An agency agreement can be terminated by operation of law, or as agreed between the parties. The parties may provide for circumstances, for example breach of contract, which will terminate the agreement.
The operation of law may result in the termination of the agreement where:
- the term has expired: parties must note that agreements governed by the Regulations will convert the agreement into an agreement for an indefinite period if the parties continue to perform the agreement;
- a party has become bankrupt;
- the agreement is for the performance of a particular role and this has been concluded;
- frustration has occurred and the performance of the agreement is not possible;
- misrepresentation by one or more of the parties and the agreement is rescinded;
- a fundamental mistake relating to the agreement is at issue and the agreement must be set aside; and
- the agreement requires an illegal act to be carried out in order to comply with the terms of the agreement.
The duration of an agency agreement may be agreed between the parties and they are usually for a fixed term. In circumstances where the term of the agreement has expired but the parties continue to perform under the agreement, the Regulations provide that the agreement shall continue for an indefinite term.
Common law principles apply to the termination of the agreement and where there is no express provision for notice in the agreement, the principles dictate that such notice must be reasonable. What is reasonable shall be determined by the circumstances of what has been agreed between the parties. Where an agency agreement is operating for an indefinite term, reasonable notice shall be determined by the amount of time the agreement has been in place. As such, the Regulations provide:
- an agreement of one year requires one month's notice;
- an agreement of two years requires two months' notice; and
- an agreement of three years or more requires three months' notice.
The notice periods set out in the Regulations are mandatory notice periods and cannot be derogated from. Where sufficient notice has not been given, the commercial agent may pursue a claim for damages.
The Directive provides that after an agency contract is terminated, the commercial agent will be entitled to commission on a transaction in the following circumstances:
- if the transaction is mainly attributable to the commercial agent's efforts during the period covered by the agency contract and if the transaction was entered into within a reasonable period after the contract terminated; or
- if the order of the third party reached the principal or the commercial agent before the contract terminated (and the agent would be entitled to commission under the Regulations).
To cover the possibility of one commercial agent immediately succeeding another and both being entitled to commission under the Regulations, the Regulations provide that the new commercial agent will not be entitled to commission unless it is equitable in the circumstances that the commission be shared.
The commercial agent may be entitled to compensation upon termination of the agreement. Compensation is payable for damage suffered by the commercial agent as a result of the termination of the commercial agent’s relations with the principal. The principle of compensation applies in Irish law which differs from the position in the UK, where the concept of indemnity also exists.
The general approach to appropriate compensation in Ireland is typically that the level of compensation should be fixed at the global sum of the last two years’ commission, or the sum of two years’ commission calculated over the average of the last three years of the agency contract. Various factors will impact on the calculation.