Although they have been in place for over 15 years, the Commercial Agency Regulations still require occasional clarification in the Courts to determine their precise meaning in specific cases.

One of the most crucial aspects of the regulations which has been determined in recent years is the question of when the regulations actually apply.

So what exactly constitutes a commercial agent? One aspect is that an agent must have “continuing authority to negotiate the sale or purchase of goods”. Some lawyers have attempted to exclude agents from the regulations by drawing up agency agreements that avoid granting the agent the authority to negotiate.

Two recent cases have helped to clarify this issue:

• In the case of Nigel Joinery Services v Ian Firth Hardware, the Court determined that an agent whose duties included generating customer interest in the product, suggesting suitable prices for the product (subject to the principal’s approval) and encouraging the customer to order the products was a commercial agent, even though the final sale was negotiated by the principal.
• The case of Raoul Sagal v Atelier Bunz GMBH - covered in an earlier article on this blog - Mr Sagal bought jewellery from the principal at a 20% discount then sold it on to his customers. The Court held that Mr Sagal was in fact a distributor, as he did not negotiate on behalf of a principal but rather bought and sold the goods himself.

Another important point is that the agent’s duties as a commercial agent must not be secondary to their main duties as an agent. This was established in the case of John Harold Crane v Sky-In Home, in which a sales agent was retained to supply and set up satellite equipment packages, and also to sell subscriptions to Sky satellite TV.

The Court held that the central issue of the case was whether the sale of the goods (the satellite equipment) generated any goodwill (repeat business, in this case) for the principal.

After considering the facts of the case, the Court found that repeat business was generated by the sale of the subscriptions, which is a service, and so is not covered by the regulations. The selling of the equipment was secondary to the subscriptions, so Mr Crane was not a commercial agent and thus was not covered by the regulations.

Technorati Tags: Agency Law, Commercial Agency Regulations, Commercial Agent