An argument between a sales agent and his principal reached court over the issue of whether the principal’s action to reduce the sales agent’s territory as a consequence of the agent's poor performance was a breach of their agreement or not.
Tony Vick operated as the sales agent for Vogle-Gapes Ltd., but was considered by the company to be operating to an unsatisfactory standard. The company alleged that he did not take steps to maximise sales opportunities and failed to attend meetings to discuss the alleged failures. It therefore considered that it had no choice but to reduce the size of Mr Vick’s sales territory. He responded by alleging that by taking this action, the company had made his agency unworkable. The company took that to mean that he was terminating the agency. He claimed that the company’s action in reducing the territory was a repudiatory breach of their agreement and that he was entitled to be compensated for the loss thus caused. The matter then went to court, where Mr Vick also claimed that the company withheld some of the commission he was due and paid other commissions late.
In the view of the court, the agency agreement had to be read on the basis of good faith and the company had not made any unjustified use of its powers by reducing the size of Mr Vick’s territory. The company had good reason to believe that he had not acted to maximise his sales opportunities so the variation (which was permitted in the agreement in such cases) had been made reasonably and with good cause.
The failures to pay commission and of paying commission late could not be considered to indicate that the company had intended to abandon the agency and the view of the court was that these were unintentional. The response of the salesman to the company indicated that he would refuse to operate under the amended agency terms, so he was entitled to neither compensation nor damages.
