The Alerion Distribution Series by Catherine Robin and Johanna Guerrero – Commercial agent (episode 3)
Alerion invites you to follow the news on distribution law. To start this Serie, focus on the status of commercial agent. Inaugurated in 1958 in France, the status followed the European harmonization in 1986 and continues to evolve under the influence of the Court of Justice.
Episode 1 – Commercial agent status does not require the power to modify prices
Episode 2 – The possibility to derogate from the right to commission
Episode 3 – Compensation and serious misconduct of the agent
Episode 4 – Commercial agent operating outside the EU and French law
Episode 3
Commercial agent – Compensation and gross misconduct
Several decisions in the commercial agency area have focused on the compensation owed to the commercial agent at the end of the contract. The Cour de Cassation now requires that, to deprive the commercial agent of the said compensation, the agent’s serious misconduct must be mentioned in the termination letter.
A commercial agent is an independent intermediary who has continuing authority either to negotiate or to negotiate and conclude the sale or purchase of goods in the name and on behalf of a principal (producer, manufacturer, traders or another commercial agent, C.com. Art. L. 134-1).
At the end of the relationship, the agent is enabled to compensation (C.com. Art. L134-12), the amount of which is generally equal to two years of commissions, calculated over the last three years. As the right to compensation is of public order, it is not possible to derogate from it. The commercial agent loses his right to compensation only in the event of serious misconduct, termination of the contract on his own initiative or in the event of transfer of the contract with the principal’s agreement (C.com. art. L134-13).
Several decisions have clarified the right to compensation of the commercial agent at the end of the contract:
- It is possible for a principal to take back a client from his agent’s portfolio and pay him in return the lump sum compensation provided for in the contract. Such a provision is authorized because it does not stipulate a lump-sum compensation for the loss resulting from the termination of the relationship with the principal (Cass. com., 5 October 2022, no. 20-16.665).
- The death of the sole managing partner of an EURL with a commercial activity does not give rise to the right to compensation. Indeed, unless otherwise stipulated in the articles of association, the EURL is not dissolved by the death of a partner. The company still exists between the beneficiaries and heirs (Cass. com. 22 June 2022, n°21-11.675).
- The agent’s serious misconduct must be mentioned in the termination letter, otherwise the agent retains his right to compensation. With this decision, the Cour de Cassation adopts for the first time the position of the Court of Justice of the European Union. Until now, the Cour de Cassation held that the commercial agent could be deprived of compensation even if his serious misconduct was alleged by the principal after the termination letter (Cass. com. 16 November 2022, n°21-17.423).
The compensation to be paid at the end of the commercial agency contract is a cost to be considered in the implementation of a distribution network. The distribution via commercial agents is nevertheless particularly suited to develop business on foreign markets, due to the flexibility of the organization required and the knowledge of the market by the agent.
The principal must comply with the new requirement of the Cour de Cassation by mentioning the serious misconduct of the commercial agent in the termination letter. If not, the latter may retain his right to compensation. We believe nevertheless that a serious misconduct, even reported late, may lead to reduce the amount of the compensation.
The Alerion Team in charge of Distribution – Commercial Contracts, Catherine Robin and Johanna Guerrero, is at your disposal to assist in the drafting of your commercial agency contracts and for any pre-litigation and litigation in connection with this type of distribution.