Commercial agent compensation

The compensation due on termination of agency agreement under the laws of England and Wales is regulated by the Commercial Agents (Council Directive) Regulations 1993 and subsequent case law.

Termination of Agency

Who can claim compensation?

Commercial agents are self-employed intermediaries who have continuing authority not just to negotiate but also to conclude the sale or purchase of the goods on behalf of the principal. The Regulations impact on most agency agreements whether written or oral. On termination (whether by notice, retirement or death), commercial agencies (or their estate if they die) are entitled to compensation or indemnity, depending on the agreement.

How is compensation calculated?

The calculation of compensation in England and Wales was determined by Lord Hoffmann in the 2006 landmark House of Lords decision Lonsdale (trading as Lonsdale Agencies) v Howard & Hallam Ltd [2007] UKHL 32. Lord Hoffmann set out the interpretation of the Regulations that the courts in England & Wales should apply. He explained that compensation should be calculated as the amount which a hypothetical purchaser would be willing to pay “to have been able to take over the agency and stand in the shoes of the agent”. He also affirmed that a commercial agent is entitled to be compensated for the value of his agency at the termination date, on the assumption it is an assignable asset, even if this is not the case, which is why he uses the term “hypothetical purchaser”.

Our experience of quantifying compensation

Our founder, Charles Lazarevic, and his team have been appointed to quantify the compensation due under the Regulations on termination by principals and agents, and occasionally jointly by both parties.

He is the author of the chapter on the quantification of compensation due on the termination of commercial agencies under these Regulations in Susan Singleton’s book: Commercial Agency Agreements Law and Practice, Fifth edition (February 2020) and earlier editions.

Charles provided expert valuation evidence in a case concerning the termination of a commercial agency.

He is a pleasure to work with and his expertise in this field was clear to all involved in the case.

Laurence Katz
Gunnercooke LLP

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