When is a commercial agent entitled to commission?

Commission is one of the two things every commercial agent cares most about, alongside the payment due when the agency ends. This guide sets out when an agent is entitled to commission under the Commercial Agents Regulations, starting with the general rule and then working through the situations that most often cause disputes: acquiring a customer, repeat transactions, orders that fall through, and a principal turning the agent’s customers into house accounts.

Throughout, one point recurs: the Regulations set the default position, but the contract can vary a good deal of it, so the wording of any written agreement matters. This is general information, not legal advice; take advice on your own arrangement.

The short answers

When is an agent entitled to commission? The general rule

Contributed by Clarkslegal LLP, October 2015.

It is common, particularly following termination of an agency agreement, for agents and principals to become involved in disputes over the commission which the agent is entitled to be paid. When is an agent entitled to commission? Where any such dispute arises, the first thing to do is check what the parties have agreed. Most written agency agreements contain detailed terms dealing with the rate of commission the agent will be paid, the timing of payment and the circumstances which will give rise to an entitlement to commission. Often though we are consulted by agents whose agency arrangements have arisen informally. Many have no written agreement with their principal. Some have agreed verbally on the rate of commission they will be paid, but have no verbal or written agreement as to any other terms. In such cases, Part III of the Commercial Agents (Council Directive) Regulations 1993 will apply. What does it say about commission?

How much?

Regulation 6 says that where the parties have not made any agreement as to the rate of commission, the agent is entitled to be paid the amount “customarily allowed” in the place where he carries on business, or, if there is no customary practice, “reasonable remuneration taking into account all aspects of the transaction”. Agents who have not agreed a rate of commission with their principal will need to consider what is reasonable having regard to matters such as the typical rates paid in their industry, lead times, and the value and frequency of the transactions they arrange.

When does a right to commission arise?

There are three situations in which an agent is entitled to be paid commission under the Regulations, set out in Regulation 7:

• The most common is where a sale has been concluded between the customer and principal, which was made directly as a result of the agent’s actions, for example because the agent introduced the customer to the principal and/or negotiated the sale.
• An agent is also entitled to commission where a sale has been concluded between the principal and a customer which he did not directly arrange, but the customer is one whom the agent originally acquired for the principal for transactions of the same kind. This provision is intended to ensure that the principal does not escape liability to pay commission on repeat transactions by cutting the agent out after the first sale.
• Finally, if it has been agreed that the agent will have exclusivity over a particular geographical region or group, the agent will be entitled to commission on any sales made to customers in that region or group by the principal directly or by another agent.

There is some uncertainty as to whether these provisions are mandatory, or whether agents can agree with their principals that they will not apply.

What about after the agency has been terminated?

An agent whose agreement has been terminated remains entitled to commission on any transaction concluded after termination where either:

• The order was received before the agreement was terminated (though the transaction itself was not completed); or
• The transaction is entered into within a reasonable time of the date of termination, and was wholly or mainly attributable to the agent’s efforts.

Once again, this provision is designed to protect agents from missing out on commission on sales which would have been due to them, had the agreement not been terminated. What is a reasonable time will depend on the industry and the typical lead time for the product the agent is selling.

When must the principal make payment?

Regulation 10 provides that commission becomes due to the agent once the principal has executed the transaction by supplying the goods to the customer, or should have executed it. This means that once again, the principal cannot escape the obligation to pay commission by failing to hold up his end of the bargain. However, if the customer fails to pay for the goods then the agent’s right to commission may be extinguished. Once the commission has fallen due, the Regulations provide that the principal must pay the agent at the latest on the last day of the month following the quarter in which it became due. The quarter periods run from the date the agency agreement began. Agents and principals can agree alternative payment arrangements if they are more favourable to the agent than those set out in the Regulations, but the principal cannot impose less favourable payment terms.

