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.

America – By the People, For the Lawyers!

In our founding documents it states that the United States of America is a nation built by the people and for the people. Unfortunately most of the laws in our society and civilization have been reshaped by lawyers and sometimes in a self-serving way. One cynical person in our online think tank stated; “America; By the People, For the Lawyers!”

Of course immediately one of the lawyers in the group labeled him a cynical person, which he immediately admitted freely. But he said; “just because I’m a cynic does not mean I am not correct.” So the question is what do you think? This is an article of pure opinion as you can tell.

Are we still a nation built by the people and for the people or are we a modified hybred; being built by the lawyers and for lawyers. If lawyers make our laws and we have to hire a lawyer to tell us what those laws are and then hire another lawyer if those laws are inadvertently or accidentally broken then who are we truly serving; ourselves “The People” or the lawyers to whom we have to pay money to for advice on how to live or run our businesses.

The cynic in the group suggested that in his business, which is a successful construction firm, he had to call his lawyer every time he wanted to use the company restroom to make sure it was okay? Indeed, it has not got that bad yet, but it surely could at the present rate in my humble opinion.

I certainly hope this article is of interest and that is has propelled thought. The goal is simple; to help you in your quest to be the best in 2007. I thank you for reading my many articles on diverse subjects, which interest you.

Safe Gun Storage Federal and State Laws

Safe gun storage laws are in effect in most all States to prevent accidents in homes especially where children are involved. The ATF (Federal Bureau of Alcohol, Tobacco and Firearms) has a mandate in place for gun selling facilities which states that firearms are to be secured in safes or have trigger locks installed to prevent firing. The selling establishment has to sign a certification form that they comply by this law. This law is required by all states.

Just to mention a few of the state’s safe gun laws, in Texas, as well as other states, a firearm sales facility has to place a sign somewhere visible to all customers buying rifles, shotguns and pistols in their store that says ” It is unlawful to store, transport, abandon an unsecured firearm in a place where children are likely to be and can obtain access to the firearm” (information taken from The Firearm Laws of Texas) or a similar statement.

In New York State, all retailers that sell firearms to customers, whether they are new or used, must provide some type of locking device with their purchase such as trigger locks, cable locks, etc. These locks do not need to be installed when sold and each device must meet certain requirements that prevent firearms from being fired. This law does not apply to sales between dealers. New York does not require buyers to secure their firearms with these devices but it is highly recommended they do. Firearm owners should check with their local authorities to determine if there are any local ordinances require otherwise. There are codes within the state that states it is a criminal violation punishable by up to 10 days imprisonment and/or a fine up to $250 for any owner to store or leave a firearm in such a manner that is out of their immediate possession or control, without making the weapon inoperable by installing a safety locking device.

While these required types of locks do protect firearms from being fired, they do not prevent them from being stolen once the buyer places them in their home. Gun cases and wood gun racks do not deter gun theft and do not qualify as safe storage. They should be secured in locking devices such as locking gun racks, firearm safes, etc. to add extra security.

Several states have passed laws that make firearm owners criminally liable if someone is injured because a child gains unsupervised access to a gun and can issue fines or jail time where children are involved depending on the circumstances.

Florida, as well as other states, has several laws and regulations regarding safe gun storage in homes as well as in vehicles. The state of Florida’s major concern is the safety for children. Anyone in violation of improper storage of firearms where children can have easy access could be subject to up to 60 days in jail and a $1000 in related fines.

The state of California, like in most all other states, requires all firearms be stored in a safe and secured manner. They also require all retail sales of firearms include a Department of Justice locking safety device or proof that the purchaser owns a firearm safe that meets regulatory standards established by the department. The types of approved devices can be found on the Department of Justice’s website…

Since State laws are constantly changing, this article is for general information and not for official use. You can check with your state and local authorities for current updates pertaining to safe gun storage laws.

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