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  1. 1. Agency Presented by Stephen Wyer, George Green LLP Head Office 195 High Street, Cradley Heath, West Midlands, B64 5HW Tel: (01384) 410410 Fax: (01384) 820065 DX: 20752 CRADLEY HEATH Birmingham Office 43 Temple Row, Birmingham B2 5LS Tel: (0121) 698 8532
  2. 2. FORCE MAJEURE <ul><li>Commercial Agents (Council Directive) Regulations 1993 (the “Regulations”) </li></ul><ul><li>Historically terms of agent’s appointment decided by the parties. </li></ul><ul><li>The Regulations introduce terms which apply by default. </li></ul> AGENCY
  3. 3. FORCE MAJEURE <ul><li>Commercial Agent = </li></ul><ul><li>“ Self-employed intermediary who has continuing authority to negotiate the sale or purchase of goods on behalf of his principal, or to negotiate and conclude such transactions on behalf of and in the name of that principal.” </li></ul> AGENCY
  4. 4. FORCE MAJEURE <ul><li>Regulations apply widely. Commercial agent: </li></ul><ul><li>does not have to negotiate sale price or terms. </li></ul><ul><li>can be an introducer only. </li></ul><ul><li>can market and promote only. </li></ul><ul><li>However , Regulations apply to sales of goods only. </li></ul> AGENCY
  5. 5. FORCE MAJEURE <ul><li>Duties imposed on agent by Regulations: </li></ul><ul><li>Look after interests of principal. </li></ul><ul><li>Act dutifully and in good faith. </li></ul><ul><li>Make proper efforts to negotiate transactions. </li></ul><ul><li>Comply with relevant instructions. </li></ul><ul><li>Communicate necessary available information. </li></ul> AGENCY
  6. 6. FORCE MAJEURE <ul><li>Duties imposed on principal by Regulations: </li></ul><ul><li>Act in good faith – cannot engineer breach of contract to justify termination. </li></ul><ul><li>Provide information about the goods sold. </li></ul><ul><li>Notify acceptance/refusal of orders negotiated by agent. </li></ul> AGENCY
  7. 7. FORCE MAJEURE <ul><li>Transactions concluded during agency – Regulations make commission payable: </li></ul><ul><li>On transaction concluded as a result of agent’s action. </li></ul><ul><li>On transaction between principal and third party acquired by agent as customer for principal previously. </li></ul><ul><li>On transaction with customer from geographical area/customer group for which agent has exclusivity . </li></ul> AGENCY
  8. 8. FORCE MAJEURE <ul><li>Unnecessary payment example: </li></ul><ul><li>2 or more non-exclusive agents </li></ul><ul><li>1 transaction </li></ul><ul><li>First commission to agent negotiating transaction. </li></ul><ul><li>Second commission to different agent who acquired customer originally. </li></ul> AGENCY
  9. 9. FORCE MAJEURE <ul><li>Good news – alternative commission arrangements can be specified! </li></ul> AGENCY
  10. 10. FORCE MAJEURE <ul><li>Transactions concluded after agency ends – Regulations state commission payable: </li></ul><ul><li>On transaction mainly attributable to agent’s efforts and entered into within a reasonable period after termination. </li></ul><ul><li>On transaction, on which commission would have been due pre-termination, arising from order received pre-termination but only accepted post-termination. </li></ul><ul><li>Fortunately, non-mandatory – alternative arrangements can be agreed. </li></ul> AGENCY
  11. 11. FORCE MAJEURE <ul><li>Minimum notice periods: </li></ul><ul><li>1 month for 1 st year. </li></ul><ul><li>2 months for 2 nd year. </li></ul><ul><li>3 months for 3 rd and subsequent years. </li></ul><ul><li>Notice to expire at end of calendar month unless express agreement otherwise. </li></ul> AGENCY
  12. 12. FORCE MAJEURE <ul><li>Lump sum payment recognises contribution of agent to goodwill: </li></ul><ul><li>Mandatory entitlement. </li></ul><ul><li>Not due if agent is in material breach of contract. </li></ul><ul><li>Must be claimed in first year after termination. </li></ul> AGENCY
  13. 13. AGENCY <ul><li>Compensation method: </li></ul><ul><li>Applies by default. </li></ul><ul><li>Compensates agent for loss of value of agency. </li></ul><ul><li>Based on amount hypothetical purchaser would pay for agency. </li></ul><ul><li>No cap on compensation payment. </li></ul>
  14. 14. AGENCY <ul><li>Indemnity method: </li></ul><ul><li>Parties must choose expressly. </li></ul><ul><li>Payment only to the extent that new customers brought in and business with those customers increased. </li></ul><ul><li>Payment must be equitable in the circumstances. </li></ul><ul><li>Capped at equivalent of one year’s commission. </li></ul><ul><li>Probably preferable from principal’s point of view. </li></ul>
  15. 15. AGENCY <ul><li>Best approach: </li></ul><ul><li>Mandatory Regulations – include in the agreement to avoid agreeing anything in breach of Regulations. </li></ul><ul><li>Non-Mandatory Regulations – agree alternative terms, including exclusion of post-termination commission and provide for lump sum to be paid on indemnity basis. </li></ul>
  16. 16. AGENCY Proper agreement is crucial! We can help! Call Stephen Wyer on 01384 340513 or e-mail [email_address] . Thank you!