One Forbury Square, The Forbury, Reading RG1 3EB · Tel: 0118 958 5321 · www.clarkslegal.com

Disclaimer: This column does not contain legal advice and is for general guidance only. Agentbase, Clarkslegal LLP and the writer accept no liability in connection with the general guidance given in this column. Please ensure that you obtain legal advice before acting in reliance upon anything in this article. For example, please be clear that the answers given in this column may not cover all possible angles, aspects, relevant considerations and/or points of law and so that all or any information which is given above needs in every instance to be referred for legal advice for clarification and amplification, before being relied upon.

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A sale but no commission? Reading the contract with Regulation 7

Contributed by David Bentley, Bentley Agency Law, April 2019.

Apart from in respect to the value of their claims for compensation or indemnity arising following termination of their agencies, one of the most frequent questions otherwise asked of us by agents is as to their entitlement to be paid commission in various scenarios, and in situations where the principal concerned appears not to be cooperating. With regards to this, Regulation 7 is very much in point:-

Notwithstanding that the above provisions seem straightforward enough in terms of what they appear to mean, the extent of an agent’s entitlement to receive commission pursuant to Regulation 7 can nevertheless be watered down or varied depending on what is written into any contract (or what is otherwise established as agreed through custom and practice). For example, and notwithstanding Regulation 7(1) (b), the parties might reach agreement that certain accounts introduced by the agent are actually and instead to be treated as ‘house accounts’ (thereby disentitling the agent to any commission at all in respect to all or any relevant sales, or perhaps only entitling the agent to a reduced amount of commission).

A further example of how an agent’s rights and entitlements might be different compared to what would otherwise appear to be the position as set out in Regulation 7, is where it has been agreed that an agent is only in fact entitled to commission in respect to relevant sales which he or she has directly taken him or herself.

On account of (if nothing else) the above, it should be clear that it is always extremely important to understand the terms of any agency contract, and to ensure that what is written down reflects what has been agreed – an example checklist of points would be (but also take our specialist and more specific legal advice beforehand) :-

• Obviously, very carefully check your contract before you sign it – does it specifically state that your appointment is to be ‘exclusive’, and does it actually define what ‘exclusive’ is intended to mean for the purposes of the agency? For example, does the contract define ‘exclusivity’ by reference to a geographical area or to a group of customers, and is it made clear that that definition can only be varied by agreement between you and the principal (i.e.- and not just by the principal, acting unilaterally)?
• Never assume that what you may have been verbally told or had understood would be the given situation as regards the basis for calculating any particular commission entitlement is necessarily then accurately reflected in the written agency agreement document – in this regard, keep in mind that, ordinarily, and except (for example) where there is evidence of a valid variation, what is set out in the written agreement is ultimately the sole point of reference (and the contract is also likely to itself reinforce that by stating that anything not set out in it, and which might have been agreed beforehand, is not applicable or is effectively superseded).
• If you have objections to the terms of any draft contract which has been presented to you on account of an issue related to what is stated to be your commission entitlement (and so that you are not actually intending to sign the agreement document), then promptly make clear in writing and in appropriate detail what your specific objections are. In other words, don’t simply not sign the contract and leave matters at that. [This advice of setting out your position and objections in writing applies notwithstanding whatever might be the various reasons as to why you are not intending to sign any draft contract which has been presented to you by the principal and where the document does not reflect terms agreed, or otherwise does not reflect other terms which you are prepared to accept].
• If you’re entitled to a commission payment in any particular instance but (for whatever (one-off or very special) reason) are not proposing to pursue that entitlement, promptly write to the principal and make clear (in an appropriate form of words) that your decision to not press for your entitlement on that particular occasion isn’t intended to set any form of precedent, nor otherwise intended to vary the agreement. Conversely, if you are not willing to accept the fact of non-payment of commission in a particular instance, then similarly promptly assert your claim in writing (and take legal advice).
• Keep also foremost in mind statutory limitation periods for unpaid commission entitlements – meaning the time period relevant to whichever Country’s laws govern the contract, beyond which period if actual legal proceedings have not been effectively commenced prior to then it would ordinarily thereafter be too late to bring a claim for the historic unpaid commissions in question (and no matter how worthy your claims might otherwise have been).

