The impact of the COVID-19 pandemic is hitting business hard, and businesses with an agency model are no exception.
With sales agents currently unable to personally visit customers, and customers in many industries buying less because of the ongoing uncertainty and decrease in demand for goods, this is bound to have a negative impact on revenue for sales agents and their principals. The consequence is that principals may be looking at ways to alleviate the pressures they face, and unfortunately, that could result in principals not paying their agents the commission they are due.
We are already seeing this being reported in the industry.
For agents who are afforded the protection of the Commercial Agents Regulations;
- Regulation 7 provides that an agent is entitled to be paid commission on transactions concluded during the agency contract.
- Regulation 10 stipulates when commission becomes due, and when it must be paid.
- Regulation 10(3) sets out the latest date on which commission can be paid to an agent – that is the last day of the month following the quarter in which it became due.
However, an agency agreement may expressly stipulate when commission is due for payment, and provided those terms are not detrimental to the agent’s position under Regulation 10(3), the express provisions of the agency agreement as to when commission becomes due will apply.
The starting position is therefore to consider the terms of the agency agreement in conjunction with the provisions of the Regulations.
If sales have been made by an agent on which commission is payable and the principal fails to pay the agent the commission by the due date, the principal will be in breach of the agency agreement. It may also be in breach of Regulation 10(3).
In certain circumstances, the non-payment of commission in accordance with the agency agreement may entitle the agent to terminate the agency agreement and still claim either compensation or an indemnity. This will depend on the terms of the agency agreement and the circumstances in each case.
Agents are advised to seek urgent advice if they find themselves in this situation, as a failure by the agent to assert his or her rights could be taken to be a waiver of such rights. Agents should also not take steps to terminate their agencies without advice. The terms of the agency agreement and the circumstances of the case must be carefully explored before any action is taken by the agent to ensure the agent’s position is protected.
Our team of experts in Commercial Agency law are ready to assist agents who might find themselves in this or a similar situation. We are always happy to have an initial no-obligation chat to help guide agents in the right direction, and we look forward to assisting you. Please do not hesitate to contact us on 0161 941 4000 or via email.