178 Chapter 6Agency
one month. In the second year it is two months. After two or more years it is three months.
The parties cannot agree to shorter notice periods. They can agree to longer periods, as long
as the notice to be observed by the principal is not less than that to be observed by the agent.
Unless the parties agree otherwise, the notice period must end at the end of a calendar
month.
If the agency agreement was for a fixed period but it continues to be performed by both
sides after the notice has expired, reg. 14 provides that it is deemed to have been converted
into an agreement for an indefinite period. The notice periods set out in reg. 15 will then
apply and, in calculating the required notice, the earlier fixed notice period is taken into
account.
Regulation 16 provides that the Regulations do not apply if the agency agreement is
justifiably terminated immediately on account of one of the parties having failed to carry out
all or part of his obligations under the contract, or where exceptional circumstances apply.Compensation and indemnity payments
Indemnity and compensation are not the same things, and the agent is entitled to be
compensated rather than indemnified, unless the agency contract provides otherwise.
So compensation is the usual remedy.Compensation
A commercial agent is entitled to compensation for loss he suffers as a result of the termina-
tion of his relations with the principal. There is no requirement that the termination should
be the principal’s fault.
Loss to the agent is deemed to occur particularly when the termination takes place in
either or both of the following two circumstances.
(i) Circumstances which deprive the commercial agent of the commission which proper
performance of the agency contract would have gained for him, whilst providing his
principal with substantial benefits linked to the activities of the commercial agent.
(ii) Circumstances which have not enabled the commercial agent to recover the costs and
expenses that he had incurred in the agency contract on the advice of his principal.
In LonsdalevHoward & Hallam Ltd (2007)the House of Lords held that the amount of
compensation should be the amount which the agent has lost by not continuing to be agent,
that is to say the amount of future commission lost. This can be assessed by asking for how
much the agent could have sold the right to be agent to a willing purchaser, assuming that
the agency would have continued. If the market was declining, or if earning the commis-
sion would have involved expense, then obviously this would reduce the compensation.Indemnity
The three requirements for an indemnity under the Regulations are as follows:
(i) The contract between the principal and agent provides that the agent should be
indemnified rather than compensated.
(ii) The agent has brought the principal new customers, or has significantly increased
the volume of business with existing customers, and the principal continues to derive
substantial benefits from the business with such customers.
(iii) The payment of the indemnity is equitable, having regard to all of the circumstances
and, in particular, the commission lost by the commercial agent on the business trans-
acted with such customers.