Module Two: Key Terms of the Regulations & Agency Law

Module two of this Dealing with Agents & Distributors course Covers regulations 17-20 of the Commercial Agents Regulations 1993 particularly as they apply to Agency Law.

Key Terms

Regulation 17: Indemnity or Compensation

Regulation 18: Grounds for Excluding Payment

In accordance with Regulation 18 of the Regulations, there are some grounds for excluding payment under the compensation or indemnity mechanism.  This will arise where the relationship has been terminated due to the default of the agent.

  • However, it is important to ensure that there is a contractual right to do this to avoid being in a position where the principal must rely upon establishing a breach of the duties under the Regulations, something which can be quite difficult.

The following graphic provides a number of grounds for excluding payment and a few exceptions

Exceptions:

Regulation 18 provides that the agent is not entitled to a payment where he terminates the relationship, except where the reason for that termination is for reasons including:

  • The default of the principal
  • The age of the agent
  • The ill health of the agent

 

  • Default of agent justifying immediate termination
  • Agent terminates (unless because of default of principal, age, ill health etc)
    • Tony Vick v Vogel-Gapes Ltd – restricted agency scope

Agent has assigned contract

Furthermore, in the event that the agent has assigned the agency contract without the consent of the principal and bring the claim in the name of the assignee, there shall be no such right to do so.  This took place in the case of Barnett Fashion Agency v Nigel Hall Menswear following an incorporation of the agent. 

Barnett Fashion Agency ltd v Nigel Hall Menswear Ltd:
In this case, Mr Barnett incorporated the company Barnett Fashion Agency Limited and purported to transfer all of his agency contracts, including the Nigel Hall Menswear contract to this new company.

He did not however, discuss or agree this transfer with any of his principals and the only change was that invoices were headed "David Barnett Associates trading as Barnett Fashion Agency Limited" and payment of commission was made to the new company. After the termination of the agency contract, Mr Barnett pursued compensation but did so in the wrong name. It was because of this that the time limit expired, as briefly mentioned earlier.

Regulation 19

Cannot:

Contract out of regulations 17 and 18 to the detriment of the Agent.

Regulation 19:

Unlike under provisions such as Regulation 8, it is not possible to contract out of Regulations 17 or 18 to the detriment of the agent. This is clearly set out in Regulation 19.

Regulation 20: Restraint of Trade

Understandably, principals want to impose restrictions onto agents given the time, money and confidential information which is invested into them.  However, bearing in mind the rights and remedies available to agents as set out above it will not come as a surprise that there are certain safeguards dealing with how such restrictions may be imposed on the agents under Regulation 20.

This provides that in order to be valid a restraint of trade clause must:

  • Be in writing;
  • Relate to goods, customers and the territory covered by the agency relationship; and
  • Be for no more than a period of 2 years in length.
On the slides to follow, there are further details pertaining to Regulation 20 and the restraint of trade…
Regulation 20: Restraint of Trade
In order to be valid a restraint of trade clause must:
  • Be in writing
  • Relate to goods, customers, territory covered by agency
  • Maximum 2 years after termination
Regulation 20: Restraint of Trade (cont.)
BUT:
  • “Nothing in this regulation shall affect any enactment or rule of law which imposes other restrictions on the validity or enforceability of restraint of trade clauses or which enables a court to reduce the obligations on the parties resulting from such clauses”
Regulation 20: Restraint of Trade (cont.)
That being said, it does not mean that should you follow those three rules, the restriction will be valid and enforceable as the Regulation goes on to state the following:
Regulation 20 (cont.)
“Nothing in this regulation shall affect any enactment or rule of law which imposes other restrictions on the validity or enforceability of restraint of trade clauses or which enables a court to reduce the obligations on the parties resulting from such clauses.”
Regulation 20: Restraint of Trade (cont.)
THEREFORE:
  • Businesses should carefully consider the nature and purposes of a restriction clause and ideally take advice on it prior to implementing the agency agreement.

Choice of Law

DWAD - LAWYER MEET

Choice of Law:

  • Parties can choose any EU state law
  • If nothing is stated – 3 Stage Test as in Wood Floor Solutions Andreas Domberger GmbH v Silva Trade SA
DWAD GMBH V SILVA TRADE

Wood Floor Solutions Andreas Domberger GmbH v Silva Trade SA
With a professionally drafted agency agreement, it will be clear as to which law applies to the relationship such that should a dispute arise, the parties are clear, regardless as to which country they are based within or the activities are being carried out within. However, the position where there is no formal agreement in place or where there is an agreement which doesn’t specify the governing law, is set out in the case of Wood Floor Solutions Andreas Domberger GmbH v Silva Trade SA.
DWAD GMBH V SILVA TRADE

Wood Floor Solutions Andreas Domberger GmbH v Silva Trade SA(cont.)
In this case, it was held that a three stage test should be followed to determine the governing law. This is as follows:
  1. Where is the main provision of services by the agent?
  2. Where is the central provision of the services?
  3. Where is the agent domiciled?
  • If the answer to 1 isn’t clear, for example where the agent carries out activities in multiple countries, where is the central provision of the services by the agent?
  • If the answers to 1 and 2 still aren’t clear, where is the agent domiciled?
DWAD CHOICE OF LAW

Stage Three:
In respect of stage 3, where the agent is domiciled is where their permanent home is located. Again, it can be seen that this is looked at from the perspective of the agent and in the majority of cases as agents are being used to expand into foreign territories, this will mean that your business has entered into a transaction subject to a foreign and unknown law. The underlying theme is of course that we would recommend a formal agreement specifying a legal system (ideally English law) that you are happy with and more readily and affordably able to take advice on both at the outset and should an issue arise under the agency agreement.

Module Two: Knowledge Quiz

The following short quiz consists of multiple choice and true false questions which pertain to information delivered in this module. Proceed through each question by selecting the arrow at right to complete this module.

Upon completion of this module’s material above, select the “mark complete” or “next module” button below to record your progress to proceed to the next module. This will save your place and your work on the course thus far and will enable you to complete the assessment at the end of the course.

Previous Section
Back to