Agency is a Matter of Fact

Under EU law, agents have a degree of protection which mere resellers do not. For example, when an agency is lost, the agent is normally entitled to compensation from the principal. This does not apply where the relationship is one of a supplier and reseller. It is therefore important in such cases to know whether the relationship is one of agency or supplier and reseller.

In a recent case, a man who sold jewellery on behalf of a firm claimed that he was a commercial agent as defined by the Commercial Agents (Council Directive) Regulations 1993. When the business relationship ceased, he sought compensation for the loss of his agency. His argument was based on the fact that he was the only UK supplier of the jewellery (which was made in Germany) and ordered from the manufacturer only when he had received an order from a jewellery shop.

However, the arguments against a commercial agency being in effect were strong. The man bought and sold through his own accounts, invoicing his customers in his own name and accounting to the supplier as a principal. His accounting records reflected that position. In addition, he had no authority to negotiate on behalf of the supplier.

The court could find no reason to impute into the business relationship something that was not there. As a matter of fact, there was no agency and no compensation was therefore due.

When making ‘reseller’ arrangements, it is important to make sure the nature of the business relationship is clearly understood. We can assist you in drawing up the necessary agreements to establish an agency or a ‘supplier/reseller’ arrangement.