This case concerned the entitlement of an agent, Spectrum Agencies (“Spectrum”), to compensation for the damage it suffered as a result of the termination of its agency agreement by the principal, Crocs Europe BV, under the Commercial Agents (Council Directive) Regulations 1993 (“the Regulations”). The ability of Spectrum to claim damages under these Regulations in this case turned on whether or not there had been a repudiatory breach (a repudiatory breach is a breach of contract which is sufficiently serious to entitle the innocent party to the contract to terminate it with immediate effect).
In such circumstances, the Regulations deprive an agent to a right to compensation. Crocs Europe had sought to terminate its agreement with Spectrum for a repudiatory breach, following a posting on a website of a piece described as “the Crawl” by an employee of Spectrum. This posting was unfavourable to Crocs Europe but Spectrum argued that the Crawl was a light hearted joke based on a typical working day of their customer services team and their alleged battle to get service from Crocs Europe.
At first instance, the High Court held that the Crawl did not amount to a repudiatory breach. The Court of Appeal held that the evidence available was sufficient to support the Judge’s decision at first instance so immediate termination was not justified. In doing so, the Court of Appeal rejected an argument by Crocs Europe that Regulation 3 of the Regulations, which require a commercial agent to look after the interests of his principal and act dutifully and in good faith, operated by way of a condition entitling termination of the agreement if breached. Although Regulation 3 was found to have been breached at first instance, the Court of Appeal considered there was no basis for the argument that it implied fundamental conditions into the agency agreement so that its breach would always be repudiatory.
In the absence of a repudiatory breach, Spectrum was entitled to compensation under the Regulations. For advice on the Commercial Agents (Council Directive) Regulations 1993 contact Marie-Louise King, Partner in Druces LLP’s Litigation & Dispute Resolution team