Commercial Law

[1]The scope of Charlie's (A) agency would depend on what type of authority he has been given by McChocolate plc - the Principal (P). We are told that A is a contractual agent who would act exclusively as a self-employed seller of chocolate for P. Given the fact that P has given prior consent to A to the effect that he would make all decisions concerning contracts for sales of chocolate, thus altering P's position in relation to third parties, A can be said to have 'actual authority'. As explained by Lord Diplock LJ in Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480, actual authority will be conferred on A under the terms of the agreement of the contract between them and applying ordinary principles of construction of contracts.

[2] A's 'actual' authority will be twofold: from the facts, it does not appear that (A) is restricted in any way as to how he is to perform. In Ashford Shire Council v Dependable Motors Pty Ltd [1961] AC 336, the Privy Council held that whereby A has authority in the form of a document not under seal or orally, it is construed liberally, with regard to the purpose of agency and the usages of such language in trade or business. Thus, A would have express 'actual' authority.

[3] Similarly, A would also appear to have implied actual authority. This is illustrated by the case of Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549. As Lord Denning MR explained, it is implied when it is inferred from the conduct of the parties and the circumstances of the case, in effect, P authorises A to do all such things as fall within the usual scope of that office. Given that P has not by any express words restricted the mode of how is to A is to perform then he could be said to have customary authority. In other words, A has the implied authority to act in accordance with the usages and customs of the particular market place or business in which he acting, so long as those usages or customs are reasonable and lawful.

[4]In addition, A appears to have apparent or ostensible authority. However, three factors must be present to give rise to apparent authority. This was best explained by Slade J in Rama Corpn Ltd v Proved Tin and General Investments Ltd [1952] 2 QB 147: (i) P must have made a representation to a third party that A had the authority; (ii) the third party relies on that representation; and (iii) the third party alters his position in reliance to the representation. In effect, it would depend on what representations P makes to third parties. Where these elements are satisfied, P is estopped from denying that A has such authority.

b) What steps may Charlie take in respect of the orders taken directly by McChocolate plc?

[1]The Commercial Agents (Council Directive) Regulations 1994, commonly known as the Commercial Agents Regulations (the regulations) came into effect on 1 January 1994 to govern the relationship between Principals and Commercial Agents in the EU. For A to qualify under the regulations, he must meet the criteria as stipulated in Reg 2.

[2] A would qualify as he is a self-employed seller or intermediary 'who has continuing authority (Light v Ty Europe Ltd [2000] EWHC 174 (QB) to negotiate the sale or purchase of goods on behalf of P, or to negotiate and conclude the sale or purchase of goods on behalf of and in the name of that P" in accordance with Reg 2. (1); (Parkes v Esso Petroleum Co Ltd (1999) 18 Tr LR 232).

[3] Under Reg 7(2), A would be entitled to commission on transactions concluded during the period covered by the agency contract as he has been given the exclusive right to the EU specific geographical area or to a specific group of customers, so long as transacts with a customers belonging to that area or group.

[4]Therefore A has a right to earn commission and this should be paid during the period of his agency contract (Reg 7(1)). Thus as he is selling the chocolate, it is considered altering the contractual position of P with respect to third parties (Reg 7(1)(a)). Furthermore, if this results in repeat orders for chocolate then he will be entitled to commission based on the transaction of the same kind (Reg 7(1)(b).

[5] A would also be entitled to commission on transactions concluded after the contract has been terminated. Under Reg 8(a) and (b), subject to Reg 9(1), A would be entitled to the commission in full for contracts attributed to his efforts in procuring them up to the time he was the P's commercial agent or a reasonable time after the contract was terminated. In addition, any orders placed directly with P or A himself before the agency terminated.

[6] In order to ensure that he is getting the correct commission, not only for the orders that he has sold, but also for the contracts that P have concluded with customers within the EU. Under Reg 12(2), A is entitled to demand that he inspect the P's books to check the amount of commission due to him.

c) What remedies are available to Charlie in relation to his 50% decrease in his commission?

[1] The first point to consider is the duties of A to P and vice-versa under the Regulations to see if there has been any breach of the terms. Regulations 3 and 4 set out the duties and obligations on behalf of both A and P. These duties are implied into the terms of the contract and cannot be derogated from (Reg 5). Under Reg 3, the duties of a commercial agent to his principal are:

a) A must look after the interest of P and act dutifully and in good faith;

b) A must make proper efforts to negotiate and where appropriate conclude the transactions as instructed by the P;

c) A must communicate to P all necessary information to him and

d) A must comply with reasonable instructions by P.

Equally, under Reg 4, the duties of a Principal to his commercial agent are as follows:

a) P must also act dutifully and in good faith;

b) P must provide A with all relevant documentation in relation to the goods concerned;

c) P must obtain for A all information necessary for the performance of his contract and notify A within reasonable time if he anticipates the volume of commercial transactions will be significantly lower than the agent could normally have expected;

d) P must inform A within a reasonable period of his acceptance or refusal upon any non-execution by him of a commercial transaction which