Secondary Activities
The UK Regulations took advantage of Article 2(2) of the European Directive on commercial agents by incorporating a provision to the effect that the UK Regulations would not apply to agents whose activities as commercial agents are considered secondary. A Schedule to the UK Regulations provides that the activities of a commercial agent are considered secondary where the primary purpose of the arrangement with the principal is other than as set out in paragraph 2 of the Schedule. The key provision in Crane v Sky was paragraph 2(b)(ii) of the Schedule to the Regulations, which provides that an arrangement will be secondary if the goods concerned are not such that procuring a sale on one occasion is likely to lead to further sales with that customer or another one. The agent, Crane, was appointed to sell Sky boxes. The court held that the sale of one Sky box would not lead to the sale of another. Further sales were generated by a desire to benefit from the Sky television service, which was not the subject of the agreement under which Crane sold the Sky boxes. Given that the UK Regulations also do not apply to agencies for the supply of services (but only to goods), they could also not apply to an agency for the sale of the Sky subscriptions themselves. The Regulations therefore did not apply to the agency for the sale of the Sky boxes. The case makes it clear that the UK Regulations will not protect agents who sell goods where each sale is a ‘one off’ and not likely to lead to further sales.
Breach justifying Immediate Termination
The case also clarifies the circumstances in which an agent looses his right to compensation or indemnity under Regulation 18, where a contract is terminated because of a breach by the agent which would justify immediate termination by the principal under any enactment or rule of law, pursuant to Regulation 16. The court held firstly that where there was an entitlement to terminate immediately, the right to compensation or indemnity would be lost even where the principal terminated by giving a period of notice, provided that the breach justifying termination is such as would have entitled the principal to terminate without notice. In determining whether the breach was a breach of this kind, the court would apply the English doctrine of repudiatory breach. It will not therefore be sufficient merely that the contract provides a contractual right to terminate without notice for a particular breach, if that breach is not of a sufficiently serious nature as to justify immediate termination as provided under the English law of repudiatory breach.
Election for Indemnity
Finally, the case also clarifies the effect of a provision in a contract purporting to exclude all rights to compensation and indemnity. The UK Regulations permit the parties to choose either indemnity or compensation as the agent’s payment on termination. Unless the contract provides otherwise, the agent is entitled to compensation, rather than indemnity. The court decided that a clause purporting to exclude both compensation and indemnity did not constitute such a contrary provision, and the result would therefore be entitlement to compensation rather than indemnity.
Edward Miller, IDI Country Expert for United Kingdom.
