Calculation of compensation for breach of the commercial agent contract: what rules?
Article L 134-12 of the Commercial Code, like the directive of 18 December 1986 relating to coordination of the rights of the Member States concerning independent commercial agents, lays down a fundamental principle of the status of the commercial agent, namely that the commercial agent has the right to compensation for breach in the event of termination of his/her commercial agent contract.
However, neither the commercial code nor the directive provides an indication on the way in which compensation for breach of the commercial agent contract must be calculated.
Also, the case law has been obliged by the legislator to address this gap.
Thus, in France, it is usual to set the compensation for breach of the commercial agent contract at two years of commissions. It is advisable, however, to note that this custom pertains essentially to France, the majority of the other European countries have adopted the system of compensation originating in Germany. Namely: compensation with an upper limit of one year of commissions calculated on the average of the commissions of the last five years.
However, this French custom has variants, particularly depending on the duration of the commercial agent contract being the subject of the breach.
Thus, for contracts of a particularly long duration, the case law has already had the opportunity to set the compensation for breach at amounts higher than two years of commissions.
We were able to witness this again when the records were processed in the last few years by our firm.
Lastly, the question of the basis of calculation of compensation for breach of the commercial agent contract.
As already indicated on our blog on several occasions, the case law is very clear on the matter: it is necessary to take into account all the remunerations paid to the commercial agent by the principal.
Thus, if the commercial agent receives not only a basic salary but also commissions, this basic salary must also be taken in account for the calculation of compensation for breach of the commercial agent contract.
Likewise, if the commercial agent receives not only a commission with respect to his/her duties strictly speaking of commercial agent (i.e. for selling the products or services of his/her principal in the name of and on behalf of the latter) but also a remuneration in any form whatsoever with respect to additional duties (administrative duties, depository, delivery, management of stocks…), the remuneration received in this respect must also be integrated into the basis of calculation of compensation for breach of the commercial agent contract.
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.
Also read on the subject:
- Article L134-12 of the Commercial Code
- Compensation for termination of the commercial agent contract
- Status of the commercial agent: recent court rulings
- Compensation for the commercial agent: his/her bases of calculation, reminder of the principle by the Court of Cassation