AGENCY Flashcards
What is the definition of Agency?
- relationship, usually created by contract
- where the principal instructs the agent to act on his behalf * * in order to produce legally binding effects for the principal.
What does it mean to say that the relationship between agent and Principal is fiduciary?
Fiduciary = the relationship involves trust and the agent must show a high degree of loyalty to the principal.
What is mandate?
Mandate = if the contract is gratuitous (no money paid)
What are the 3 ways Agency can come about?
- Express Contract
- Implied Contract
- Ratification
Does an express Agency contract have to be in writing?
No
- s 1. RoW(S)A
How can an Agency contract be implied?
The actings of principal and agent are used as a basis from which to infer the existence of the consent necessary on both sides to form the contract.
Does the Principal AND the Agent need contractual capacity?
Principal - Yes, because they are contracting with a 3rd party (agent intermediary)
Agent - Less important because it is the Principal who is bound to the 3rd party.
What was held in in Tinevalley Sugar Refiner?
Tinevelly Sugar Refining Co v Mirlees Watson & Yaryan Co Ltd (
- At time of contracting: principal must have contractual capacity. The company had no title to sue as they did not exist, therefore…
- Agent, not company, bound by the contract.
What is the internal agency relationship?
What is the external?
Internal = contract between the Principal and Agent
External = contract between the Principal and 3rd part
The agency contract can expressly provide for what the Agent can and cannot do.
What if the contract is silent as to the extent of authority Agent has?
If the contract is silent as to the extent of authority, the agent has implied authority to do whatever is necessary and incidental to the completion of the transaction.
Custom and usage of the trade may help to define the scope of implied authority.
Can implied authority apply to both general and special agents?
No, implied authority can only apply to general NOT special agents.
What is a General and a Special Agent?
General = appointed to carry out all the business of Principal (or business of a kind)
Special = to carry out a specific task
What is apparent authority?
= if the principal acts in a manner which suggests to the third party that the agent is authorised, the principal cannot thereafter seek to deny that the agent is properly authorised.
What happened in International Sponge Importers Ltd v Watt & Sons?
International Sponge Importers Ltd v Watt & Sons
- Agent sells sponges on behalf of pursuer
- Defenders (third party) sometimes made cheques to the agent, not the company.
- Agent had encouraged the defendants to make cheques to him directly or in cash
Held: pursuers cannot recover money from the defenders (third party)
Pursuers had tacitly allowed the practice of cheques being written to the agent - it was enough that the principal knew about it. Third party is therefore led to believe the practice was fine.
What was (confusingly) held in *First Energy (UK) Ltd v Hungarian International Bank Ltd ?
- First Energy (UK) Ltd v Hungarian International Bank Ltd ?
- Snr manager(A) in a bank was negotiating with FE (3) re:finance from the bank,
- FE(3) KNOW manager(A) was not granted to agree to finance by himself (his authority is limited).
- Manager sends a letter to FE confirming the finance, signed by only him.
- Bank(P) then attempt to repudiate the transaction on the basis that the manager did not have authority.
HELD: Manager was ‘clothed with’ authority to say what P’s decision was.
Should not be up to the customer to verify the extent of customer’s authority.
where the agent gave the impression that the principal would approve the agent’s actions, the principal was found liable for not contradicting that impression at first stage.
What is ratification?
Where no prior authority has been given, the acts of the agent may be ratified by the principal.
It can create the agency relationship.
What are the 2 different ways ratification may operate?
- the agent may be authorised to do certain acts but exceed his or her authority. Ratification validates the actions carried out in excess of his or her authority;
- there may be no valid agency relationship, but the agent purports to act for a specific principal. In this situation ratification actually creates the agency relationship.
Ratification is only effective if 6 certain conditions are fulfilled:
(i) The principal must have been in existence at the time the agent purported to enter into the contract on the principal’s behalf;
(ii) The principal must have had the requisite legal capacity to enter into the contract at the time the agent purported to enter into the contract on the principal’s behalf;
(iii) The agent must have entered into the contract as an agent, and not on his or her own account;
(iv) Relevance of time limits and retrospective nature of ratification;
(v) The principal in ratifying must make an informed choice. - know and understand what they are ratifying.
