Compensation when an agency is terminated
The compensation due when agency agreements are terminated is regulated by the Commercial Agents (Council Directive) Regulations 1993 and case law.
Who can claim compensation?
Commercial agents are self-employed intermediaries who have continuing authority not just to negotiate but also to conclude the sale or purchase of the goods on behalf of the principal. The Regulations impact on most agency agreements whether written or oral. On termination (whether by notice, retirement or death), commercial agencies (or their estate if they die) are entitled to compensation or indemnity, depending on the agreement.
How is compensation calculated?
The calculation of compensation in England and Wales was determined by Lord Hoffmann in the 2006 landmark House of Lords decision Lonsdale (trading as Lonsdale Agencies) v Howard & Hallam Ltd  UKHL 32. Lord Hoffmann set out the interpretation of the Regulations which the courts in England & Wales should apply and explained that compensation should be calculated as the amount which a hypothetical purchaser would be willing to pay “to have been able to take over the agency and stand in the shoes of the agent”. He also affirmed that a commercial agent is entitled to be compensated for the value of his agency at the termination date, on the assumption it is an assignable asset, even if it is not assignable, which is why he uses the term “hypothetical purchaser”.
Our experience of quantifying compensation
The director and the consultants of Vero Consulting have been appointed by principal and agents on many occasions, and occasionally jointly by both parties, to assist in determining the level of compensation due under the Regulations.
He is a pleasure to work with and his expertise in this field was clear to all involved in the case.
Want to hear more about our experience and services?
If you would like to discuss how we can help or for more information, please click here.