Case law: Another business doing sales or marketing work from your premises can be your commercial agent and protected by EU law
Businesses need to investigate whether individuals and other businesses negotiating and/or closing sales for them are their commercial agents, with consequential EU rights and protections, even if they work from the business’s premises and/or carry out functions other than their sales-related work.
This update was published in Legal Alert - February 2019
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A business agreed that a manager employed by another business would work out of its premises. The work comprised negotiating and closing sales for it, and unrelated jobs such as staff management and business planning.
The manager’s employer argued that the agreement between the two businesses amounted to a commercial agency. This was important because under EU law, a business (the ‘principal’) which has appointed a commercial agent to negotiate and/or conclude sales of its goods to potential customers on its behalf must usually pay compensation to, or indemnify, the agent if the agency is terminated. The amounts involved can be significant.
A ‘commercial agent’ means a business with ongoing authority to negotiate the sale of the principal’s goods to third parties. Sometimes the agent can also conclude sales on the principal’s behalf.
In this case, the other business argued that its agreement was a contract for work, and not a commercial agency. It relied on the fact that the manager, on behalf of the employer:
- operated from its premises; and
- did work that was unrelated to the negotiation or closing of sales of goods.
The Court ruled that a commercial agency could still exist where the agent operates from the principal’s premises, if the arrangement does not fetter the agent’s ability to carry out its duties independently of the principal.
It also ruled that the fact an agent is also carrying out tasks unrelated to its agency work does not stop the commercial agency rules from applying - as long as carrying out those tasks does not compromise the agent’s independence and provided its agency work is at least as important as those other tasks.
- Businesses need to investigate whether or not individuals and other businesses finding, negotiating and/or closing sales for them are their commercial agents, with consequential EU rights and protections, taking into account that they may be agents even if they work from the business’s premises and/or carry out other functions than their sales-related work.
Case ref: Zako SPRL v Sanidel SA, Case C-452/17
Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.
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