Commission agreement dispute

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Gannons resolved a commercial dispute over unpaid commissions to recover costs for our client.

Many commission disputes arise where agents or brokers are used but there are lots of other business situations, especially in the tech sector where commission agreements are now used.

Our client was an SME (Small or Medium Enterprise) database company with substantial IP and IT assets. They sought our advice to resolve a dispute with a large customer who had failed to pay commissions after using our client’s customer database. The customer used its market power to withhold payment for as long as possible. We stepped in to resolve the issue.

How we resolved the dispute in our client’s favour

After we were instructed, our first step was to ensure that the customer could not terminate the commission agreement without our client’s consent. Then we served a statutory demand on the opponent for the unpaid commission payments. Finally, we prepared a commercial settlement agreement for our client, that preserved costs, and entitled our client to accelerated commission payments.

The facts of the commission dispute

The customer operated in the telecommunications sector. They used our client’s contact database to promote its service. However, before our clients instructed us, some months earlier the customer attempted to terminate the commission agreement and withheld commission payments received from customer sales.

The commission agreement

We reviewed the commission agreement and discovered the other party had not validly terminated the agreement. The commission agreement detailed termination requirements. Our client retained the power to appoint an auditor, who could inspect the  accounts to ascertain the commission payments due. Once the auditor provided a commission figure, the commission became an undisputed debt. The agreement also contained post-termination clauses that enabled our client to continue receiving commission payments despite the alleged termination.

Tactics

We discovered that the other party was subject to a takeover bid. We used this knowledge to advise our client that they would want to settle as otherwise they would have had to disclose the dispute with during the due-diligence process.

We used the terms of the agreement to our client’s advantage. We argued that the agreement had not been validly terminated and therefore, the agreement continued. The post-termination conditions would also continue, even in the event that the other party attempted to terminate the contract.

This was a key negotiating point. The opponent did not want to be tied to lengthy commission agreements with no certainty as to the financial cost.

Reaching a deal over commission payments

We served a statutory demand and only agreed to withdraw it on the condition that the defendant paid the arrears, and agreed to pay our client a pre-payment of 24 months commission. In exchange, we offered to release the defendant from its obligations in the commission agreement.

Settlement terms

Following negotiations, we prepared a settlement agreement that released the defendant from its post-termination obligations. The settlement agreement gave effect to the confidentiality clauses of the commission agreement and enabled our client to receive 24 months of expected commission payments as an accelerated sum, together with the commission arrears.

John Deane is a partner in the commercial dispute team at Gannons. John advises SME’s on a host of contentious matters. The expertise extends to commission and bonus disputes and ensuring that matters do not become contentious in the first instance, which will help save costs.

  • Gannons acted swiftly and decisively to justly recover our unpaid dues