Finally, it is often the case also that agents don’t actually have any agreements in writing at all, and so that it is then a matter of establishing what evidently has been agreed through studying the history of the relationship, and determining what amounts by way of commission may be due by applying the provisions of Regulation 7 in the same way.

© David Bentley, Bentley Agency Law Limited, Bentley & Co Solicitors, 7 Littlemoor Road, Pudsey, Leeds, LS28 8AF
T: 0113 236 0550 · e-mail: db@bentleyandco-solicitors.com

The ONLY law which we practice is the law as it relates to commercial agents. Please note that, as far as we can, we take cases on a “success related fee”. Please ensure that you obtain legal advice before acting in reliance upon anything in this article, particularly since each individual’s circumstances may necessitate a unique approach, and also on account of the fact that the law may of course at any time change. Furthermore, please be very clear that the answers given in this column may not cover or otherwise refer to all possible angles, aspects, relevant information and/or points of law and so that all or any information which is given above needs in every instance to be referred for legal advice for clarification and amplification, before being relied upon.

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How a commercial agent “acquires” a customer

Contributed by Kevin Manship, Blake Morgan LLP, February 2015.

Under Regulation 7(1) of the Commercial Agents (Council Directive) Regulations 1993 (“the Regulations”), a commercial agent is entitled to receive commission on commercial transactions concluded during the period covered by the agency contract where: (a) the conclusion of the transaction resulted from the act of the agent (e.g. the agent dealt directly with the customer’s order); or (b) the transaction was concluded with a customer whom the agent has previously acquired as a customer for transactions of the same kind.

This article focusses on Regulation 7(1)(b) and the circumstances in which a Court would conclude that a commercial agent has “acquired” a customer for their principal. If a commercial agent can show they have “acquired” a customer, they would be entitled to commission on repeat orders placed by that customer (for transactions of the same kind) up to termination of the agency contract, whether or not the commercial agent had any direct involvement in those repeat orders. The commission sums involved can be quite considerable. So how does a commercial agent go about “acquiring” a customer? Surprisingly, in the 21 years that the Regulations have been in force the Courts have not had to directly consider this issue, although there has been some consideration by the Courts of the similar concept of a commercial agent “bringing the principal new customers”, in deciding whether a commercial agent is entitled to an indemnity payment under Regulation 17 on termination of the agency contract.

On that point, the Court decided that “bringing the principal new customers” required the commercial agent to show they were instrumental in obtaining the business of new customers for the principal. Logically, one would expect a similar outcome from the Courts when considering whether a customer has been “acquired”. Where the commercial agent is solely responsible for a new customer placing business with the principal, it should be straightforward for them to argue they “acquired” that customer. Examples of this could include the commercial agent: introducing customers that they have dealt with before to a new principal where those customers have had no previous dealings with that principal; or identifying, contacting, visiting and obtaining orders from a new customer who has not dealt with the principal before, without any input from the principal. At the other end of the spectrum, where the commercial agent has little or no input in the principal obtaining business from a customer, it would be difficult for them to argue they have “acquired” that customer. Examples of this could include: the principal asking a commercial agent to visit and look after an existing customer who has done business with the principal for a number of years; or a new customer who has contacted the principal directly and has placed an order with the principal before any involvement by the commercial agent, although the commercial agent is subsequently asked to visit and look after that customer.

In between these two extremes is a considerable grey area, where much is likely to depend on the level of involvement of the commercial agent in “acquiring” the customer. In general, the Court would consider what happened at the outset of the business relationship between the customer and the principal. It would be difficult for the commercial agent to argue they had “acquired” a customer that had previously done business with the principal, although it might be possible to argue this in the situation where a customer had done business with the principal in the past, but not for a considerable period of time and the commercial agent has persuaded the customer to resurrect their business relationship with the principal.

