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Case Note: Commercial Agents Right to Compensation

Thursday, 24 May 2012

Rosetti Marketing Ltd v Diamond Sofa Company Ltd and another [2011]

This case concerns The Commercial Agent's (Council Directive) Regulations 1993 which were introduced to regulate the relationships between commercial agents and their principals.

Rosetti considered a number of issues regarding this relationship including:

  1. whether an agent acting for multiple principals qualified as a commercial agent within the regulations;
  2. whether a commercial agent acting for multiple principals was in breach of their duty good faith and loyalty; and
  3. whether a commercial agent acting for multiple principals was conducting 'secondary activities' within the meaning of the regulations and that the regulations did not therefore apply.

Definition of a Commercial Agent

In the words of the legislation, a "commercial agent" means 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 that principal.

Case Facts

In Rosetti an agency agreement was originally made between the first defendant and the second defendant. The second defendant held a number of such agreements with other businesses for similar but non-competing products. During the course of its agreement with the first defendant it entered into two further agreements with other parties.

When the first defendant's products suffered some negative publicity, the second defendant transferred its other agency agreements to the claimant to avoid the products of its other principals being affected by the negative publicity. Both the claimant and second defendant were owned by the same individuals.

After several months the first defendant terminated the agency agreement and the claimant brought a claim for loss of agency against the defendants.


In relation to the issues at hand, the court held:

  1. A commercial agent that acted for multiple competing principals could not be excluded from the definition of a commercial agent as defined in the regulations. It was clear that the claimant could negotiate and conclude the sale or purchase of goods on behalf of and in the name of the first defendant as principal.
  2. The duty of good faith and loyalty that applied to commercial agents applied in this case. There were no express terms in relation to this issue regarding multiple principals but the terms were implied by the knowledge of the parties. The first defendant knew of the existence of the other agency agreements and did not object.
  3. The regulations were not disapplied by the exclusion for agents engaged in 'secondary activities' because acting for multiple principals was not considered as secondary within the regulations, particularly where the other tests had been met.

If you need advice in respect of commercial agency agreements Rollingsons has experienced lawyers who can assist you; for more information please contact James Crighton via e-mail or by telephone on 0207 611 4848.