Terminating an Agency Agreement – Breach of a Commercial Agency Agreement – Compensation for Agents

PJ Pipe and Valve Co Ltd v Audco India Ltd [2005], the Court ruled that damages for a breach of a commercial agency agreement should be assessed on a flexible basis according to the particular facts of each case.

The claimant, PJ Pipe, is an agency in the petrochemicals industry, promoting and selling products in this industry. The defendant, Audco, is based in India and manufactures valves some of which are used in the petrochemical industry.

Audco hired PJ Pipe as their agent and entered into two agreements with them. In 2001, they entered into an Agency Agreement granting PJ Pipe the right to sell products as its agent in Nanhai (the “Nanhai Agreement”). In 2002, the two parties entered into a general exclusive agency agreement which gave PJ Pipe exclusive rights to represent six named UK contractors for a period of two years expiring on 31 December 2003 (the “Exclusive Agreement”).

In September/October 2002, Audco breached the Exclusive Agreement by employing an alternative UK agent and by purporting to terminate the Exclusive Agreement with PJ Pipe before the expiration of the term of the Exclusive Agreement.

PJ Pipe accepted the breach and commenced proceedings against Audco for commission and damages under the two agreements.

Regulation 17 of the Commercial Agents (Council Directive) Regulations 1993, SI 1993/3053, , provides: ‘(6) . the commercial agent shall be entitled to compensation for the damage he suffers as a result of the termination of his relations with his principal. (7) For the purpose of these Regulations such damage shall be deemed to occur particularly when the termination takes place in either or both of the following circumstances, namely circumstances which- (a) deprive the commercial agent of the commission which proper performance of the agency contract would have procured for him whilst providing his principal with substantial benefits linked to the activities of the commercial agent; or (b) have not enabled the commercial agent to amortize the costs and expenses that he had incurred in the performance of the agency contract on the advice of his principal.’

The case concerned a number of issues, for instance, whether the claimant was a commercial agent within the meaning of the Commercial Agents (Council Directive) Regulations 1993, SI 1993/3053 (see above) and the approach to be taken in the calculation of the amount of compensation, if any, arising under Regulation 17 of the Regulations. The arguments centred on whether the approach of the French courts should be adopted whereby the level of compensation was fixed as the global sum of the last two years’ commission or the sum of two years’ commission calculated over the average of the last three years of the agency contract, although the court retained a discretion to award a lesser sum.

PJ Pipe argued that a 5% commission rate should have been awarded as this was the standard commission rate in this industry. Audco contended that there was no such standard commission rate but rather the commission rate depended on a number of factors which would reduce the rate to 3.5%.

The Court concluded that:-
the “rule of thumb” commission level in the oil, gas and petrochemical supply business is 5%;
to reflect commercial reality, the 5% figure is not immutable and will be fact sensitive to the relevant case, particularly when either low or large value orders are involved;
for small amounts of work undertaken late in the day, the commission rate would be 4.5%;
where PJ Pipe had simply “opened the door” for Audco in Nanhai the commission rate would be 3%;
PJ Pipe was a commercial agent for the purpose of The Commercial Agents (Council Directive) Regulations (“the Regulations”) as PJ Pipe played a crucial role in effecting introductions, persuading contractors to deal with Audco and assisting with quotations and queries;
in accordance with the Regulations, the Court should gauge the loss to PJ Pipe by the termination of the agency and avoid any double counting;
the Court need not confine itself to the French two-year tariff approach when assessing loss (the global sum of the last two years’ commission or the sum of two years’ commission calculated over the average of the last three years of the agency contract); and
PJ Pipe was entitled to compensation of $118,518.60 under the Regulations as well as damages for loss of commission.
It is likely that Audco will appeal this award.

If you require any advice on drafting or termination of agency agreements, please contact us at [email protected]

© RT COOPERS, 2005.

This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it constitute legal advice. It is intended only to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances.

