One of the most controversial aspects of the Commercial Agents (Council Directive) (as amended) Regulations 1993 (SI 93/3053) is that they regulate the conclusion and termination of agency contracts.Regardless of any agreement to the contrary, either party is entitled, on request, to receive from the other a signed written document setting out the terms of the agency contract, including any terms subsequently agreed.

Any purported waiver of this right is void.Where an agency contract is entered into for an indefinite period, it will be possible for it to be terminated by either party giving notice to the other, provided that the period of notice is one month for the first year of the contract, two months when the second year of the contract has commenced and three months when the third year has commenced and for subsequent years of the contract.

The parties may agree on a longer period of notice.

However, that period may not be shorter for a principal than his or her agent.

Unless otherwise agreed by the parties, the end of a notice period must coincide with the end of a calendar month.Where an agency contract is entered into for a fixed period, but continues to be performed by both parties follo wing the expiry of the fixed period, it will be deemed to be converted into a contract for an indefinite period.

The fixed period will have to be taken into account when calculating the period of notice.An agency contract may be terminated immediately under general law, because of the failure of one party to carry out all or part of his or her contractual obligations or where exceptional circumstances arise.A key feature of the regulations is the entitlement of the agent to an indemnity or compensation for the damage suffered as a result of the termination of the agency contract.

It is generally accepted that this applies also to the expiry of a fixed term contract.The agent will only be entitled to an indemnity if there is a provision to that effect in the agency contract.

If there is not, the right to compensation applies.

The agent's entitlement to an indemnity will arise if and to the extent that:-- the agent has brought the principal new customers or has significantly increased the volume of business with existing customers.

In addition, the principal must continue to derive substantial benefits from the business with such customers (although the regulations do not make it clear whether these are new or existing customers); and-- payment of an indemnity is equitable having regard to all the circumstances and, in particular, the commission lost by the commercial agent on the business transacted with such customers.The regulations cap the amount of the indemnity so that it cannot exceed a figure equivalent to one year calculated from the agent's average annual remuneration over the preceding five years, or a shorter period if the agency contract has been in existence for less than five years.The language of the regulations in respect of the indemnity is such that it is uncertain as to whether the principal can look to see whether the agent has mitigated his or her loss or has failed to perform.

In addition, the regulations provide that the grant of an indemnity will not prevent the agent from seeking damages.

As a result the giving of an indemnity (as an alternative to compensation) is unlikely to be of significant, if any, value to principals.Where the agency contract is terminated by the principal, the principal will be liable to pay compensation to the agent for the damage he or she suffers as a result of the termination of relations with his or her principal.In particular, damage shall be deemed to occur when the termination takes place in circumstances which:-- deprive the agent of the commission which proper performance of the contract would have procured for him or her, whilst providing his or her principal with substantial benefits linked to the activities of the agent;-- have not enabled the agent to amortize the costs and expenses incurred by him or her in performance of the agency contract on the principal's advice.An indemnity or compensation will also be payable if the contract is terminated by the commercial agent as a result of any breach of contract by the principal or on the grounds of the agent's age, infirmity or illness, including death of the agent.However, an indemnity or compensation will not be payable if the principal has terminated the agency contract for breach by the agent justifying immediate termination.

Similarly, if the agent has assigned his or her rights and duties under the agency contract to another person with the principal's consent.In order to obtain an indemnity or compensation, an agent has to notify his or her principal within one year of the termination.

The par ties cannot contract out of the provisions in respect of an indemnity or compensation before the contract expires.All of these provisions concerning the termination of the agency contract are new to English law.

Particular attention will need to be given to the terms regarding compensation.A restraint of trade clause in an agency contract restricting the right of the commercial agent to act as such following its termination will be valid only if and to the extent that: it is concluded in writing; it is limited to a two-year period; it relates to the geographical area or group of customers and the area entrusted to the agent and to the kind of goods covered by the agency under the contract.One difficulty which arises from these provisions is the meaning to be given to 'concluded'.

It is uncertain whether an unexecuted document recording the terms of the agency would satisfy the requirement for the restraint of trade clause to be 'concluded' in writing.

The better view is that in the absence of an executed agreement or exchange of correspondence, a post-termination restraint of trade on the agent will be invalid.Unless the parties otherwise provide, they will be bound by the provisions concerned with service of notice set out in the regulations.

However, these do not provide for when notice is to be deemed to have been served and how service may be proved.Many of the problems which the regulations cause lie in the vagueness of the language used.

For example, the regulations provide no guide as to what is meant by 'executed' in the context of determining when commission becomes due.

The blame for this lies with the Department of Trade and Industry.

In much of the regulations the language follows word for word that of the Directive.

The DTI has clearly applied the 'copy out' technique in drafting the regulations.The European Council has anticipated that there might be some uncertainty in implementing some of the provisions, in particular those concerning the compensation on termination of the agency contract.

The European Commission is to produce a report on this matter before the end of 1994.

It may well submit proposals for amendments.

As a result, can there be any surprise about the following joke.

Question: what has a long gestation period, a quick birth and when only days old is causing serious problems to thousands of business people? Answer: the Commercial Agents Regulations.