Following two recent cases, it is now apparent that agents must be very clear when they are giving notice to their principals of their intention to claim for compensation or an indemnity under the Commercial Agents Regulations. In both cases the agents lost their entitlement to compensation on termination of their agencies because the courts considered that they had not given effective notice for the purposes of the Regulations.
The Regulations state that an agent will lose his entitlement to compensation or an indemnity if, within one year following termination of his agency contract, he has not notified his principal that he intends pursuing his entitlement. However, there is no guidance in the Regulations as to what the content of the notice should be. We therefore set out below some tips in order to ensure that agents, whose agreements are subject to English law, do not lose out:
1. Ensure that the letter is addressed to the correct person or legal entity and served in the correct manner. If there is a written agency agreement, you should check each of the following:
- Who is named as the principal?
- Has there been any transfer of the principal’s rights? If so, the notice should be addressed to the transferee?
- Has the principal notified the agent of any change of address for notices? If so, the new address should be used.
- How must notice be given? Often agreements stipulate that notices are only effective if given in a particular way. If there is a choice of methods, registered post, courier or fax are the preferred methods as these enable you to obtain proof of delivery.
2. Refer clearly to each and every claim which is intended to be made, together with a brief explanation of the basis of that claim and the relevant statutory provision or provision of the agency agreement (if any).
3. The notice should be signed by a representative of the business who has authority to sign such documents.
4. Ensure that the notice is served on the principal within one year of the date of termination or expiry of the agency agreement. If there is a written agency agreement, check when notices will be deemed to be served. The agreement may provide for notices to be deemed to be served a number of days after they are sent. If possible, send the notice well in advance of the one year deadline.
5. The notice should be dated and a copy should be kept together as proof of delivery. This will be useful in the event of any dispute as to whether notice has been properly given.
6. If the principal is a non-UK entity, it is advisable to check with local lawyers whether there are any formalities which must be completed before the notice will be recognised as being validly served under local law.
Written by Jane Elliot
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