Different Kinds of Lawyers for Business

Most of the time when people think about lawyers they imagine the lawyers that are seen on television arguing back and forth in order to either prosecute or free a criminal who has created some type of heinous crime. However, criminal lawyers are not the only lawyers that are available. There are lawyers who specialize in just about every industry available. There are civil lawyers, entertainment lawyers and even dui lawyers. If you are ever in trouble and need the services of a lawyer, make sure that you get one who is skilled and trained in the area in which you need advice. For example, it really is not wise to get a general lawyer if you are trying to get a patent or a license. The following are just a few of the lawyers that practice within the business world.

Employment lawyers are required when you are having severe difficulties on the job. This is usually when a person is being harassed because of their sexual orientation, race, gender or disability. Unfortunately, these things happen. When they do, advise management that you are being harassed by fellow co-workers. When it is someone from management that is treating you unfairly, then take this matter to the Human Resource department within your company. Most companies will have policies that say that employees should never be discriminated against, no matter the reason. However, depending on the corporate environment, many companies do not enforce these policies. As a result employees are bullied or harassed, which makes the working environment hostile. However, get a lawyer if your working environment becomes hostile. He can help to get the situation taken care of.

Commercial lawyers are a necessity for any business that wants to remain profitable. A commercial lawyer can ensure that your business is running in an efficient manner. He will also make sure that your assets are property secured. He can also ensure that things such as vendor contracts are in order. Basically, any time that a company enters into a legally binding agreement, it should seek the services of an attorney.

Trademark lawyers handle all matters that deal with trademarks. It is their responsibility to counsel the client about their particular trademark. He should do the proper research and determine if your trademark is safe once you submit an application.

Corporate lawyers are there to handle all legal issues for one corporation. Depending on the size of the business, a corporation can have a whole legal team working within the company or just one person handling all legal matters. Usually anything that has to do with contracts, mergers, acquisitions or product liability will be handled by corporate lawyers.

All in all, there are many different types of lawyers that fill various needs. Although criminal lawyers are more prevalent that other types of legal professionals, this does not mean that they are not the only ones found. There are so many different areas of life in which people need legal advice. There is no way that one lawyer could every business questions that ever comes up. This is why legal professionals choose to become experts and specialize in certain areas of business. This is a good thing for business all around.

Protect Your Business Using Commercial Litigation Lawyers

Running a business is no walk in the park. A person needs to be very careful and innovative while handling a business. Running a business adds up to a lot of responsibilities for the owners and protection of your business is one of those responsibilities. There are a lot of commercial laws that apply to the state in which you have your business and these laws are used to solve any dispute between a company and customers or some other company. It is not possible for the owner to know all about the laws so the best option is to hire commercial litigation lawyers.

A lot of legal issues arise while running a business,like claims and settlements by customers, claims by other businesses, patent laws, premise liability and product liability. To take care of all the issues that might arise, expert lawyers are required who can handle these matters with ease. There are a lot of commercial litigation lawyers who can do this job, but not all will be a great fit for your business. There are a few things to be kept in mind while choosing a lawyer for your business.

Requirements

While choosing a lawyer for your business it is very important to be clear on your needs. Requirements can vary from needing a patents expert for firms where a lot of research work takes place, while securing a claims settlement expert will be needed if you own a hospitality business. The needs depend on the nature of your business and the type of legal issues in which you can fall. So keep these points in mind while you choose a commercial litigation lawyer for your business.

Be patient

It is very important to be patient while choosing a lawyer for your business. A wrong choice may prove damaging to you and your company. You need to be very patient while you search for lawyers and be sure to check out all the commercial litigation lawyers that are available in your area before you choose one. There are many online sites that offer you the service of finding a lawyer for your business. You need to specify your requirements to these sites and they will search for the lawyers that best match your needs. These sites are known to provide accurate results but still it is recommended to cross check on all the options before you finalize your decision.

Thus, it is seen that lawyers play an important role in protecting your business from legal issues. Commercial litigation lawyers provide the required services and make sure that your company never gets mired in any legal issue. They bring you out of trouble by giving you good advice on how to handle certain complicated situations and also help you with the settlements and claims that any customer or rival firm may have with you. If you deal with research then these lawyers can help you out with the patent laws and make sure that all your inventions and intellectual property remain safe and are not copied by any of your rival businesses.

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