Commercial agency

This is a specialist area of law which was fundamentally changed by the Commercial Agents (County Directive) Regulations 1993, which came into force on 1 January 1994.

What is Commercial Agency Law 1993?

It entitles 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 usuals basis for a claim by an Agent is where the Principle terminates the agency to reduce their overheads once a product has become successful.

The Commercial Agents Regulations are also there to protect the Principle (to a lesser extent) in situations where the Agent loses interest in their brief to sell the Principal’s goods and therefore becomes 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 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.