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.
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Choice of Law

Module Two: Knowledge Quiz

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