(vi) Ratification may not be possible if it would cause unfair prejudice to a third party.
What happened in Boston Deep Sea Fishing v Farnham re: capacity and ratification?
Boston Deep Sea Fishing v Farnham
- Trawler owned by french company, but at an english port at the point france becomes occupied during WW2
- English company continue to to trade using the french trawler, acting as ‘agent’ for french company.
French company say it’s fine.
Held: purported principle (french company) could not ratify the agency. Because when france was occupied at the time and was therefore an alien enemy and could not ratify. Agent could not act on behalf of french company. Did not have requisite contractual capacity at the time of the acts they wanted to ratify - even though they had it before.
Was the Principal liable in Keighley Maxted v Durant ?
No
Keighley Maxted v Durant
- A authorised to buy wheat up to a maximum price.
- A unable to buy wheat at max, but could buy it at a higher price- buys it at a higher price, expecting it to be a joint speculation with P
- P is happy - purports to ratify A’s actions even though
A fails to receive delivery of wheat.
Seller sues P
Held: P not liable for failing to take delivery because he was not a party to the contract.
Even though P purported to ratify - A did not act in a way that he was given capacity to - he went beyond.
In contrast to the Keighly Maxted case, was the Principal liable in Lockhart v Moodie?
Which case is preferable to follow?
Yes - for the lower approved price
Lockhart v Moodie
- Two parties agree to enter into joint agreement to purchase yarn
- B authorises A to buy yarn at certain price.
- A buys it at a higher price, does not disclose that B has any involvement. Enters into contract in own name,
- A goes bankrupt
- Seller sues B for sums due for the yarn.
Held: B liable for the price to the extent of the approved lower price. - not the full price paid.
Follow Keighley case -
(though this contrasts with Keighley Maxted. Lockhart actually came first, but it was not referenced and hasn’t been referenced since. )
What does ‘omnis ratihabitio retrotrahitur et mandato priori aequiparatur’ mean?
Effective ratification binds the principal in a contract with the third party from the moment that the agent purported to enter into the contract with the third party, as though the agent had been properly authorised from that moment
How does Goodall v Bilsland clarify the ‘omnis…’ rule?
Where an act must be done within a certain time limit, and the agent carries it out within this time limit, subsequent ratification by the principal beyond the time limit will be ineffective
Goodall v Bilsland
- Solicitor authorised to object to a license being renewed by licensing court - unsuccessful so appeal in good time.
- Principal purports to ratify after the time limit.
Held: ratification ineffective
General rule: if you ratify principal is bound from the time the agent acts, but if it has to happen within a time limit and it was ratified beyond the time limit - ratification not effective.
What English case showed that English law appears to recognise ratification by the principal after a third party has purported to withdraw from the contract:
How has the case been criticised?
- Bolton Partners v Lambert (english case)
- D offers to buy lease from P
- One of the P’s work committee (A) writes to D and accepts - but they do not have authority.
- D writes to P to withdraw his offer - unaware it was unauthorised
- Action for implement raised on 17th jan
- 28th jan - the board of directors of P ratify the actions of the works committee(A)
Held: purported withdrawal is rejected. If there is ratification it binds from the time the agent acts (can go backwards) - notwithstanding the fact the defendant tried to withdraw and that at that point there was no valid contract (acceptance exceeded authority).
Case criticised: contract not valid at the time he tried to withdraw - principal had not authorised it. Defendant left in limbo. Though he did think it was valid - therefore opportunity-snatching.
What is the suggested middle ground re: ratification?
Principal would have to ratify within a particular amount of time - not to allow the defendant (third party) to withdraw and snatch, but also not be left in limbo waiting for ratification.
Which Scottish case followed Bolton?
Gray v Baird Logistics (UK) Ltd
- court follows Bolton.
- Cannot withdraw from invalid contract if there is subsequent ratification.
