Achieving a happy ending to an agency relationship

Appointing an agent is commonplace, but bringing such relationships to an end can be problematic. A case involving couture house Jenny Packham is the latest illustration of the difficulties that can beset the ending of an agency.

Since late 2008 Jenny Packham’s exquisite eveningwear has been sold directly from its new Mayfair showroom. Prior to that time an agency, Claramoda, was the exclusive agent in the UK for the mainline eveningwear collection, which was shown to boutiques and department store buyers through Claramoda’s own showroom.

When Jenny Packham decided to take its sales in-house, it was anticipated that the collection for the Spring/Summer 2007 season (being sold until the end of October 2006) would be the last collection sold by Claramoda. However, there then followed a period where some activity was carried out by Claramoda, and it claimed that there was a suggestion that it may still be called upon to sell the next season if the alternative arrangements were not in place. In the event, the Autumn/Winter 2007 collection was able to be sold in-house, however, the parties did not agree when Claramoda ceased to act as agent. Claramoda argued that this was not until January 2007 when a letter was sent to customers informing them of the new arrangements, but Jenny Packham said that Claramoda’s authority as agent ended when the main collection orders were finalised in October 2006.

The Commercial Agents (Council Directive) Regulations 1993 (the “Regulations”) entitle a commercial agent to certain compensation arising from termination of the agency, but an agent has only one year after termination to notify that it will pursue a claim. The issue considered by the Court in this case was precisely when the agency ended, and therefore whether Claramoda’s notification in November 2007 was given too late.

The Court found that although no order forms were submitted by Claramoda after October 2006, its activities in handling email enquiries from customers about particular dresses and amendments to orders amounted to continuing activities of an agent. The Court said that an agency contract did not necessarily terminate when the agent ceased to negotiate sales. It decided that the agency terminated in January 2007 and therefore its notification was in time. The case will therefore progress to a full hearing to decide the level of compensation, unless the parties reach agreement.

This case, which was on a discrete question of fact, shows the importance of clarity of communications. The advice to any company contemplating terminating a relationship with its agent is certainty: give a firm date for the termination. If it has to be changed because of altered circumstances, record what has been agreed between the parties in writing. A further problem encountered in this case was the absence of any formal contractual documents. This leaves open the possibility that the parties may have an imperfect recollection of important issues, such as the extent, nature and duration of the agency. In addition, the Regulations apply a statutory notice period where none is agreed between the parties. It is, therefore, preferable to confirm all commercial relationships with third parties by a written contract, which can often be short and straightforward.

Another novel point discussed in this case is the issue of the length of the selling season: the Court said it was unclear whether it ended with the placing of orders for one collection followed by a gap until the activities begin some months later for the following season’s collection; or if the selling season for one collection was ongoing until the launch of the next collection. Care should be taken when making agreements by reference to a “selling season” as it is not clear how the Court will interpret this phrase.