Not every breach of an agency agreement by the agent results in the loss of entitlement to an indemnity.<\/p>\n
\ud83d\udeab An indemnity will not be payable if three conditions are met together:<\/p>\n
\u27a1\ufe0f the principal terminated the agency agreement;<\/p>\n
\u27a1\ufe0f termination was prompted by circumstances for which the agent was responsible;<\/p>\n
\u27a1\ufe0f those circumstances were sufficiently serious to justify termination without notice.<\/p>\n
\u26a0\ufe0f Merely proving that the agent breached the agreement is not enough.<\/p>\n
A connection between the breach and the decision to terminate must also be established. The agent\u2019s conduct must have been the actual reason why the principal ended the relationship.<\/p>\n
\ud83d\udccc Example<\/p>\n
The principal terminated the agreement on notice. Only later did it discover that the agent had previously committed serious breaches that could have justified immediate termination.<\/p>\n
In such a case, the subsequent discovery of the breaches will generally not deprive the agent of an indemnity, because those breaches were not the reason for termination.<\/p>\n
\u26a0\ufe0f This does not mean that they will be irrelevant.<\/p>\n
They may be considered in assessing equitable considerations and, depending on the circumstances, may affect entitlement to an indemnity or its amount.<\/p>\n
\ud83d\udccc Must the principal terminate the agreement with immediate effect?<\/p>\n
No.<\/p>\n
If a breach was serious enough to justify termination without notice, the principal may nevertheless choose to give notice. This may be justified by the need to ensure business continuity, hand over customers or find a new agent.<\/p>\n
\u26a0\ufe0f The crucial point remains to identify and document the reason for termination properly. The circumstances in which the relationship ended should clearly show that the agent\u2019s breach prompted the termination decision.<\/p>\n
\ud83d\udccc Conclusion?<\/p>\n
A litigation strategy for an indemnity dispute with an agent who has breached the agency agreement should be developed before the relationship ends. Properly analysing the nature and seriousness of the breaches, then identifying the reason for termination correctly, can significantly strengthen the principal\u2019s position in a potential dispute. Shortcomings at this stage may make it harder to prove later that the agent\u2019s breaches were the actual reason for termination, depriving the principal of an important argument against the indemnity claim.<\/p>\n","protected":false},"excerpt":{"rendered":"
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