Since the Commercial Agents Regulations were instituted in 1994, the courts have shown a marked tendency to favour the agent in any dispute, as agents are generally seen as the more vulnerable party.

However, a County Court case in April last year has found in the principal’s favour on a key issue which could have wider repercussion in future disputes.

In this particular case, the claimant sought to prove that they fell under the protection of the Commercial Agent Regulations so that they could claim compensation from their principal after their contract had been terminated.

Although the claimant had to develop customers’ interest in the principal’s product, obtain a quote from the principal and encourage customers to buy, they did not have the authority to make a sale on behalf of the principal themselves.

According to the regulations, a Commercial Agent is a person who has “continuing authority to negotiate … or negotiate and conclude” the sale of goods on behalf of the principal.

The court decided that, although the agent could not “conclude” the sale, their involvement in the process could certainly be described as attempting to “negotiate” the sale, so the claimant qualified as a Commercial Agent and was eligible for compensation from the principal.

However, the principal contended that the agent had committed numerous breaches of contract. Under the terms of the agreement, the agent had to produce various sales reports for the principal, and was restricted from working for any competitors of the principal in order to prevent any conflicts of interest.

Not only had the agent failed to provide regular sales reports to his principal, he had also been spending roughly a third of his time working for another company - a fact which he had hidden from the principal.

While the judge determined that neither issue was in itself of sufficient seriousness to warrant a repudiatory breach of contract, when taken together these persistent minor breaches did constitute a repudiatory breach, and so the agent could not claim compensation for the termination of his contract.

This case confirms that the principle can rely on the combined effect of persistent minor breaches to end the agency.

Each situation will turn on its particular facts but a principal who can substantiate his claim with a detailed paper trail and can show that he gave suitable warnings to the agent, strengthens his chances of being able to end the agency without having to pay compensation or indemnity.

Technorati Tags: Commercial Agency, Commercial Agent, Repudiatory Breach of Contract