Shearman v Hunter Boot, High Court
The parties entered into an agreement under which Shearman was appointed as Hunter Boot’s commercial agent. Under the Commercial Agents Regulations, which were implemented into English law to reflect European Union law on the protection of commercial agents, agents have a right to be indemnified or compensated at the end of the agency agreement, even if there has been no breach of contract by the principal. Indemnity and compensation arise from two different systems of law – German law for the indemnity basis and French law for compensation. Indemnity and compensation give rise to different levels of payments to the agent on termination of the contract. Indemnity usually involves a lower payout than compensation. So the principal (or lawyers advising the principal) tried a clever move: in the contract, it provided for indemnity to apply, unless the payment was less if compensation was the basis.
The High Court said that that was not a valid clause and struck it out. The EU law underpinning the Commercial Agents Regulations was designed to help agents. To have a clause like this would give agents the worst of both worlds. They should be entitled either to indemnity or compensation, not the lower of them depending on the circumstances. As the clause was struck out, compensation applied.