The level of involvement of the commercial agent in obtaining business from a new customer for the principal is likely to determine whether they “acquired” that customer under Regulation 7(1)(b).

This should not have to mean that there was no involvement of the principal in obtaining the business, but rather that the business was obtained mainly due to the efforts of the commercial agent (e.g. the commercial agent was instrumental in obtaining the business). Some examples of this could be: the principal receives an enquiry from a potential new customer. This could come from a trade show, by telephone or via the internet. The principal passes the enquiry on to the commercial agent, who follows it up by contacting the potential new customer, arranging a meeting, visiting them and taking an initial order; or the commercial agent identifies, contacts and visits a potential new customer but the customer places their first order directly with the principal.

Until the Courts make a decision on this issue, there will be uncertainty as to precisely what involvement a commercial agent has to have in order to “acquire” a customer for the principal. That is not necessarily a bad thing, as it gives scope for arguments to be raised about commission entitlement and for commercial settlements to be reached in order to avoid costly Court proceedings. The commission sums involved can be quite considerable so if there is any doubt about whether a commercial agent has “acquired” a customer or customers, the commercial agent and the principal could save considerable time and money by getting legal advice. NB It is yet to be decided by the Courts whether the rights granted to a commercial agent by Regulation 7 can be overruled by contrary provisions in an agency contract. Watch out for this type of provision as it might be enforceable by the principal.

by Kevin Manship of Blake Morgan LLP
Bradley Court, Park Place, Cardiff CF10 3DR · Tel: 029 2038 5502 · www.blakemorgan.co.uk

Disclaimer: This column does not contain legal advice and is for general guidance only. Agentbase, BLAKE MORGAN LLP and the writer accept no liability in connection with the general guidance given in this column. Please ensure that you obtain legal advice before acting in reliance upon anything in this article. For example, please be clear that the answers given in this column may not cover all possible angles, aspects, relevant considerations and/or points of law and so that all or any information which is given above needs in every instance to be referred for legal advice for clarification and amplification, before being relied upon.

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Commission on repeat transactions: can it be excluded?

Contributed by Millie Pierce and Stephen Sidkin, Fox Williams LLP, March 2023.

Introduction

In a recent judgment of the Court of Justice of the European Union, a definitive stance has been taken for the first time as to the entitlement of a commercial agent to receive commission on repeat transactions of the same kind with the same customer under the EU Agents Directive. This marks a significant change to the interpretation of the entitlement to commission of commercial sales agents in the EU and may also have an impact on UK agents and principals.

Background

Various key provisions in the Directive and the Regulations make it clear when it is not open for principal and sales agent to derogate in their agreement from the statutory entitlements afforded to the agent.

One example of this concerns the sales agent’s entitlement to back commission – that is, commission on confirmed orders which are then unfulfilled by the principal for a reason for which the principal is to blame.

Often where a sales agent is appointed on an exclusive basis, the written agency agreement will provide for the agent to receive commission on orders received by the principal from customers that have been previously introduced by the sales agent.

In turn this reflects the position under the Directive and the Commercial Agents Regulations. Indeed it could be claimed that whilst it was arguable that there was no express prohibition from derogation, it was to be implied into the legislation that derogation from this right was not possible.

The recent Court of Justice judgment means that this is no longer the case.

Judgment

The case before the Court of Justice was concerned with a sales agency agreement in place in Poland for financial intermediation services. The agent, Rigall Arteria Management (RAM) had been the sales agent for the Bank Handlowy between 1999 and 2015.

The Bank decided to terminate the agency and RAM demanded that the Bank provide it with information on the commission that had been payable to RAM over the span of the agency. The Bank refused on the basis that this information had already been provided during the course of the sales agency and so there was no further reason to do so. The Bank also claimed that the information was covered by banking secrecy. RAM commenced litigation to try and force the supply of the information needed in order to calculate commission owed.

