Under regulation 17(3), the agent is entitled to an indemnity on termination if and to the extent that:
He has brought in new customers or significantly increased the principal’s business with existing customers, and substantial benefits continue to be derived by the principal from those customers.
The payment of an indemnity is “equitable” in all the circumstances and in particular with regard to the commission lost by the agent on the principal’s business with those customers.
As noted above, the amount of an indemnity is capped at one years commission, taken as an average of the previous 5 years or such lesser period as you have been engaged. To qualify for payment of an indemnity it is necessary to show that you have brought in new customers or significantly increased your principal’s business; further, that your principal continues to derive a benefit from such custom. Therefore, if you are terminated and take your customer base to another widget supplier, leaving your old principal with a diminished customer base then the indemnity payment may be minimal. Equally, if the principal goes out of business then the same principal may apply.
Tip: To prepare your indemnity claim you should create a spreadsheet showing customers introduced by you and customers whose business you have intensified. If a customer’s business has deteriorated during your tenure then it may not be taken into account in calculating your indemnity even if it forms part of the calculation for the cap.
The leading case is that of Moore v Piretta PTA Ltd  CLC 992.
For more information on our Preparing an Indemnity Claim for Agents services please fill out call back request form or call EAD today on 0151 735 1000.
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