In Lonsdale, the Court held that the amount of compensation on termination of an agency contract would be calculated by reference to a valuation of what a hypothetical buyer would have paid for the agency had it continued.
Three main additional points are made in Fryer.
- In valuing an agency where the owner or owners work in the business, a deduction should be made for the owner’s notional salary for his work in the agency
- Following the earlier case of PJ Pipe, the Court confirmed that an introducing agent who does not have a substantial role in determining price or other terms and conditions of sale, but develops business for the principal is covered by the UK Regulations
- When terminating an agency for breach of non-compete clauses, the principal should normally provide the agent with an opportunity to cease the competing activity, rather than terminating immediately. In Fryer, the agent was obliged to notify and seek approval for competing accounts and also, unless otherwise agreed by the principal devote his full time to the agency. The principal had not given the agent a real opportunity to cease work for competing accounts, but was permitted to terminate without paying compensation because the agent had demonstrated in other ways that it did not intend to work full time for the principal.
Edward Miller, IDI Country Expert for UK.