Source: https://www.technology-law-blog.co.uk/2015/11/commercial-agency-where-the-principal-cannot-have-his-cake-and-eat-it-too.html
Timestamp: 2019-07-17 02:20:05
Document Index: 206627154

Matched Legal Cases: ['art 1', 'art 2', 'art 2', 'art 2', 'art 1', 'art 2', 'art 2']

Commercial agency: where the principal cannot have his cake and eat it too - Mills & Reeve: Technology Law Update
« Recycled maps for cyclists, and whether it's time to revisit database right | Main | A tax on trade marks »
Commercial agency: where the principal cannot have his cake and eat it too
On termination of a commercial agency agreement the agent is normally entitled to either an indemnity or compensation. This is a lump sum payment to reward the agent for the goodwill it has developed for the principal. They can agree by contract which option they prefer. But in the absence of agreement, the agent is entitled to compensation.
The courts have looked at this in a recent case between a Californian luxury fashion company and its UK sales agent (Brand Studio Ltd v St John Knits Inc), and considered the interaction between compensation and indemnity.
The clause of the agreement dealing with termination remedies was split into two parts:
Part 1: on termination, the agent would be entitled to an indemnity;
Part 2: but where the indemnity payable would be more than the compensation that would be due, the agent would be entitled to compensation instead.
If part 2 was valid, the principal (St John Knits) would clearly be in a better position. It could pick and choose the applicable remedy and the agent would only ever be entitled to the lower sum.
Interestingly, both sides accepted that the clause as it stood was invalid. The dispute centred on whether or not you could cut away (sever) part 2 of the clause, leaving part 1 behind.
If you could cut away part 2, then the agreement provided for an indemnity on termination - capped at one year’s average commission.
If you could not, the whole clause was invalid. This meant that the agreement was silent on the question and so the agent would be entitled to compensation - unlimited and open to negotiation.
The judge said that part 2 could be severed. So the choice of an indemnity was valid.
The lesson to learn from this ruling is that the indemnity or compensation election is just that, one or the other. The principal cannot have his cake and eat it too.
Posted by Isabel Teare on 16/11/2015 at 09:52 | Permalink