Commercial Agency Law is a specialised area of law which was fundamentally changed by the Commercial Agents (Council Directive) Regulations 1993, which came into force on 1st January 1994.
The Commercial Agents Regulations entitle a self-employed agent to either an indemnity or compensation payment upon termination of their agency (depending on the contractual terms-if any). This applies whether the Agent dies or is incapacitated, however the usual basis for a claim by an Agent is where the Principal terminates the agency to reduce their overheads once a product has become successful.
The Commercial Agents Regulations are also there to protect the Principal (to a lesser extent) in situations where the Agent loses interest in their brief to sell the Principal’s goods and therefore become ineffective.
The House of Lords’ decision in the case of Lonsdale v Hallam in July 2007 clarified the age old question of how to compensate an Agent in the event of the termination of their Agency. The decision has led to the need for expert forensic accountants or valuers to be involved in the quantification of compensation and has emphasised the need for Agency Arrangements to be properly documented.
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