The issue of time: critical timing issues in agency agreements

The Commercial Agents Regulations set out the rights and duties of commercial agents. Some of these rights and duties are subject to various time periods.
 
The time period for notice to terminate the agency

The Regulations set out the minimum periods of notice of termination to which an agent is entitled. Unless the agency contract provides otherwise, the notice period is to expire at the end of a calendar month. This means that the effect of the minimum periods could be that a 3 month notice period is extended to 3 months and 30 days! 

Even where notice has been given, it is possible that the contract can be brought to an end with immediate effect before the expiry of the notice period if, either:

(i)    one party is in serious breach of the contract; or

(ii)    the agent claims that he is no longer able to carry out his activities due to his age, infirmity, or illness. 

Where it is the principal which is the party in serious breach of the contract, the agent will be entitled to claim compensation (or indemnity if applicable). Similarly, where the agent is able to justify that he is no longer able to carry out his activities due to his age, infirmity, or illness, he will be entitled to claim compensation (or indemnity if applicable). 

The time period in which a claim for serious breach should be made

If one party commits:

(i)    a serious breach of the agency contract; or

(ii)    a series of successive breaches which show an intention of that party not to be bound by the terms of the agency contract, 

the other party is entitled to terminate the contract with immediate effect and, if it is the principal which has committed the breach (or successive breaches), the agent is entitled to claim compensation (or indemnity if applicable).

However, the right to terminate the contract in such a situation does not last indefinitely. The innocent party needs to decide within a reasonable period what action to take. Indeed, if the innocent party does nothing for too long, it risks being deemed to have accepted the breach. To further complicate the situation, there is no standard period which is a “reasonable period”. What is reasonable will depend on the particular facts and the breach in question. 

The time period in which a claim for termination on the ground of age, infirmity or illness should be made

As mentioned above, an agent can claim that by reason of his age, infirmity, or illness he cannot reasonably be required  to carry out his activities. But neither the Regulations nor case law provide any guidance as to whether a time period is applicable to the agent who wishes to make this claim.

As such, it is likely to be determined on the facts and the agent will be expected to be reasonable. Accordingly an agent who unfortunately suffers a heart attack will not be required to give notice! In contrast an agent who relies on, for example, arthritis will be well advised to give his principal notice of termination as required by the Regulations or the agency contract. A failure to do so may:

  • at best for the agent, result in a claim for damages by the principal; and
  • at worst for the agent, call into question the extent to which the infirmity can be relied on by the agent to justify termination and a subsequent claim for compensation or indemnity.   

The time period in which a notice of the agent’s intention to claim compensation or indemnity should be given

The Regulations contain an important limitation which provides that the agent shall lose his entitlement to indemnity or compensation if he has not notified his principal within one year following termination of the agency that he intends to pursue his entitlement. 

In the event of a written contract, the parties should be alert to:

(i)    any notice provisions in the contract which are stated to survive termination; and

(ii)    in the event of such notice provisions, when notices will be deemed to be served,

in order to ascertain whether the notice is or will be deemed served before the one year deadline. 

The time period in which a claim for post-termination commission can be made

Under the Regulations an agent is entitled to post-termination commission, being commission on transactions that are mainly attributable to the agent’s efforts during the agency and that are entered into within a reasonable period of termination.

What is a “reasonable period” will largely depend on the length of the agency and the industry in question. Again, there is no standard period. 

As can be seen from the above, it is important for both principals and agents to be mindful of the time periods set out in the Regulations, and to be aware of the consequences of missing the deadline for the time period in question. 

 

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.
Laura Monro
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