Commercial Law – Commercial Agency – Only the Benefit of a Contract Can be Assigned

Facts

In the case of Barnett Fashion Agency Ltd v Nigel Hall Menswear Ltd [2011], the defendant designed, manufactured and sold menswear.  In 2000, DBA (a partnership at the time) and the defendant entered into an agency agreement in accordance with the Commercial Agents (Council Directive) Regulations 1993.  In 2003, DBA incorporated and began operating as a company (which is the claimant in this case).

Subsequently, in October 2005, it transpired that the claimant had incorporated another new company (‘NEWCO’), which was intending to sell a new clothing range to the public.  It also transpired that the claimant had made contact with a longstanding supplier of the defendant.  The defendant concluded that it was the claimant’s intention, through ‘NEWCO’, to compete with the defendant.   The claimant and defendant could not resolve their differences and the defendant served notice on the claimant to terminate the agency agreement due to an alleged fundamental breach of the agreement by the claimant.

The claimant commenced proceedings against the defendant and sought compensation in accordance with the Commercial Agents (Council Directive) Regulations 1993.  One of the key arguments of the defendant was that it had not entered into any contractual arrangement with the claimant, refuting that the agreement with DBA was assigned to the claimant upon its incorporation in 2003.  The defendant asserted that its contractual relationship had been with DBA and therefore it was not liable to the claimant.

Decision

It was held that the claimant would have no cause of action against the defendant as there was no contractual arrangement between the parties.  The court ruled that, because the defendant had not agreed to the transfer of the burden of the agreement with DBA (the obligations of the defendant under the agreement), the only thing DBA could transfer to the claimant was the benefit of the agreement (the right to receive payments due under the agreement).  It was further established by the court that there was no written assignment transferring all rights under the agreement to the claimant and therefore the claimant could not allege that there was now a contractual relationship between it and the defendant.

As this was tantamount to an equitable claim, in order for a claim of this nature to be considered, it was held that the assignor (which would have been DBA) would need to be joined as a party to such action.

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© RT COOPERS, 2011. This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it constitute legal advice. It is intended only to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances.