Eastern Gas and Energy were two subsidiaries of Eastern Electricity plc. Tamarind was appointed by Eastern under written agreements for the purpose of pre-selling contracts to existing British Gas customers in anticipation of the free market brought about by the deregulation of the gas and electricity supply industries. The supply contracts were to be sold “on the door step”, either as a result of cold calling or through recommendations.

The agreements had been drafted by Eastern and were not negotiable. The agreements were described as “service agreements” and not commercial agency agreements. However, the agreements all referred in various places to the Regulations.

Following the termination of the agreements, Tamarind brought a claim against Eastern under the Regulations. Eastern argued that Tamarind’s activities had been “secondary”. As such, it was not entitled to the rights and protections given by the Regulations.
There was a trial of two preliminary issues to determine whether the agreement made between Tamarind and Eastern was subject to the Regulations. The preliminary issues for determination were:

  1. whether the claimants’ activities were “secondary” under Regulation 2(4), so as to fall outside the scope of the Regulations; and
  2. whether the Regulations applied to the agreements in any event by reason of the terms of the agreements.

The Court determined the preliminary issues as follows:

  1. The Regulations apply to the sale of products such as gas and electricity. The activities of Tamarind and the other claimants as commercial agents were not secondary and so the agreements were governed by the Regulations.
  2. If it had been necessary to decide the second preliminary issue, the court would have concluded that the Regulations applied to the agency agreements by reason of the terms of the agreements. This was because the language used by the parties and the references to the Regulations in the agreement showed that the parties contracted on the basis that they intended the Regulations to govern the relationship between them. Eastern argued that they were uncertain as to the application of the Regulations and the references to the Regulations had only been included in the event that the Regulations were found to apply. The judge rejected this argument and decided that the agreements should be construed against Eastern an din favour of the agents. This was because the agreements had been drafted by Eastern and imposed on the agents.

This briefing note is for general information. For advice in applying this general information to your specific circumstances, please contact Stephen Sidkin or any member of the Fox Williams’ agentlaw team.(www.agentlaw.co.uk)

Written by Jane Elliot

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