Which case illustrates: (vi) Ratification may not be possible if it would cause unfair prejudice to a third party.
Smith v Henniker-Major & Co
- Company has a claim, director tries to assign that to himself
- Calls a board meeting - but he is the only director who attends. He resolves on behalf of the company to assign this claim to himself. He believes this has been validly done.
- 1999: issues proceedings in relation to this claim.
- Defendant argues it is ineffective according to the company’s constitution - not appropriate for a sole director to assign a claim as an agent acting outwith his authority.
- 2001: plaintiff is sole director, and he purports to ratify the earlier assignment.
Held: ratification ineffective.
One factor - serious allegations had been made against the defendants, would cause prejudice to them to deal with this problem. Had been significant delay. Unfair to rely on 2001 ratification for an assignment 3 years earlier.
How does Gray distinguish Bolton?
Gray v Baird Logistics (UK) Ltd
- Invalidly dismissed a director - outwith authority
- Director then resigns
- Board purports to ratify earlier invalidly dismissal
Held: Although follows Bolton in principle - states in this instance would be unfairly prejudicial to third party to ratify backwards.
When would a 3rd party have a claim against the Agent for breach of warranty of authority?
If Principal does not ratify..
Agent does not possess authority but he negotiates a contract on behalf of principal and third party -therefore if principal does not ratify - the third party has a claim against the agent for breach of warranty of authority.
If A acts without authority, and it transpires that the third party does not have the contract that he thought he had, that third party has an action against A (breach of warranty of authority). Damages are available.
What is the general rule as to who the 3rd party has a contract with when the Agent has acted without authority?
General rule: 3rd party does not have a contract with P
P is protected. 3rd party can sue A for damages if they think they have a contract with P.
What happened in Frank Houlgate Investment Company v Biggart Baillie LLP ?
Frank Houlgate Investment Company v Biggart Baillie LLP
- Investment company(F) introduced to C through reputable source. C convinces them to lend him 100k as initial investment. Asks for more, offers up property as security. BB works for C. Security granted.
- Turns out that C is not owner, BB realise their client does not own the property, but they say nothing to the investment company (F).
- F then give C more money.
All goes wrong.
- F claim that BBB acted on behalf of true owner of the property.
Held: any warranty given by BB was only with regards their authority to act for C - no one else. Did not warrant he owned anything, just that they were in capacity to represent the client.
How do the Cheshire Mortgage Limited and Blemain Finance cases narrow limits of warranty of authority - clarifying that all agent does is warrant he is acting on behalf of the principal for whom he is acting.
*Cheshire Mortgage Corporation Limited v Grandison; Blemain Finance Limited v Balfour + Manson LLP (joined cases)
- Two identical cases - joined
pursuers related to companies who provided security loans
- fraudulent - did not own property
- Both instruct their own solicitors
- Fraudsters disappear
- Claim defendants had breached warranty of authority
Held: by the time the solicitors were involved the pursuers thought they knew who they were dealing with. Instructed by borrowers to draw up loan. IH affirmed OH.
What is the external agency contract?
The contract between the Principal and the 3rd Party
What is the general principle for when an Agent acts for a disclosed and named Principal?
A contract is created between P and 3rd party through the medium A.
A is not a party to this contract, and should not incur any liabilities to the 3rd party
However, this general principle must be considered in the light of the presumption that the party signing a written contract is bound by that contract.
Was Shannessy liable in Stewart v Shannessy ?
Yes
Stewart v Shannessy
- Shannessy employed Stewart as a representative for 2 companies that Shannessy himself was an agent for.
- Shannessy writes to Stewart to confirm arrangement - on headed paper of one of the companies Shannessy was acting as agent for, but signs off using his own name.
- Stewart later raises an action against Shannessy for payment for work carried out.
- Shannessy claims he is just an agent, and the company is principal.
IH: Shannessy was personally liable to Stewart because the letter was signed off in his own name with no indication he did not want to bind himself as Principal for that contract. Presumption where if you sign a document you are bound by it.