Ultimately the Polish Supreme Court asked the Court of Justice whether it was possible for the parties to derogate in the sales agency agreement from the right of an agent to receive commission for a transaction that is entered into with a customer that the sales agent has previously introduced for a transaction of the same kind.

The Court of Justice decided that the provision in the Directive had to be interpreted as allowing derogation given the lack of express wording in the Directive to make it clear that derogation was prohibited.

Further the Court of Justice appeared to justify its decision on the basis that even if the provision were to be interpreted as prohibiting derogation, this would not necessarily lead to increased protection for commercial sales agents – the lodestone of the Directive and, in turn, the Regulations.

However, the Court of Justice’s judgment has been the subject of criticism both inside the EU and in the UK on the basis that the Court of Justice:

• misinterpreted the relevant part of the Directive;
• as a result flawed reasoning was put forward in its judgment;
• failed to address the issue of the potential effect of inequality of bargaining power between principal and sales agent.

Indeed it is to be hoped that the opportunity will present itself at some point in the future for the Court of Justice to reverse its decision.

Where does this leave us?

Whilst for English courts the judgment is of persuasive authority only, it does raise the possibility that in respect of UK based principals and sales agents the entitlement to commission on repeat orders can be excluded by agreement.

In respect of a sales agency agreement between an EU based principal and a UK based sales agent, the agent will need to be alert to the possibility that the principal could take advantage of the Court of Justice judgment and claim that this means that the sales agent is not entitled to commission on repeat transactions in the absence of an express provision in the sales agency agreement that the agent is so entitled.

Where the principal is based in the UK and the sales agent is based in the EU, it would seem that it is open to the parties to agree to exclude the sales agent’s entitlement to commission for repeat transactions.

Millie Pierce is an associate and Stephen Sidkin is a partner at Fox Williams LLP
10 Finsbury Square, London EC2A 1AF · www.agentlaw.co.uk · www.foxwilliams.com
© 2023 Fox Williams LLP

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Commission on incomplete orders (Regulation 11)

Contributed by Kevin Manship, Morgan Cole LLP, December 2013.

Did You Know? Circumstances exist in which a commercial agent remains entitled to commission, even though the sale between the principal and the customer has not been completed.

The vast majority of commercial agents and principals will be well aware of the circumstances in which the commercial agent is entitled to be paid commission on sales made to customers by the principal under the Commercial Agents (Council Directive) Regulations 1993 (“the Regulations”).

This is largely dealt with under Regulations 7 and 8, and there have been a number of cases in the UK and European Courts which have clarified the rights of the commercial agent. While the issue of entitlement to commission is often considered following termination, the entitlement applies throughout the commercial agency. However, there may be understandable reluctance on the part of the commercial agent to raise such issues or bring claims while their agency is still live.

Much less attention has been paid to Regulation 11, which sets out the circumstances in which a commercial agent remains entitled to commission even though the sale between the principal and the customer has not been completed.

Again, this entitlement applies throughout the commercial agency. Regulation 11(1) deals with this by setting out when the commercial agent’s right to commission is extinguished, as follows:

There are a few key points which can be drawn out of the above:

1. There must be a contract between the customer and the principal

Despite the use of the word “executed” (see below), I think it is clear that there must be a contract in place between the customer and the principal. In deciding whether there is a contract, I would need to look at the trading terms of the principal, and perhaps also the customer, to determine the point at which an order from the customer has been “accepted” by the principal.

Generally, it will not be sufficient for the customer, or the commercial agent on behalf of the customer, to simply place an order with the principal. The principal will usually need to take some positive step to confirm it has “accepted” the order. That action could involve the principal issuing an order acknowledgement confirming a delivery date, taking steps to deliver the order or issuing an invoice for the goods ordered.

Assessing the point in time at which an order has been accepted by the principal, such that there is a contract in place, can be quite difficult and will probably require legal advice unless the position is very clear.

2. Meaning of “the contract … will not be executed”

The use of the word “executed” is quite confusing in the context of Regulation 11(1). Under UK law, using the word “execute” in conjunction with “contract” usually indicates a requirement for a contract to be signed by the parties to it.

