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Termination of authority

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For a principal to terminate all obligations resulting from his agent, both the agency agreement must be terminated, which terminates the agent’s actual authority, and the apparent authority of the agent must also be revoked. After this has occurred, if the agent is a commercial buy alprazolam .25mg agent, within the meaning of the Commercial Agents (Council Directive) Regulations 2003, the principal may still be obliged to pay the agent on termination. A principal is also entitled to terminate the authority given to his agent at any time, according to Warlow v Harrison (1859). This termination may give rise to financial obligations (such as damages for breach of contract), but this does not prevent the authority of the agent from being terminated.

Termination of actual authority

The most common way for actual authority to be terminated is through the terms of the agency agreement. The agreement may automatically terminate after an agreed period of time, or upon the completion of the agent’s objectives, as occurred in Blackburn v Scholes (1810). Actual authority may also be terminated in law, for example due to illegality, as in Sovfracht v Van Udens (1943) where the agent became an alien upon the outbreak of World War II. Similarly, frustration, or an agent’s repudiatory breach of contract (following election by the principal) will terminate actual authority. It may also be unilaterally revoked. Finally, the demise or incapacity of a principal will usually terminate an agent’s actual authority: in Yonge v Toynbee (1910), solicitors were liable for acting without authority when their principal had lost his capacity and in Lodgepower v Taylor [2004], an agents service of notice or repairs to a principal’s tenant was rendered invalid by the death of that principal (landlord). The only exception to the rule of termination on loss of capacity is where a statutory lasting power of attorney allows another person to make decisions on behalf of a principal after that principal has lost his capacity.

Irrevocable authority

There is one exception to the Warlow v Harrison (1859) rule that a principal may unilaterally terminate his agent’s authority at any time. As illustrated by Guassen v Morton (1830), if an agent attains his authority by deed and the consideration provided by the principal is to secure a pre-existing interest of the principal, that authority is irrevocable. In Guassen v Morton (1830), a principal authorised an agent to sell some of his land to pay off a debt which the principal owed to the agent. The principal was unable to revoke the authority. It should be noted that merely the fact that an agent might gain from the conferral of authority does not qualify as a pre-existing interest.

Termination of apparent authority

Apparent authority, as has been previously mentions, is not generated by agreement, but by a representation made by the principal to the third party. In Rockland Industries v Amerada Minerals Corp of Canada [1980], actual authority had been terminated, but a principal was still bound my his agent’s apparent authority, which had not been terminated; the third party knew not of the termination. Drew v Nunn (1879) also found that insanity did not revoke apparent authority, only actual authority. Although the agent could have been sued for breach of warranty.

Financial consequences of termination

At common law, if an agency agreement is lawfully terminated, no obligations will be imposed on a principal. Where there is unlawful termination, damages may flow from the termination if damage was caused as a result. Specific performance will not be ordered to resurrect agency agreements.

The Commercial Agents (Council Directive) Regulations 1993 has much more to say about termination. Regulation 17(1) provides that the good will generated by the collective enterprise of a principal and a commercial agent endures through termination. Termination therefore obliges a principal to remunerate the agent by way of either compensation or an indemnity. Moore v Piretta [1998] confirmed that the termination of an agency contract, within the meaning of regulation 17(1) refers to the termination of the ‘agency’, which excluded renewals of an agent’s contract. In Tigana v Decoro [2003], it was confirmed that regulation 17 operates on lawful termination as well as unlawful termination. In Ingmar v Eaton Leonard [2000, ECJ], the European Court of Justice found that regulation 17 (and the rest of the regulations) was effective upon a principal whose agent simply traded in the European Union; it was irrelevant that the agency contract was concluded in California, USA.

The two options for post-termination remuneration result from the French and German disagreement over the appropriate remedy. The default remedy, according to regulation 17(2) is compensation. According to Shearman v Hunter Boot [2014], an agency agreement may not make the elected remedy conditional (i.e. whichever is lower); if an indemnity is chosen , it must be done so absolutely, or else compensation will apply.

Indemnity

If an indemnity is chosen as the type of remuneration to be provided on termination, it is calculated as follows. Firstly, asses the extent to which the agent has bought in new customers or increased trade volume from which the principal continues to derive benefit; this should not include any commission payable under regulation 8. Secondly, moderate the figure to ensure that it is equitable. Finally, if this figure exceeds the average commission made by the commercial agent over the proceeding 5 years, the amount will be capped at that figure. In Semen v Deutsche Tamoil [2009, ECJ], the European Court of Justice rejected the German approach to indemnity calculation, whereby the lower of the principal’s lost commission or an equitable sum would be payable. The regulations were said to independent of the national remedies from which inspiration may have been derived.

Compensation

If no remedy is chosen by the agency agreement, compensation is the default remedy. Compensation’s purpose is to compensate an agent for damage resulting from the termination, especially where the agent is deprived his fair share of the benefits generated for the his principal or where the agent has been unable to amortize his investment in the principal. Lonsdale v Howard and Hallam [2007] rejected the French approach to the calculation of compensation, whereby the sum would be double the agent’s 3 year average commission, instead opting to calculate compensation as equalling the amount the agency would be worth if it were (fictionally) put up for sale. There is no cap on the amount of compensation awarded.

Exceptions

According to regulation 18, neither compensation nor an indemnity will be payable if: the agent unlawfully terminated the agency contract; the agent assigns his agency contract to another person or the agent terminates the contract. However, if the agent’s termination is on the grounds of circumstances attributable to the principal, or the agent’s age, infirmity or illness such that he could not reasonably be required to continue his activities, regulation 17 will still be operative. According to Abbot v Condici [2005], an agent was still entitled to remuneration under regulation 17 where he wished to retire at 65. He was not required to show any illness or infirmity.

One obvious gap in the regulations is if the principal wishes to terminate his business and compensation is payable. Compensation will be payable, but the agency will be worthless, so the value of the compensation will be £0. Although this may be justifiable if the regulation wished to permit (implicitly) principals to remain in control of their own businesses (no sarcasm intended…).

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