TV personality Holly Willoughby has recently been in the news regarding potential litigious action being taken against her by her former talent agent, YMU. The dispute relates to contracts which were brokered by YMU, who are due an annual commission as part of their agency agreement. Ms Willoughby has since left YMU and has set up her own management company, called Roxy Management. Roxy are unique in that they only employ woman. Her former agents will argue that they are entitled to continue to collect this annual commission from her, despite there no longer being an agent-client relationship. They rely on a clause within their contractual agreement with Ms Willoughby typically referred to as a ‘sunset clause’, otherwise known as a post-term commission clause. This is agreed on the basis that they initially secured the deal and are entitled to collect commission on said deal, usually for a finite amount of time.
Where are Sunset Provisions Used?
Sunset provisions are not only implemented in such agent-client relationships. They are widely applied in public policy whereby politicians may seek to pass legislation on the caveat that this legislation is reviewed again on a fixed period basis. This may be to consider how effective the legislation has been or whether there is merit in its continuation after the passage of time in the ever changing political landscape. The provision will usually work on an ‘opt out’ premise, whereby unless action is taken by the legislature by a certain time period the provision will simply cease to have effect, or will pass like the setting sun.
Why are they used in Contracts?
Whilst on the surface it may seem wholly unfair that an agent is entitled to continue to collect a commission when their relationship with the client has come to an end, there is certainly strong arguments for their inclusion. Agents will say that the contract brokered would never have been secured had it not been for their expertise and negotiation. It offers a protection against a client simply utilising the experience of an agent to broker a deal then ending the relationship to seek representation from another agent who will represent them and collect a smaller commission, having conducted no real work towards the deal.
How does it Work?
A sunset clause will usually take effect for a finite period. This will vary from three to five years, or in some instances longer. A typical sunset provision will see the commission collectible by the agent drop on a yearly basis, with year one the agent collecting 15%, through to year three where they collect 5%. Comparisons can be drawn between the Scots Law presumption in favour of a ‘clean break’ provision between spouses after divorce. This sees financial provision tapered off in a similar fashion.
An example sunset provision can be found within the Musicians Union’s specimen management agreement as below:
“In respect of monies earned up to five (5) years from the end of the Term our Commission shall remain at twenty (20%). In respect of monies earned after the date five (5) years from the end of the Term our Commission shall reduce to ten per cent (10%). In respect of monies earned after the date ten (10) years from the end of the Term our entitlement to Commission shall cease”.
What is the Dispute with Ms Willoughby and YMU?
It is likely the dispute in this instance relates to the renegotiation of existing contracts by the new agent. The new agent will claim their commission for this work and the client will likely fail to pay the commission to the former agent on the understanding the renegotiation disenfranchises the former agent from claiming their fee. The loss of commission involved in these contracts is likely to run into several hundred thousand pounds per annum, meaning any dispute will involve several million pounds.
Regardless of the result, it is likely not in the interests of Ms Willoughby to have a prolonged, and public, litigious battle with her former agent. Her earnings information will become public knowledge and any form of litigation will likely result in significant legal fees.
Blog by Conor Kenny, solicitor