Q’s and A’s on Agency Law – March 2013

Assuming that your entitlement to any compensation on termination of your agency is indeed to compensation as opposed to an indemnity, and in relation to the amount to which you may be entitled, based (pursuant to the decision of the House of Lords in the case of Lonsdale -v- Howard & Hallam) on the perceived (i.e.:- hypothetical) capital sales value of the agency as at the point of termination, I would consider that the current “profile” of the Company (and insofar as that relates and is relevant to your agency, and its value, therefore also) is potentially very relevant in respect to a “Lonsdale” type valuation process, and so that I doubt that the principal would succeed in what may have been its plan, to minimize its potential liability to you, by dint of its choice of timing of termination and insofar as that could have negatively impacted on you.

Whereas, ordinarily, and for safety’s sake, I would stress that we generally always take, for the purposes of the strict notification deadline rule as set out in Regulation 17(9), the first twelve months anniversary date of termination of any agency as being the date one year on from when notice of termination was actually given, where however the agency clearly continued beyond that date when notice was given (with the agent subsequently continuing just the same as previously, in carrying on his functions for the principal, and with the principal’s agreement and authority) then, in reality, the first twelve months anniversary date (relevant for the purposes of notifying the former principal of your intention, as a former agent, to bring a claim against the principal concerned for compensation/an indemnity) could be taken as that date exactly twelve months on from when your role as the agent actually ceased, by agreement. On this basis, and depending when therefore you ceased actually acting as this principal’s agent, with its authority and in accordance with the Regulations, what your former principal’s solicitors appear to be arguing seems plainly incorrect. As a footnote, it is clearly wise to give appropriate and proper notice in good time, and long before you may be likely to get into these sorts of debates as to the promptness of your notification.

Whereas this action on the part of your principal is certainly one which appears not to bode particularly well from your point of view, the actions of the principal are not however of themselves anything which you can actually complain about - there is no property in (i.e.:- ownership of) customers in the territory (in the event of - for example - any dispute, and in terms of who might be called as witnesses) and your principal is entitled to effectively check up on you, provided of course always that, in doing so, it does not do anything whatsoever to harm or disparage your reputation, or otherwise unfairly or unjustifiably do anything which is in breach of the terms of your contract, or howsoever otherwise in breach of its obligations to you, pursuant to the Regulations. In short, this sort of contact with customers is not that uncommon, is not anything which (subject to my comments above) is anything which you can do anything about, does not always necessarily mean the start of the end of the relationship, and - provided that you are complying with your obligations - is nothing to be unduly concerned about, either.

This will depend on whether (a) you have a contract in writing with your principal (and what that agreement may provide for), and/or (b) what may have happened in previous instances (if any), where your principal has introduced new product lines. Dealing first of all with if you have a written agreement with this principal, then, if so, its terms would need to be considered - for example, does the agreement contain a definition as to what - for the purposes of the agency - is meant by the word “Products” to be sold on the principal’s behalf by the agent, and does that definition make clear that “Products” means only those products currently in the principal’s range as at the date the agreement was entered into, or does it (instead) mean also all and any products sold by the Company at any point in time in the future? Alternatively, is there a clause somewhere else in the contract, and other than in the “Definitions” section, which other clause deals with this specific issue? - perhaps a clause which says something along the lines of that the principal is engaging the agent (only) to sell on its behalf the products listed (maybe in an annex or a schedule), and that all and any other products which may come on line in the future may be passed on to the agent to sell, but only at the principal’s sole discretion. Maybe, on the other hand again, there is a clause which specifically says that the agent will be entitled to sell all and any products at any stage introduced into its range by the principal (although an agent would need to be careful about agreeing to something necessarily in such strict terms if that tees up potential conflict scenarios, in the future). Secondly, there is the possibility of course that this sort of situation may have arisen in the past, in which case how those previous situations were dealt with by the parties on those previous occasions may now constitute a precedent in terms of how the present situation would need to be addressed. For example, if the principal has routinely in the past asked the agent to sell all and any new ranges of products which it has introduced, then the agent would ordinarily expect that it can potentially require the principal to continue that practice, and thus continue to offer it all and any new product ranges, now. On the other hand, if the principal has occasionally or generally not offered new products to the agent, then there is the possibility that it would not then be obliged to do so in this instance, either.

No, there is nothing whatsoever specifically about that, in the Regulations. There may of course (and on the other hand however) be some relevant provisions which you have agreed to, in an agency contract - if so, you would have then to abide by whatever is set out in that agreement as regards this issue, although I would comment that it is generally a bad move for any agent to agree anything about potentially restricting the number of other agencies which he carries - I say this as (a) as a self employed entity, the essence of that and of being an agent is that you should be free to operate however many agencies you consider is appropriate for your business (and distinguishing you from being an employee), and that (b) pursuant to the Regulations, you any way owe an implicit duty to all of your principals to devote sufficient time to their business, and so as to maximize sales and selling opportunities for each of them; this being the case, if you were at any time failing in any of your duties and/or obligations, a principal would be able to fault you on that basis, and wouldn’t therefore need to rely on anything else (including requiring the inclusion of a clause in a written contract, nominating a restrictive and arbitrary number of agencies which you may carry).

If the take-over of your principal was on the basis of a sale of its shares to new owners, then whatever period of time has passed since that transaction will have made no difference, to your situation - i.e.:- your agency was originally with X Limited and the fact that the ownership of the majority holding of shares in X Limited may have changed hands, would ordinarily make no difference to your contractual situation (whether pursuant to a written agreement or not) - the terms of your agency cannot ordinarily be amended without your consent. Also, if the take-over of your principal (did not involve a sale of shares, but) was instead by a sale of the actual business itself to a different company (and so that (a) your agency would likely ordinarily have terminated by virtue of the conclusion of the business sale transaction, and by virtue potentially also of the original principal - having sold its business - no longer having any requirement for your services, and (b) if the new owner of the business had no need for you to effectively continue in your role, it would likely have had no obligation to take you on as part of the acquisition (with liability for paying you any appropriate amount of compensation then being with the old owners)), the fact that your agency appears nonetheless to have been affirmed and continued since last July 2012 by the new owners of the business, strongly suggests to me that, save for any relevant information not disclosed in your question (and which might have made any difference to my answer), the original terms of the agency (save as agreed to be varied) potentially hold good against those new owners (i.e.:- your current principal, therefore). Following on from the above, and whereas it is obviously always good to try to find a workable solution in terms of your relationship with any principal, subject to whatever terms may exist in any agreement which you may have with regards to this agency and potentially subject also to whatever relevant parallel situations you may have ceded in the past, you appear to be on very solid ground to be able to say to your principal that it is not entitled just to unilaterally make changes to any of the terms of your agency (i.e.:- without your consent), and that, if it terminates your agency as a result of your resistance as regards this issue, you would expect to receive an appropriate sum by way of compensation, as you would be perfectly entitled to withhold your consent to any contractual changes with which you did not agree.