However, in the context of Regulation 11(1)(a), I think the word “executed” actually means “completed” or “fulfilled”. This view is supported by the wording in Regulation 10, which makes a number of references to the principal and customer “executing” the transaction, meaning completing or fulfilling their obligations under the contract.

Logically, therefore, Regulation 11(1)(a) applies where the contract between the customer and the principal will not be completed or fulfilled.

3. Reasons for the contract not being executed

The commercial agent only retains their entitlement to commission under Regulation 11 if the contract is not completed or fulfilled for a reason for which the principal is to blame. Those reasons would include:

• The customer cancelling the order because the principal has delivered the wrong goods or has failed to deliver the goods within timescales specified by the customer.
• The customer rejecting the goods delivered because they are defective, of poor quality or not fit for purpose.

Reasons for which the principal would not be to blame include failure by the customer to pay for goods received, or if the order was cancelled by the customer for a reason for which the commercial agent is to blame. For example, the commercial agent inserted the wrong goods in the customer order or placed an order for goods which the commercial agent knows are out of stock.

As far as I am aware, the right to commission under Regulation 11 has not yet been addressed by the Courts in the UK or in Europe. The reason for this is probably that the circumstances in which the commercial agent could bring this type of claim are quite rare.

However, the rights under Regulation 11(1) should be kept in mind by both the principal and the commercial agent where sales are not completed. This may be particularly relevant where a new product proves to be extremely popular and the principal has difficulty keeping up with demand, or where the principal is focusing on new markets and accepts orders but does not give priority to the UK market.

Under Regulation 11(3), the commercial agent and the principal are not able to contract out of Regulation 11(1). Any contrary provisions in the contract between the commercial agent and the principal would therefore be overridden by Regulation 11(1) and would be void.

Another important point for commercial agents and principals to keep in mind is Regulation 11(2), which notes that if commission has already been paid for a particular sale, the commercial agent will be required to refund that commission if the sale is not completed or fulfilled for a reason for which the principal is not to blame.

The most obvious example would be if the customer fails to pay for goods delivered. Again, this scenario is likely to be quite rare, as the majority of principals do not pay commission to their commercial agent until they have received payment from their customer.

By Kevin Manship, Associate, Morgan Cole LLP
Bradley Court, Park Place, Cardiff CF10 3DR · Tel: 029 2038 5502 · www.morgan-cole.com

Disclaimer: This column does not contain legal advice and is for general guidance only. Agentbase, Morgan Cole LLP and the writer accept no liability in connection with the general guidance given in this column.

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House accounts: how far can a principal go?

Contributed by Thom Vaughan, EAD Solicitors LLP, March 2018.

When the Commercial Agents (Council Directive) Regulations 1993 came into force on the 1st of January 1994 they represented an entirely new concept in the United Kingdom. Unlike other jurisdictions, notably France and Germany, that had established legislation specifically tailored to the class of persons known as “commercial agents”, the United Kingdom was, give or take, starting fresh.

Since that time the nuances of the Regulations have been explored, prodded and poked in innumerable court rulings to the extent that it is fair to say that it is now a fairly well established area of law. An agent can telephone an agency lawyer with a set of facts relating to a legal issue and the lawyer is able to draw on a rich jurisprudence, rather than speculating and hypothesising.

A good example of this is the Court of Appeal (Light v Ty Europe Ltd [2003] EWCA Civ 1238) finding that on expiry of a fixed term, the agent will have the right to payment of an indemnity or compensation. Therefore a principal could not, for instance, hand out a two year contract and then allow it to expire and avoid paying compensation.

However, there still remain certain issues upon which the light of the judiciary’s intellect has not yet shone. A good example of this is where an agent has a written contract that, on its face, extends an unfettered right for the principal to remove customer accounts and designate them as House Accounts. This is a pernicious clause that finds its way into many contracts. Pernicious in the sense that the agent is, on the face of it, working to develop clients whilst always knowing that his principal can swoop in at any time and remove them. That creates a climate of fear that is unfair to the agent and not conducive to a healthy vital relationship.