⁃ Thus the agent must make it clear they are acting on behalf of the client and not to bind themselves.
How did Digby Brown sign to avoid avoid being personally liable?
Digby Brown & Co v Lyall
- Digby Brown signed ‘on behalf of our client’ - therefore making it clear they did not intend to be bound.
- the commitment was on behalf of Principal as an Agent and they were the contracting parties.
Brebner v Henderson 1925
Brebner v Henderson
- Two signatories: director and secretary
Held: titles of director and secretary did not prove that the document was signed on behalf of the company.
What are the four main ways agents make contracts?
- Agent acts for a disclosed and named principal.
- Agent acts for a disclosed but unnamed principal.
- Agent acts for an undisclosed principal
- Agent acts on behalf of a non-existent principal
What happens when an agent acts for a disclosed but unnamed principal?
This occurs when it is unclear who the agent is acting for - the principal has not been identified.
There is little Scots authority on agent acting for disclosed but unnamed Principal, what does the authority we do have point to?
The authority we do have points towards it being dependent upon whose credit (i.e. financial reputation) the third party relied upon when he entered into the contract: did the third party look to the credit of the agent, or to the credit of an unknown principal? Whose financial status was he looking at when entering into contract? This could be indicative of who the parties to the contract are.
What 2 things will the court look at re: agent working for disclosed but unnamed principal? (case for each)
- Whose credit do they look to?
- Lamont, Nisbet & Co v Hamilton: If the third party was relying on the agent’s financial reputation then it is probable that a contract is formed between the third party and the agent. But if the third party is relying on the financial reputation of the unknown principal then it is likely that the contract is formed between the third party and the unknown principal. - Who is it the third party has elected to sue?
- Ferrier v Dods: F not entitled to sue both agent and principal. On the basis he took the horse back to the owner, it was implied he was electing to sue the principal.
When the Agent acts for an undisclosed principal, who can the 3rd party sue?
The agent may act on behalf of a principal, but this fact may be entirely concealed from the third party.
From the third party’s perspective, the ‘agent’ appears to be a principal.
A contract is then formed, and the third party considers that his or her contracting party is the agent.
The real principal may, at a later stage, disclose his or her existence.
Following disclosure, the principal may choose to sue the third party under the contract formed by the agent. The third party may also (once aware of the principal’s existence) choose to sue either the principal or the agent.
Rolls Royce Power Engineering plc v Ricardo Consulting Engineers Ltd
Rolls Royce Power Engineering plc v Ricardo Consulting Engineers Ltd
- RR have a subsidiary called Alan, who enters into a contract with Ricardo.
- RR argue that Alan was entering into this contract as their agent, and RR could sue on the contract as third party.
Held: contract not ordinary contract - nature of the services to be provided by Ricardo, including employees of Ricardo’s and Alan’s working together for a common objective.
If the person is of great importance to the contract - the normal rule that the undisclosed principal can reveal and sue is set aside.
It what 3 scenarios may the principal be excluded from intervening?
- following normal rules of interpretation of the contract, the terms indicate, either expressly or by implication, that there is no concealed principal;
- if delectus personae is present;
- Possibly also if concealment of the principal was intended as a deception of the third party
English case law is conflicting on whether the principal may be excluded from intervening if their concealment was intended as a deception.
What did Dyster v Randall & Sons hold?
Dyster v Randall & Sons
- P gets friend A to contract with 3rd party to buy land.
- P does not want to disclose to 3rd party that he is Principal since if they knew would not agree
- 3rd party complains that there has been a breach of stipulations.
- 3rd party, at the request of A without authority of P (undisclosed principal), wants to cancel contract and A agrees and purports to cancel contract.
- but A is acting without Principal’s authority.
Held: mere undisclosure of the person who would benefit from the contract is no defence. It’s only if the qualities of who you are contracting with is fundamental to you contracting mean P can avoid liability.
Said v Butt
Said v Butt
- theatre critic asks friend to buy a ticket as agent.
