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

Can you please explain to me what for the purposes of the Regulations are recognized as being “goods”, and what instead are deemed as “services”? Also, is my understanding correct that selling “services” is not an activity which is covered by the Regulations?

Can you please explain to me what for the purposes of the Regulations are recognized as being “goods”, and what instead are deemed as “services”? Also, is my understanding correct that selling “services” is not an activity which is covered by the Regulations?

Setting aside the potential for arguing (and as would be beneficial to your position, but likely, however, irrelevant nevertheless on the facts) that maybe what you sell in your own right perhaps assists sales of the principal’s products (and there are other potential arguments and issues which also would need to be looked at), the main point here in addressing your question would appear to be that your principal was unaware of (and didn’t agree to) your other activities as per what you have described, and that fact might potentially very well entitle the company to terminate your agency forthwith, and therefore without any entitlement to have to pay to you any form of compensation). There was in fact a case heard a number of years ago (in 2006) [Cureton -v- Mark Insulations Limited] which established that whereas it was of course accepted that agents (not being employees) were free to take on other (non competing) contracts on behalf of other principals, non disclosure of another interest such as this may well constitute grounds to terminate an agency, without notice (and, therefore, and as I say, without any entitlement to compensation or an indemnity).

The answer to this question essentially again lies in the definition of “commercial agent” as per Regulation 2(1) - i.e.- “a commercial agent means a self employed intermediary who has continuing authority to negotiate the sale or purchase of goods on behalf of another person (“the principal”), or to negotiate and conclude the sale or purchase of goods on behalf of that principal …..” and what would need to be looked at in this instance is therefore whether what you had as your arrangement with this company was indeed a one off or was instead, and as a matter of fact, a transaction in a series of apparently one off transactions which, taken together, and despite what may be set out in any letter of appointment, may very well be regarded by a Court as indicating (because, for example, this was actually an ongoing situation where your authority to act as the company’s agent was effectively continuing) a “commercial agency” relationship. Following on from the above, the points to be noted are therefore:- Firstly, a Court will look beyond what is stipulated in a written letter of appointment or in any contract if, in reality, what is set out therein is not an accurate reflection of the actual nature of the relationship (i.e.:- just because a contract for example states that the arrangement is not a commercial agency relationship that would not at all preclude a Court from subsequently ruling the opposite if it was satisfied that what was written into the contract in this regard was inaccurate). Secondly, and unless (as I have pointed out in the immediately preceding paragraph) the actuality of the situation was that the business relationship was indeed a commercial agency (albeit described or masquerading as something else), the Regulations would not apply to any situation which can be shown to involve the agent merely having one off (and not therefore “continuing”) authority to sell on behalf of the other company concerned (and so that, on termination, no entitlement to any form of compensation [unless otherwise agreed as a matter of contract] ordinarily would arise).

The position is that if you haven’t agreed (as you would not have had to) that you would not be potentially entitled, on termination of your agency, to claim, pursuant to Regulation 8, commissions in respect to transactions which were merely in the pipeline as at that date of termination, then you are perfectly able to do so. As however Regulation 8 stipulates that an agent is only entitled to claim commission in respect to transactions concluded after the termination date where such transactions (a) were “mainly attributable” to the efforts of the agent during the period of the agency contract, and (b) were entered into “within a reasonable period” following termination, you would only potentially be entitled to claim commissions which satisfy this double criteria, although there is nothing in the legislation which also stipulates as to how long the “reasonable” period is deemed to be, and it is fair to say that that period varies from industry to industry (and depending on whether, in respect to the industry concerned, there is generally a long lead in time and a long negotiation and decision making process involved in concluding any transaction). [Incidentally, any contract which you may have with your principal which confirms your entitlement to Regulation 8 transactions may also stipulate what the parties agree as being the correct post termination “reasonable” period, for the purposes of assessing what transactions are relevant]. As therefore (and subject to the above) an agent is entitled to bring separate claims for compensation and pipeline transaction commissions, it would not at all be overlapping or double counting to pursue both, and/but it needs to be borne in mind that the basis for assessing how much an agent is entitled to in respect to (as appropriate:-) compensation or an indemnity is entirely different compared with the criteria for assessing how much commission an agent may be entitled to pursuant to Regulation 8, and by way of pipeline transaction commission.