In the case of Sagal (trading as Bunz UK) v Atelier Bunz GmbH the Court of Appeal was asked to interpret the definition of ‘commercial agent’ in the Commercial Agents (Council Directive) Regulations 1993 (the Regulations).

Background

Article 2(1) of the Regulations defines a commercial agent as:

“a self-employed intermediary who has continuing authority to negotiate the sale or purchase of goods on behalf of another person (the “principal”) or to negotiate and conclude the sale or purchase of goods on behalf of and in the name of the principal”.

Facts

Sagal and Atelier agreed that Sagal would be Atelier’s sole agent in the UK for the sale of Atelier’s platinum jewellery. Sagal began trading as Bunz UK. Business was done in the following way:

Atelier:

  • Supplied sample jewellery;
  • Insured the sample jewellery and jewellery orders until they were safely delivered to the customer;
  • Dealt with all returns and repairs; and
  • Supplied marketing and promotional material for Bunz UK to use.
  • Sagal:
  • Obtained orders from customers and provided a confirmation of purchase in its own name;
  • Faxed orders through to Atelier. Sagal itself did not hold any stock;
  • Invoiced the customers and was free to charge a mark up on the prices;
  • Supplied customers with standard terms and conditions that regulated the contract between the customer
  • and “the Company”. Both the High Court and the Court of Appeal accepted the evidence that “Company”
  • in the terms and conditions referred to Bunz UK.

A dispute arose between the parties and it was necessary to decide whether Sagal was a commercial agent within Article 2(1) of the Regulations (this would be relevant to the payment of compensation on termination of the agency). The question went to the Court of Appeal.

Decision

The Court of Appeal referred to the second limb of the definition of commercial agent in Article 2(1). It said that agents with authority to contract (as opposed to agents with authority only to negotiate) are only commercial agents falling with the scope of Article 2(1) if they have authority to contract (and do contract) in the name of the principal and on his behalf. The name of the principal needs to be on the face of the contract with the customer. A trader would not be a commercial agent within Article 2(1) where he contracted in his own name and on his own behalf.

Here, the standard terms and conditions demonstrated that Sagal was contracting in his own name with customers. He was not, therefore, a commercial agent within the Regulations.

The Court of Appeal also said that the documentation will be key in indicating whether an agent is a commercial agent. It would consider only the documentation and if this was decisive other inconsistent evidence would be ignored. The Court of Appeal said, by way of example, that an agent’s ability to charge a mark up on sales would generally be inconsistent with that agent being a commercial agent. However, if the relevant documentation suggested that he was, then the documentation would prevail.

Comment

This decision is helpful in clarifying what factors the court will take into account in determining whether an agent is a commercial agent and appears to be pro-business in focusing on the form rather than the substance of a trading relationship. It emphasises that the documentation will play a very important role in determining whether a commercial agency exists.

Further reading

Click here for a copy of the judgment