- Refused entry
- Claims damages for breach of contract - as undisclosed principal
- Action fails
Held: Non-disclosure of the fact the ticket was bought for Said prevented it from being formed.
Identity of ticket holder was fundamental for creation of this contract. Identity of party key.
(mistaken contract formation?)
contrast with Dylan
What is ‘election’?
Third party can elect whether to sue the Agent or the Principal.
Once made an election is final.
Is liability between the agent and principal alternative or joint and several?
liability between the agent and principal is alternative
must pick one to sue.
Is it possible for agent to act on behalf of a non-existent principal?
Certain older cases suggested that where an agent acts for a non-existent principal, that agent may become personally bound in a contract with a third party. In these cases the principals were unincorporated associations, and thus lacked contractual capacity. Arguably therefore the parties intended the agent to be personally bound, knowing that the principal could not be bound.
Meekin v Easton (1889)
- TP sues individuals who signed promissory note
Held: those individuals were personally liable.
Because church was not a legal person - did not have capacity to contract.
Halifax v DLA Piper LLP
Halifax v DLA Piper LLP
- solicitor acting on behalf of a non-existent client (a consortium which was never formed) was not personally liable given that none of the parties intended that the solicitor be personally bound.
If it was never in the contemplation that the agent would be personally liable, then they will not be personally liable.
Which case was this quotation taken from? and what happened in it?
“The law imposes on agents high standards … An agent’s own personal interests come entirely second to the interest of his client. If you undertake to act for a man you must act 100%, body and soul, for him.”
Imageview Management Ltd v Jack [2009]
- Jack is from trinidad and tobago, wants to come to UK to play profesh football.
- Enters into agreement with football agent. J agreed to pay a 10%of his income if he gets signed. Agent gets him a job with Dundee.
- Agent agrees separately with club that the club will pay agent 3k if he gets J a work permit to play. This is not disclosed to Jack.
- When Jack finds out a year later, he stops paying commission.
- Agent raises an action for commission.
Held: although it is possible for Agent to enter into another deal, this second one was collateral and he only got it in his position as Agent for Jack and getting him signed to the club.
Therefore, Agent was not entitled to commission. Jack was entitled to be paid the entire 3k of ‘secret profit’ without the Agent receiving anything.
What 4 things must the agent do under his/her fiduciary duties?
- account to the principal for any benefits received from third parties, in whatever form they are received,
Neilson v Skinner & Co (1890) 17 R 1243 - not disclose any information which is confidential to the principal,
Liverpool Victoria Friendly Society v Houston (1900) 3 F 42 - not enter into any transactions which would place him or her in a position of conflict of interest vis-à-vis the principal. Transactions between agent and principal will be scrutinised carefully and may be void, see the highly significant case,
* McPherson’s Trustees v Watt - not accept any secret commission or bribes,
see:
Imageview Management Ltd v Jack [2009] 1 Lloyd’s Rep 436, FHR European Ventures LLP & Ors v Mankarious & Ors [2013] EWCA Civ 17; [2014] Ch 1; [2014] UKSC 45; [2015] AC 250.
*McPherson’s Trustees v Watt
*McPherson’s Trustees v Watt (1877) 5 R (HL) 9.
- Agent acts in sale of houses from trustees to brother.
- Trustees seek reduction of transaction b/c Agent was both brother’s agent and also the trustee’s agent - potential conflict.
He was also buying some of the houses for himself - also had an interest in the transaction.
Held: ‘Agent’ held as buyer even though brother was - because of conflict of interest.
Transactions between agent and principal will be scrutinised carefully and may be void, see the highly significant case
Rosetti and Anor v Diamond Sofa Co Ltd [2012]
Rosetti and Anor v Diamond Sofa Co Ltd [2012]
- Agent for sofa company, at time of contracting he tells them he works for 2 other furniture manufacturers but their ranges do not conflict.
- Later on, Diamond become aware that the Agent is working for 2 other sofa manufacturers. They did not object as they understood that the ranges did not conflict.
