Are sub-agents covered by the Regulations?
At the present time, we don’t know. Neither the Regulations nor the Directive address the issue of sub-agents. Equally there have been no reported cases that have considered the issue. However, the DTI’s guidance notes on the Regulations which were published in September 1994 thought it likely that sub-agents were covered.
The difficulty is caused by the fact that the Regulations pre-suppose that the commercial agent will obtain orders for goods which are owned by the principal. But as between agent and sub-agent, the agent does not own the goods.
Despite this we feel that if the issue was to come before a court, it would try and find a way of bringing a sub-agent within the ambit of the Regulations. It is for this reason that agents need to take care when engaging sub-agents. For example, the termination of the principal-agent relationship may have ramifications for the agent-sub agent relationship. This can result in the agent fighting a war on two fronts as a number of our clients have found
Care should also be taken by principals. Invariably principals have deeper pockets than agents. It is more than possible that a sub-agent may decide to pursue the wealthier principal as opposed to the agent.