Commercial agency has been an important way for companies to break into new markets for centuries. It is often not viable for a company to venture into a new market on its own as it will often not have the brand recognition or resources to establish goodwill and attract customers. An Agent, who is experienced in the local market, will often have much greater success. What many companies might not realise however, is that the Commercial Agent (Council Directive) Regulations (‘the Regulations’) impose strict obligations on the relationship between principal and agent.
The Regulations apply to any ‘Commercial Agent’ operating in the UK or wider EU. The scope of the Regulations is very wide and will apply to almost any agent engaged in the sale of goods or services in a purely commercial environment. The Regulations do not apply to non-commercial agency or to franchises and distribution agreements.
The Regulations are wide and regulate many aspects of the principle-agent relationship. Of particular note however are Regulations 14 – 15, which cover minimum notice periods for the termination of an agency agreement. These cannot be contracted out of and therefore are the most common area on which commercial agency agreements fall foul. The minimum notice periods are defined in Regulation 15(2) and range from one month, within the first year of the agency contract, to a maximum of 3 months for an agency contract that has lasted longer than three years.
It is important for the principal to calculate the correct notice period when terminating an agency agreement, as failure to do so will leave the principal open to a claim by the agent for breach of the Regulations. This is true even of fixed term agency agreements. Regulation 14 mandates that a fixed term agency agreement will convert to an indefinite agreement if not terminated immediately at the end of the fixed term. It is easy for a principle to be caught out in this circumstance and only calculate notice with regard to the fixed period. Such an approach would be wrong and would once again leave the principle open to a claim for breach of the regulations.
Are you a business that needs advice on commercial agency? Or are you a commercial agent who feels that the Regulations have been breached? If so the experience company and commercial litigation team at Levi Solicitors can help you.