Legal Updates

Commercial Law – Agency – Termination – Conditions – Repudiation – Commercial Agents 

• The respondent (“S”) had been the appellant’s (“C”) UK agent for the sale of C’s footwear products;
• Some of S’s employees posted comments about C on a website, which S claimed to be a joke about C’s failure to respond to orders;
• A URL to the website was sent to C and some of C’s customers and distributors;
• C claimed that the comments disparaged the very products that C had appointed S to sell and that this constituted a repudiation of the contract;
• The judge held that there had been a breach, but this was not sufficiently serious to be repudiatory.

• Regulation 3 of the Commercial Agents (Council Directive), should be read as a condition and thus a breach of which entitled the principal to terminate the agency agreement. C deemed the judge to be wrong in holding that a breach of duty under regulation 3 of the Directive only entitled the principal to terminate the agency contract, if it was “sufficiently serious”;
• C was entitled to terminate the contract due to S’s breach of fiduciary duty;
• S’s conduct had been sufficiently serious to be repudiatory;

• Regulation 3 did not create a condition of the contract which would automatically terminate the agency agreement if breached;
  • Regulation 3 merely sets out the obligations of the agent;
  • Regulation 5(2) expressly provides for the consequence of a breach, thus no implication could be made.
• C’s submissions pertaining to fiduciary duty were not substantiated by the general principles of fiduciary law;
  • Not all fiduciary duties, if breached, automatically repudiated the contract;
  • Breaches of fiduciary duty are capable of other remedies, depending on the parties’ intentions and the circumstances surrounding the breach.
• The judge was correct to address the question of seriousness of C’s conduct, in all circumstances. The judge’s assessment of the evidence led him to view the breach as not sufficiently serious to justify summary termination, in particular:
  • The website did not disparage C’s goods, but instead referred to its inability to meet its delivery obligations, which was well known;
  • The website was as a joke, which was obvious;
  • There was no evidence of harm suffered by C.
• Although there had been a breach of contract, it did not go to the root of the agency relationship and was considered a one-off incident, without the element of bad faith;
• C’s appeal was dismissed.