As we explained in earlier posts, how an agency agreement ends may be decisive for the agent’s entitlement to an indemnity. To recap:
➡️ If the principal terminates the agreement, the agent is generally entitled to an indemnity. We discussed the exceptions in earlier posts.
➡️ If the agent terminates the agreement, an indemnity is generally not payable… Again, subject to certain exceptions discussed previously.
Transferring an agency agreement
❗ That is not the whole story. The Civil Code provides another way to end cooperation with a particular agent which causes them to lose their right to an indemnity: the agent transfers their rights and obligations to another person.
If the agent transfers the agency agreement — strictly speaking, the rights and obligations under it — to another person, they lose their right to an indemnity.
Implications for the new agent
⚠️ This way of ending the relationship with the outgoing agent also has significant implications for the new agent.
Legal commentary recognises that customers acquired by the first agent are “credited” to the new agent. When the new agent’s entitlement to an indemnity is assessed later, customers acquired by their predecessor may therefore be treated as though the new agent had acquired them.
Conclusion
How a change of agent is carried out may affect both the outgoing agent’s claims and their successor’s future claims.
Transferring the rights and obligations under an agency agreement to a new agent causes the outgoing agent to lose their right to an indemnity. At the same time, it may result in customers acquired by the predecessor being attributed to the new agent, potentially increasing the significance of the new agent’s future indemnity claim.
