How much notice is required to terminate an agency agreement?

How much notice is required to terminate an agency agreement?

There are a number of different ways by which an agency relationship may terminate in terms of the period of notice required to be afforded by either party to bring it to an end: -

Firstly, there might be a fixed term contract: -

A fixed term contract is where the principal and the agent agree that their relationship will continue for a pre-determined fixed period at the end of which the relationship may either then automatically roll into another fixed term period, otherwise automatically expire, or, and as a third possibility, will thereafter continue for an indefinite period going forward (pursuant to Regulation 14 of the Commercial Agents Regulations), and so that (as then a contract for an indefinite period) it would only in the future be terminable in accordance with the minimum notice provisions as set out in Regulation 15(2) (see below).

Secondly, there is (perhaps) the most likely scenario of the agency terminating after the statutory minimum number of months’ notice is served which minimum period reflects how long the agency has been ongoing, and (unless otherwise agreed) ending on the last day of the final month of the notice period - this is in accordance with Regulation 15(2), which provides that (in the absence of any agreed longer periods of notice pursuant to Regulation 15(3)) where the agency has lasted for less than a period of one year, the required period of notice to terminate it is not less than a month (with, unless otherwise agreed and as stated above, the actual last day of the notice period having to coincide with the calendar end of the final month in question). The minimum period of one month increases to not less than two months where the agency has been ongoing for more than 12 but less than 24 months, and rising to a minimum of three months where the agency has been ongoing for any period longer than two years. An example would be: -

An agency has lasted 15 months, and notice to terminate is served by the principal on 21 January. In that scenario, the agent is entitled to a minimum of two months’ notice (as the agency lasted for more than a year, but less than two years) through to 31 March (i.e.: - as the end of the notice period (unless agreed to the contrary) has to coincide with the calendar end of the month).

Apart from in the instance of any termination due to the default of the other party which would justify immediate termination of the agency contract pursuant to Regulation 16 (again, see below), the minimum notice provisions of Regulation 15(2) cannot be derogated from.

A third possibility (and very similar to the second possibility as per the above) is the agency terminating after a minimum number of months’ notice is served which minimum period reflects how long the agency has been ongoing, but not ending on the last day of the final month of the notice period - this would reflect Regulation 15(4), which provision enables the parties to ‘otherwise agree’ that the end date for a notice to terminate a contract for an indefinite period does not need to coincide with the calendar end of the month. Example: -

Parties have entered into a non-fixed term contract (i.e.:- a contract for an indefinite period) and agreed that the end of any notice period does not require to coincide with the calendar end of any month. The relationship has been ongoing for 15 months and the principal then terminates on 21 January. In that scenario, the agency would then be deemed to have terminated on 21 March.

A fourth possibility (pursuant to Regulation 15(3)) is that the parties agree in the contract that the period of notice to be served will actually be longer than the minimum periods (as explained above and as per Regulation 15(2)), in which case the period of any notice to be served by the principal cannot be stipulated to be any shorter than the period of any notice required to be served by the agent.

A fifth possibility (and as already flagged) is that the principal might terminate pursuant to Regulation 16 on the basis that the agent has fundamentally breached the contract, and so that, in those circumstances, it [the principal] is entitled to terminate without having to afford any notice at all.

A further possibility is that it is the agent who terminates the relationship without any notice on account of legitimate exceptional circumstances as envisaged by Regulation 18(b), such as that the principal has broken the contract in a way and to an extent that immediate termination is then justified (and so that no notice is required to be given by the agent).

The above points all (hopefully) explained, agents should additionally take particular note of the following further points: -

During any notice period, they [the agent] should continue to act and carry out their functions entirely normally until actual termination, as they would still be under contract.

Secondly, where an agent terminates his own contract, he would not ordinarily then be entitled to any form of compensation unless one of the exceptional circumstances as set out in the Regulations apply, all of which potential exceptional circumstances require very careful aforethought and consideration, including where the agent is considering terminating without any notice due to the principal’s breach (which particularly requires very careful assessment and handling in order for it to be confidently classifiable as circumstances entitling the agent to terminate and then be entitled to any form of compensation (including any indemnity)).

? David Bentley, Bentley Agency Law Limited, Bentley & Co Solicitors 7 Littlemoor Road, Pudsey, Leeds, LS28 8AF 

T: - 0113 236 0550 e-mail:- [email protected].

The ONLY law which we practice is the law as it relates to commercial agents.

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Please ensure that you obtain legal advice before acting in reliance upon anything in this article, particularly since each individual’s circumstances may necessitate a unique approach, and also on account of the fact that the law may of course at any time change. Furthermore, please be very clear that the answers given in this column may not cover or otherwise refer to all possible angles, aspects, relevant information and/or points of law and so that all or any information which is given above needs in every instance to be referred for legal advice for clarification and amplification, before being relied upon.