsequently indeed being terminated and on ironical account of your now fundamental breach of your obligations in that you had wrongly ceased acting as the agent altogether when - but for your confusion - you would most definitely instead have been continuing, as normal. Secondly, if you don’t know for sure the date when your agency supposedly terminated, you won’t then know what is the relevant first anniversary date of termination for the purposes of within a year of that termination date notifying of your intention to pursue a claim for compensation/an indemnity, pursuant to Regulation 17(9). If applicable to your circumstances, you also won’t then know what is the date when time starts running down with regards to any post termination restrictive covenant, and nor (on the other hand) will you know when you will be able to take on an agency with any competitive principal or with any other agency which your taking on might otherwise have constituted a breach of your obligations, pursuant to the terms of your contract. Finally, if within a reasonable period of time you still haven’t heard from your principal in respect to confirmation of what you had understood to be the termination of your agency then (and as I have already pointed out) at the same time as being very careful not to use any language which fatally suggests that you are yourself terminating (rather than the principal), you should write to the company in question (sending the relevant communication by e-mail, fax and by signed for post):- (1) asking what is the position as regards your status, (2) setting out what you had understood was the position (and making clear that you are happy to remain as agent if your understanding is incorrect, but that you obviously need to know the situation), and (3) stipulating a reasonable period within which you require the clarity response. If still - however - no reply (or any satisfactory reply), you ought promptly to take further legal advice.

The answer to your Question is that - and very simply - you must remain loyal to your current principal, until the contract terminates (with your potentially also owing obligations post termination, depending on what was agreed). You have in fact to be very careful about being professional in this, in that if your current principal later discoverers that, during your notice period, you have effectively been diverting or squirreling away business for the benefit of a new (and competitive) principal, you may lay yourself open to potentially being sued by the current principal in respect to its loss of profit for the business which you have prevented it from getting, and also for any other longer term adverse consequences. A couple of additional points to make:- Firstly, I assume that, in your agency agreement with your current principal (assuming there to be one in writing), you don’t have any valid post termination “restrictive covenant”, the effect of which may be to validly prevent you from taking up this new competitive agency appointment straightaway, after the expiry of the notice period. Secondly, in the event that you may have any entitlement to any form of compensation/or an indemnity on termination of the current agency (which may or may not prove difficult to establish, given that you propose going to work on behalf of a competitive company), if the current principal becomes aware of your taking business away from it, it may very likely be entitled to then immediately curtail the notice period, thereby losing you whatever entitlement you may have had to appropriate compensation, in any event.

First of all, I am assuming that you don’t have any agreement with your current principal, which contains any provision which excludes your entitlement to these so called “pipeline transaction” commissions (or which otherwise excludes the application of Regulation 8). I also assume that you are not at this point also wanting my advice as to your potential additional claim for compensation or an indemnity. On the basis of my above assumptions being correct, I would then answer your Question, as follows:- Basically, establishing an entitlement to post termination “pipeline transaction” commissions can sometimes be quite difficult, as, following your no longer being connected with the relevant company, the principal concerned will ordinarily try very hard to muddy the waters and so to be able to subsequently claim that whereas you may have had some involvement with a particular deal having taken place, that deal happening was supposedly instead substantially due to the efforts of others, after you were no longer the agent - in this, I have seen all manner of things argued, such as that the deal wasn’t actually going ever to happen until the new agent became involved (who, like Superman, heroically rescued the transaction after you supposedly almost lost it for the company) and/or until one of the Directors personally became involved, and/or a series of communications may be produced to supposedly demonstrate that there was still a lot of negotiating that had to be done following the termination of your agency, to actually secure the relevant contract. The above said, if you can show that the deal in question ultimately taking place at all was “mainly attributable” to your efforts (and disregarding that your input was, obviously, pre-termination of your agency), and that the transaction was concluded within (and given the normal sorts of timescales which prevail in your industry) a reasonable period following termination, then, potentially, you may well be entitled to the commission, and it is a matter therefore of your (for example) keeping all relevant paper communications and being able to thereby prove that, by the time you ceased being the agent, the deal was substantially already struck (or, in the language used by the Regulations, was “mainly attributable” to your efforts). In some instances, I have known Regulation 8 claims to be financially very substantial of themselves, so definitely very worthwhile being thorough with - for example - your paper trailing.

The position is, as follows:- You need first of all to look carefully at what are the terms of your written agency agreement with this company, in order thereby to establish whether that contract makes any reference to your subsequently being obliged also to be bound by what is contained in any sort of “handbook” which the principal might decide down the line to introduce at any point in time, and which additional set of provisions may then apply on a par with the terms of your original contract. If (however) there is no mention in your written agreement of any “handbook” (or of any similar external or additional contractual document, irrespective as to whatever is the exact word used to describe it) then, and unless you have ever agreed to be bound by any such newly introduced set of rules, you should not be bound to accept these additional obligations now, and you should therefore make your position appropriately clear in terms of your objection, promptly and in writing. To be clear, the reason why it is potentially exceptionally bad that you agree to the principal being entitled to unilaterally introduce any new “rules” (whether to sit with any current written agreement which you have, or otherwise to stand alone) is that whereas whatever is set out in your original written agreement will bind you and will be familiar from your point of view, what you cannot afford to do is agree that the principal can at any time in the future, and as and when it may elect to do so, introduce an additional set of obligations for you to be bound by, none of which additional obligations you have expressly agreed to previously (nor which would you ever ordinarily agree to). Finally, as the principal would (presumably) reserve to itself the right to additionally update or otherwise vary its “handbook” further from time to time, you can clearly see that what you would effectively be agreeing to is an unknown set of contractual obligations, the fact of which is potentially so catastrophically adverse from your point of view that (and quite apart from any other possible negative consequences from your perspective) you may in practice ultimately unlikely ever be entitled to any form of compensation/an indemnity, on termination.