A commercial agent is a self-employed business intermediary who has authority to negotiate the sale or purchase of goods for the principal or to negotiate and conclude the sale or purchase of goods on behalf of and in the name of that principal. On 1st January 1994 EU Regulations became effective to bring the UK into line with other member states to give statutory protection similar to that of an employee. These regulations apply throughout the UK including London, Cardiff, Edinburgh and Belfast notwithstanding devolution of certain other powers.
Agency termination occurs at the end of the agreed period however continuance beyond the fixed period changes the character of the agreement into an agreement for an indefinite period. Such an agreement may only be terminated by either party giving a minimum period of notice which is outlined in the legislation as one month for each full year or part of a year up to a maximum of three months.
Once termination occurs, except in certain limited circumstances, the agent is entitled to be paid compensation or an indemnity payment even after the expiry of a fixed term contract. The estate is also entitled to compensation if the contract ends because of death. Except where the agreement otherwise provides compensation is payable rather than an indemnity payment. An indemnity payment, which may be up to one year’s commission, relates to the amount that the agent has enhanced or expanded the principals business by the introduction of continuing new business. In addition a claim for damages for breach of contract can be made provided that such a claim does not duplicate damages already paid by way of indemnity.
An agent will, in the alternative, be entitled to compensation as a result of termination if he loses commission or loses the opportunity to set-off expenses. He must notify the business principal of an intended claim within one year of the termination of the agreement and even if the commercial agent waived his rights to compensation during the period of the agreement he is still entitled to claim.
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