- CoA: general position: agent has a fiduciary duty to principal (act body and soul) so as not to act for the benefit of the third party competitor without permission of the Principal.
Therefore Agent cannot work for any other manufacturers, except those 2 the Agent told Diamond about at contract.
Diamond not reacting to the later 2 manufacturers and not acting, was Not enough to be consent. Agent must establish that the Principal gave informed consent.
What is the exception to the rule laid down in Rosetti that Principal must give informed consent if Agent works for competitors?
where the Agent’s business is such they will be acting for numerous Principal’s e.g. estate agents and the Principal would know this as it is so obvious.
Agent in position of trust, so if you breach it you must pay benefits of breach - not just damages.
it is possible for the principal to consent to a breach of fiduciary duty by the agent, but the principal’s consent must be fully informed.
What was held in:
*Parks of Hamilton Holdings Ltd v Colin Campbell [2014] CSIH 36; 2014 SC 726
*Parks of Hamilton Holdings Ltd v Colin Campbell [2014]
Agent must fully indulge information - just giving half the fact is not consent.
What are the 7 duties of the Agent?
- Fiduciary duty
- Good faith
- to follow instructions
- skill and care
- keep accounts
- not to delegate
- right of relief
- What is the authority for the Agent’s duty to follow instructions?
both:
- common law and
- Commercial Agents Regulations, reg 3(2)(c)
4.What is the ‘test’ for the Agent’s duty of skill and care?
The agent must perform the agency contract using the skill and care reasonably expected from a reasonably competent and careful member of the particular profession.
- technically can the accounts kept by the Agent be verbal as well as written?
Yes - very rare in modern context though.
- what is the exception to the duty not to delegate?
Delegation may be permissible according to the custom of a trade - what normally happens in that particular sector
- What is the Agent’s duty of ‘right of relief’
Where the agent has entered into a contract in excess of his or her authority and this leads to a loss on the part of the principal, the principal may recover that loss from the agent.
Which case illustrates the Agent’s duty to give a ‘right of relief’?
Milne v Ritchie (1882)
- Price paid for house was higher than Principal was prepared to pay, Agent had to make up the difference.
What are the 2 Principal’s duties and 3 Agent’s rights?
- P’s Duty of Good Faith
- P’s duty to continue business
- A’s right to remuneration
(common law + regs) - A’s right to commission
(common law + regs) - A’s right to reimbursement
What was held in Kennedy v Glass?
Kennedy v Glass (1890)
HELD: agent entitled to be paid remuneration, may be for commission - if it is not expressed they may be entitled to be paid a reasonable sum for services rendered.
What do the Commercial Agents Regulations say on Remuneration for the Agent?
commercial agent is entitled to ‘the remuneration that commercial agents appointed for the goods forming the subject of his agency contract are customarily allowed in the place where he carries on his activities, and, if there is no such customary practice, a commercial agent shall be entitled to reasonable remuneration taking into account all the aspects of the transaction’, see reg 6(1).
What did Walker, Fraser & Steele v Fraser’s Trs 1
say about commission?
Walker, Fraser & Steele v Fraser’s
- The agent is entitled to commission where the contract was ‘brought about, or materially contributed to’ by his or her actings.
Is the principal always under a duty to continue his or her business to secure the agent’s remuneration?
Depending on the terms of the agency contract, the principal MAY be under a duty to continue his or her business to secure the agent’s remuneration.
What does the Agent’s right to remuneration entail?
The agent has a right to reimbursement of his or her expenses, and relief of his or her liabilities whilst carrying out contract, and may exercise a lien to secure payment.
What is Del Credere Agency?
When an agent contracts on behalf of a principal, he or she will not normally guarantee that the third party will properly perform the contract with the principal.
The agent may, however, grant such a guarantee, in which case the agent is said to act del credere. This is no longer common, and may have been superseded by other commercial practices, such as the use of documentary credits.
What 5 ways can an Agency contract be terminated?
Termination of Contract:
- completion of the transaction;
- mutual agreement;
- death, bankruptcy or mental incapacity of the principal or the agent;
- material breach by the agent;
- principal ceasing to carry on business.