On the one hand there is a generally prevailing judicial reverence for the parties to arrive at whatever bargain they see fit when entering into a business deal, such as a commercial agency agreement. However, that latitude is not unchecked.

Regulation 4(1) requires that a principal in his relations with the agent must act ‘‘dutifully and in good faith.’’ The notion of good faith was, until recent times, generally an alien one in the United Kingdom; it is a continental concept that has been imported to these shores by the introduction of the Regulations.

Specific features of this duty are spelled out in the Regulations, though they are not exhaustive. For instance, a principal must ‘‘provide [the] agent with the necessary documentation relating to the goods concerned’’ and ‘‘obtain for his commercial agent the information necessary for the performance of the agency contract…’

Returning to the example above, if the principal removes 20% of the agent’s accounts and re – designates them as house accounts has he offended the requirement that he should act dutifully and in good faith? What about if he removes 80% and leaves the agent without enough income to cover his fuel costs etc such that he needs to cease his activities? Is it possible to look at the question as one of degree or is it, rather, an absolute question as to whether the principal can or cannot remove accounts?

There is a potential further check on such activity, which comes in the guise of Regulation 7 (dealing with an agent’s right to commission). This provides that a commercial agent shall be entitled to commission on commercial transactions concluded during the period covered by the agency contract where the transaction has been concluded as a result of his action; or where the transaction is concluded with a third party whom he has previously acquired as a customer for transactions of the same kind.

There is academic disagreement as to whether the agent’s rights to commission per Regulation 7 can be excluded by agreement of the parties and the matter has not been settled by the courts. The thrust of the main argument for those who say the rights can be excluded is that because certain other Regulations specifically state that they cannot be derogated from then the absence of such wording in Regulation 7 means that it can. Not the most sophisticated line of argument but still.

If the Regulation 7 rights cannot be excluded then arguably the agent will remain entitled to payment of commission on sales made to the customer even if the customer is removed from his sphere. This would be a fine outcome for the agent – he is paid in full for a customer that he does not need to spend time, money or effort nurturing.

Of course there will be those who argue that an agent who knowingly contracts on the above basis (i.e. permitting his principal to cherry pick prime accounts) should honour such an agreement in any event. However, that is to ignore that the clause may have been left in the contract precisely because of the parties’ unequal bargaining power and the agent’s desperation to secure his own appointment. The statutory support of the Regulations was introduced precisely to protect this “downtrodden race” and to rebalance power between the parties. Not my description but that of Staughton LJ!

Both the question of whether Regulation 7 commission rights can be excluded and the extent of the Regulation 4 obligation of good faith are issues that are ripe for judicial consideration. Whilst they remain matters of credible debate then lawyers will delight and agents / principals are liable to clash.

Thom Vaughan is a Partner with EAD Solicitors and specialises in Commercial and Property Litigation.
EAD Solicitors LLP, Prospect House, Columbus Quay, Liverpool L3 4DB · Tel: 0151 735 1000 · www.eadsolicitors.co.uk

Disclaimer: This column does not contain legal advice and is for general guidance only. Agentbase, EAD Solicitors LLP and the writer accept no liability in connection with the general guidance given in this column. Please ensure that you obtain legal advice before acting in reliance upon anything in the article. For example please be clear that the answers given in this column may not cover all possible angles, aspects, relevant considerations and/or points of law and so that all or any information which is given above needs in every instance to be referred for legal advice for clarification and amplification, before being relied upon.

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The contributions on this page are general guidance, not legal advice, and reflect the position at the time each was written. Commission turns on the Regulations and on the wording of each agreement, and some points remain unsettled by the courts. Agentbase and the contributing firms accept no liability for any reliance placed on them. Please obtain legal advice before acting on anything set out here.

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