Over Taylor Biggs

The most recent in a line of cases is Sagal v. Atelier Bunz [2009] EWCA  Civ .700.

It has already been established that the Regulations will not apply if the Agent was concluding contracts with customers on his own behalf, rather than on behalf of his principal.  The Court of Appeal has now gone further and said that the Regulations will not apply if the Agent contracts in his own name. 

In brief, Mr. Sagal placed orders for stock with Bunz only when he received orders for the stock from his own customers.  He did not hold any stock but Bunz did insure the UK sample collection held by him.  The stock referred to was various jewellery, designed and manufactured by Bunz.  The contract was oral in nature. 

Bunz provided the stock to Sagal with a 20% discount on wholesale prices.  Bunz then allocated customer numbers to each of the customers.  Sagal invoiced the customers under the name of Bunz UK and Sagal accounted for his purchases from Bunz for VAT purposes.  There were apparently occasions where Bunz agreed a delay in payment by Sagal, pending reimbursement of Sagal by his customers.

Based on the facts, the Court decided that Mr Sagal was in fact a distributor and not an agent of Bunz.  The Court held that it was clear that the relationship was one in which Sagal purchased goods from Bunz for resale.  The various evidence produced to the Court confirmed that Sagal had no authority to negotiate contracts on behalf of Bunz.  It was considered that the agreement to allow late payment by Sagal was more out of the fact that it was a long term relationship and of the nature of an indulgence.  It did not affect the contractual position.  In addition, Sagal's trading accounts and tax returns were not consistent with the existence of a commercial agency.

Conclusion

The following points therefore may be taken away from this case:-

•1.       An agency agreement is unlikely to be within the scope of the Regulations unless:-

•a.       The principal concludes contracts with customers directly, with the agent merely negotiating the contracts; or

•b.       The agent concludes contracts with customers using the principal's name (not the agent's name).

2.         There has been suggestion that this decision provides a way to remove agency agreements from the scope of the protection of the Regulations.  It is suggested that by including a clause requiring the agent to contract with customers in his own name, the parties can, in effect, contract out of the Regulations, which otherwise it is not possible to do.

3.         Both principals and agents should therefore review their contracts to see whether or not the arrangements that they have do, in light of the above case, still fall within the scope of the Regulations or whether they are now outside the scope of the Regulations.

This briefing note is not intended to be a comprehensive guide and does not cover every aspect of the topic and is not intended to provide legal or other advice.