Following his recent article drawing the distinction between agents and distributors, David Walker, founder of Grid Law, responds to a reader’s question regarding the termination of agreement by an agent.
I’m writing in response to your article on appointing agents and distributors.
Are we right in understanding that the Commercial Agents Regulations mean that if an agreement is terminated by the agent themselves, then they are not entitled to anything?
What is the arrangement when the contract just comes to an end – both parties agree that the contract will not be rolling, and will have an expiration date?
This is at an apt time – we are in the midst of finalising an agency agreement with someone who is reluctant to get their own advice.
Thanks for your question.
First, we need to establish that the Commercial Agents Regulations apply to this agency agreement.
The agent will be a commercial agent if they 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.
The key points from this is that they must be selling products on your behalf, not services. They must also have continuing authority which means that this must not be a one-off arrangement.
Even if the Commercial Agents Regulations do apply, not all agents are entitled to compensation when the agency agreement comes to an end. For example, an agent would not be entitled to compensation if you (the principal) terminated the agreement due to a serious breach of the agreement by the agent.
Alternatively, if the agent terminates the agreement for reasons other than their age, illness or circumstances attributable to principal they won’t be entitled to compensation.
However, on expiry of a fixed term contract (which seems to be the case here) the agent would have the right to compensation unless the agreement was renewed.
Calculating the amount of compensation due is complicated and the courts have taken different approaches to this. So, it would be a good idea to take professional advice about this so you know what your potential liability is.
I hope this helps and if you have any further questions, please feel free to email me at email@example.com
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