When did the Commercial Agents Regulations com into force?
1st January 1994
Apply to agreements in existence on that date.
Which type of Agency contracts are covered by the Commercial Agents Regulations?
- ‘A self-employed intermediary who has
- continuing authority to negotiate the sale or purchase of goods
- on behalf of another person (the principal) or to negotiate and conclude the sale or purchase of goods on behalf of and in the name of the principal.
What case gave narrow interpretation to commercial agent and the meaning of ‘negotiate’
Reg definition of ‘negotiate’ don’t require a process of bargaining, but it does require more than self-service at petrol pump:
Parks v Esso Petroleum Company Ltd [1999]
- Parks (agent) runs service station for Esso.
- Parks is entitled to commission for amount of petrol sold.
- Agency agreement terminated, parks claims he has rights under the regulations.
- Court must consider - does he fit within this definition?
Held: parks did not have authority to negotiate and conclude the sale of goods and purchase on behalf of esso. He was an agent, but not a commercial agent in terms of the regulations.
Which case gave a more lenient definition of ‘negotiate’ in terms of the definition of commercial agent?
P J Pipe and Valve Co v Audco India Ltd [2005]
- Held as a commercial agent even though he was not empowered to agree with third party on terms or pricing.
- Agent did affect crucial introductions between principal and third party, and paid a crucial role in third party interest in the principal’s products.
Is it a requirement that the commercial agent have a direct contractual relationship with the principal? (case)
YES
Light & ors v Ty Europe Ltd,
If agent appoints agent to do something, there is no relationship between principal and the sub-agent. Regs do not apply.
What is the 4 part test for whether an Agent is a Commercial Agent under the Regs?
- Did it take place in UK?
(Did she take economic risk?)
- Did self-employed agent have continuing authority to negotiate and conclude purchase of goods in name of the principal.?
- Is there a direct contractual relationship (sub-agent has no claim in principal)?
Is it possible to contract out of the regulations through a choice of law clause?
NO
Ingmar GB Ltd v Eaton Leonard Inc [2001]
- A principal established outside EU, with an agent in the EU, cannot contract out.
Regulations will apply in relation to any agent within the UK, or in EU.
Why are the regulations important? Why does someone want to fall within?
- Indemnity and compensation rights
- Parties can stipulate indemnity or compensation in the contract - if contract is silent then compensation applies (must specify if you want indemnity)
If you do not specify a clause in a commercial agent contract, which of Indemnity or Compensation is default?
Compensation
What is indemnity?
See regulation 17(3). The provisions seek to ensure that the commercial agent obtains the benefit of his or her work which would otherwise accrue to the principal on termination of the agency contract. Payment is subject to a maximum of one year’s commission (reg 17(4)).
So:
Indemnity is at termination
If an to the extent they’ve brought new customers or significantly increased work.
And the principal continues to derive benefit of that work.
And the agent has lost commission as a result of termination
Max one year’s commission
What Compensation is the Commercial Agent entitled to?
The commercial agent is entitled to compensation for the damage which he suffers as a result of the termination of his relations with the principal.
Reg 17(7) provides two non-exclusive examples of when such damage is deemed to occur.
- See reg 17(6) to 17(7).
Calculation of compensation has proved extremely controversial. The principles are not yet settled. Until recently the leading Scottish case was:
- King v Tunnock Ltd 2000
- This case suggests that a benchmark of two year’s gross commission may be used as a guide for the courts to calculation of compensation.
- This benchmark is not found within the Regulations, but is adopted from French law, on which the compensation provisions in the original directive were loosely based.
Case criticised in many subsequent cases
Matters regarding Compensation of Commercial Agents have potentially been clarified following a House of Lords ruling in an English appeal in 2007. The House of Lords criticised the approach of the Inner House in King, see:
*Lonsdale v Howard & Hallam [2006]
HoL: compensation is payable under the regs, calculated in ref to value of agency on the assumption the relationship had continued. So what is that relationship worth?
