Remuneration of the commercial agent
The usual mode of remuneration of the commercial agent is remuneration on commission, i.e. remuneration which varies depending on the number or on the value of the business conducted by the commercial agent for his/her principal.
It may thus concern, notably, a percentage on the turnover but also a percentage on the margin with respect to the orders taken by the commercial agent on behalf of his/her principal.
The rates of commission of the commercial agent are in principle stipulated in a common agreement between the principal and the commercial agent and it is rare that the parties are not in agreement unless on this element of their collaboration.
But if this has not been the case (as surprising as this may seem, from experience, we know that such a situation may occur all the same), the Commercial Code has stipulated such a hypothesis: in this case, the commercial agent has right to “remuneration in line with standard practice, in the sector of activity covered by his/her mandate” (for example, wines, deli meats, joinery, clothing, tiling, orthopaedic prostheses, machine-tooling, etc.), even if there are no uses, according to a slightly sibylline formula of the Commercial Code, to “a reasonable remuneration which takes into account all the elements which were processed in the transaction.”
The fact that the usual mode of remuneration of the commercial agent is commission, not prohibiting for all that fixed remuneration in full or part, even bonuses, fixed or variable, depending on the results of the commercial agent.
Lastly, to be complete, the commission of the commercial agent can still be completed by other elements of remuneration with respect to additional tasks entrusted to the commercial agent by his/her principal (for example, if the commercial agent must conduct a function of depository, manage a stock of goods, even deliver the goods…). These elements of remuneration can also be fixed or variable.
As soon as the rate of commission and more generally the modalities of remuneration of the commercial agent have been agreed between the parties, the principal must ensure to respect them and cannot modify them unilaterally. Failing that, the principal would take the risk that the commercial agent acknowledges the breach of the contract through the fault of the principal.
The right to commission of the commercial agent
Subject to correctly understanding the right of the commercial agent (written right + case law), the right to commission of the commercial agent does not pose any particular problem.
Initially, if the principal entrusted to the commercial agent a sector or a clientele, unless otherwise specified in the contract, the commercial agent will have the right to a commission on all the business finalised on his/her sector or his/her clientele, whether s/he was involved or not.
And this, important clarification (this is clearly not always straightforward), that the commercial agent is granted exclusivity or not on his/her sector or his/her clientele by his/her principal.
The writing of the contract is therefore important here as well.
If the commercial agent does not have an appointed sector or clientele, the commercial agent will have the right to a commission for any commercial operation completed during his/her contract, when this operation has been completed thanks to his/her intervention or, unless otherwise specified by the contract, when the operation has been finalised with a client of which s/he had obtained previously the clientele for operations of the same kind.
The time when the commercial agent acquires his/her right to commission
The right to commission of the commercial agent will be acquired as soon as the principal has completed the operation (in other words supplied the goods or provided the service) or would have had to have completed it in virtue of the agreement entered into with the client or even once the client has completed the transaction, in other words, paid the price of the goods or services (being specified here that it is not possible to anticipate that the commercial agent acquires his/her right to commission later).
The right to commission of the commercial agent may end if it is established that the contract between the client and the principal will be not executed and if the non-execution is not due to circumstances attributable to the principal (i.e. except for the case where the principal does not supply, the goods or services are faulty, etc.).
On this subject, an important clarification provided by the case law quite recently (see CJUE 17 May 2017 ERGO Poist’ovna a.s / Alzbeta Barlikova): if clients only pay in part the invoices of the principal, the commercial agent may lose his/her right to commission for everything; in effect, in such a situation, the commercial agent will lose his/her right to commission for the part of the invoice which remains unpaid. In other words, the commercial agent must be commissioned from invoices paid by the clients.
Payment of the commission of the commercial agent
As soon as the commercial agent has acquired his/her right to commission, the principal must not only allow him/her to know the amount of his/her commissions but also to pay them to him/her on the correct date.
To do so, the principal must give the commercial agent a statement of the commissions which are due to him/her at the latest the last day of the month following the quarter in the course of which these commissions have been acquired. This statement must therefore mention all the elements on the basis of which the amount of the commissions has been calculated.
Of course, and today, this is common practice, a monthly statement will be possible. However, it will not be possible to schedule statements exceeding the quarter.
Lastly, once the commercial agent has produced his/her invoice, the principal will be obliged to pay him/her his/her commissions.
Failure in having communicated to his/her agent his/her statements of commissions and/or to have paid his/her commissions on the correct date, the principal will then take the risk of a breach of the contract by his/her fault with all the financial consequences that this may entail for him/her.
The sanction is perfectly well established in case law.
FOUSSAT AVOCATS: our expertise at your service
Specialised in commercial agent law and managing over a long time the issues linked to the breach of commercial agent contract, FOUSSAT AVOCATS advices and assists its clients throughout the life of their commercial agent contracts, including in the event of international contracts, as well as concerning their conclusion, execution and cessation.
We are therefore at your disposal for any additional information that you may wish.