The issues involved in compensation for commercial agents
Compensation of commercial agents is an issue fundamental to their status.
This is because the compensation of commercial agents after the termination of their contracts is as much a key moment for the parties concerned as the initial conclusion of the commercial agent contract itself.
With experience in commercial agency law gained over more than twenty years, and as specialists in the same legal field, our law firm has recognized expertise in dealing with questions relating to termination-of-contract compensation for commercial agents, including:
- assessment of the circumstances of the termination (termination for serious professional misconduct by the commercial agent whether or not proven, termination by the commercial agent due to conduct of the principal, resignation, exceptional circumstances, etc.),
- evaluation of the compensation that the commercial agent may claim according to the course of dealing and the latest case law in commercial agent compensation (contributions of customers, substantial benefits, etc.),
- evaluation of other compensation that may be due to the commercial agent (compensation in lieu of notice, outstanding commission fees, damages, etc.),
- conduct of negotiations with the opposing party in order to settle the amount of the compensation due to the commercial agent,
- conduct of the litigation process for payment of the compensation for breach of contract (after determining the applicable law and the competent courts in the case of an international commercial agent contract).
Due to our international presence and expertise in the status of commercial agents at the European level, our firm can intervene whether the compensation of the commercial agent is subject to
- French law or Belgian law,
- or the commercial agency legislation of another Member State of the European Union.
Reminder of the legal rules governing the compensation of commercial agents
As a reminder, compensation for a breach of the commercial agent contract is based on article L 134 12 of the French Commercial Code of Law and on article L 134 13 of the same Code, both of which relate to public policy.
The principle of the right to compensation
Under the terms of article L 134 12 of the French Commercial Code of Law, “In the event of termination of the relationship with the principal, the commercial agent is entitled to an indemnity as compensation for the loss sustained“. This article establishes the principle of the right to termination-of-contract compensation for the commercial agent.
The exceptions to the right to compensation of the commercial agent
Article L 134 13 of the French Commercial Code of Law makes exceptions to this principle of the right to compensation for termination of a commercial agent’s contract, namely in the case of serious professional misconduct by the commercial agent which precludes compensation, that of the resignation by the commercial agent which also deprives the latter of the right to compensation, and that of the transfer of their contract by one commercial agent to another.
Finally, article L 134 13 of the French Commercial Code of Law sets out the exceptions to the right to compensation of the commercial agent. This is particularly the case when the termination of the contract is clearly on the initiative of the commercial agent but due to circumstances attributable to the principal. This is also the case when the contract of commercial agent is terminated by the latter due to age, infirmity or illness.
Amount of compensation
With some exceptions, the course of dealing is to set the indemnity of the commercial agent at two years of commission fees.
To calculate the amount, the indemnity must include all the remuneration paid to the commercial agent.
Forfeiture of the commercial agent’s right to compensation
The commercial agent must claim termination-of-contract compensation within the year following the termination of the contract. In fact, article L 134 12 of the French Commercial Code of Law provides for the loss of this right if the commercial agent “has not notified to the principal within one year after the termination of the contract that s/he intends to assert his/her rights“.
After this period, the commercial agent therefore loses his/her right to compensation.
FOUSSAT AVOCATS: our expertise in commercial agency law at your service
As specialists for more than twenty years in commercial agency law and therefore with long-standing experience in the issues related to commercial agent contracts as well as to the compensation of commercial agents, FOUSSAT AVOCATS advises and assists its clients from start to finish of their commercial agent contracts, including in cases of international contracts, whether with regard to their conclusion, fulfilment or termination, and therefore in particular with regard to issues concerning the commercial agent’s right to compensation.
We are therefore at your disposal for any additional information you may require.
Other reading on the subject:
- Article L 134-1 et seq. of the French Commercial Code of Law
- Article L 134-12 of the French Commercial Code of Law and our explanations
- Article L 134-13 of the French Commercial Code of Law and our explanations
- Compensation for termination of the commercial agent contract
- Serious professional misconduct by the commercial agent: a fundamental concept in commercial agency law