Supply chain · 2 May 2018

Commercial Agents Regulations: Am I entitled to compensation at the end of my agency contract?

Commercial agent regulations
Compensation is not payable in all circumstances, but it is payable where you have reached retirement age

Responding to a reader, Grid Law founder David Walker clarifies whether Commercial Agents Regulations could see a limited company owner receive compensation at the end of existing contracts with several European manufacturers.

Question

I am a limited company (but one man-band) and have been working as an agent for five Italian manufacturers in the plumbing and heating business for nearly 30 years.  Now I am 64 and I plan to retire in three to four years’ time.

With some manufacturers I have a basic agency contract and with others none, just a verbal agreement and never had any problems in getting my commissions.

Under the “Commercial Agents Regulations” am I entitled to any compensation at the end of my working relation with these Italian manufacturers?

Thank you for your reply.

Answer

Thanks for your question.

I note that you’re working for Italian manufacturers, but the first thing I need to clarify is whether you are actually working in the UK or Italy?

I’m going to assume that you are working for them in the UK and that English law applies to your contracts. However, if not, then I would expect there to be similar provisions under Italian law as the purpose of the Commercial Agents Regulations was to harmonise laws across the European Economic Area.

The first thing we need to check is whether the Commercial Agents Regulations apply to you.

You will be a commercial agent if you are 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 and in the name of that principal.

You are clearly self-employed, so the first criteria is fulfilled.

Do you have continuing authority to negotiate? This means, do you have ongoing authority, rather than just authority to negotiate a one-off deal. I’m going to assume you do.

Do you sell products on behalf of the principal? Again, I’m going to assume you do as the Commercial Agents Regulations don’t apply if you sell services.

So, taking all of this into account, I’m going to assume that the Commercial Agents Regulations do apply to you.

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Agents
What is the difference between an agent and a distributor and which is best for your business?

If you want to grow your business and increase sales, you have a choice. You can either try to do everything yourself, or you can outsource the task by appointing an agent or distributor.

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Looking now at your specific question.

It doesn’t matter whether you have a written or a verbal agreement, the Commercial Agents Regulations will still apply. However, under the Regulations, you are entitled to a signed document confirming the terms of your agency agreement if you request it.

You’re doing the right thing by planning ahead for your retirement. The Regulations provide minimum notice periods depending on how long the agreement has been in effect. These are:

  • One month for the first year that the agreement;
  • Two months for the second year and
  • Three months for the third and subsequent years.

So, you will need to give at least three months’ notice. If a longer notice period is needed, this can be agreed between you and unless otherwise agreed, the notice must expire at the end of a calendar month.

Compensation is not payable in all circumstances, but it is payable where you have reached retirement age so it seems like compensation will be payable to you.

Calculating the amount of compensation due can be complicated and the courts have taken various approaches to this. This is something that you will likely need professional advice on.

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ABOUT THE EXPERT

David Walker is the founder of Grid Law, a firm which first targeted the motorsport industry – advising on sponsorship deals, new contracts and building of personal brands. He has now expanded his remit to include entrepreneurs, aiding with contract law, dispute resolution and protecting and defending intellectual property rights.

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