15 Nov 2016
Termination compensation in connection with commercial agency contracts governed by French law
Article L.134-12 of the French Commerce code provides that ″if their relationship with the principal ceases, commercial agents shall be entitled to a compensatory payment for the loss suffered″.
This is a mandatory legal provision.
As constantly recalled in case law, ″any clause or agreement which conflicts with the provisions of Article L.134-12 shall be deemed unwritten″.
(French Supreme Court, Commercial chamber, decision dated 18 May 2010, Appeal Nr 09-15023 / 09-66439)
Pursuant to Article L.134-13 of the French Commerce code, there is an exception to the above compensation rule when the agency contract was terminated as a result of serious misconduct on the agent’s part.
As a matter of fact, only serious misconduct, in other words misconduct which undermines the common intended purpose of the mutual-interest mandate and ″makes it impossible to continue contractual relationships″, excludes the commercial agent from the benefit of compensation for contract termination; in such a case, it is the principal’s responsibility to provide evidence of serious misconduct on the part of the agent.
(French Supreme court, Commercial chamber, decision dated 15 October 2002, Appeal Nr 00-18122)
Losing the benefit of legal compensation is a heavy sanction on the agent; that is why the two above criteria (i.e. serious nature of misconduct and burden of proof on the principal) must be met.
As early as in 1966, the Paris Court of appeal (decision of 9 February 1966) defined serious misconduct as follows: ″proven breach of an essential contractual obligation, as a result of which continuation of the contract becomes impossible″.
Serious misconduct has always been assessed in a restrictive manner.
For instance, actions taken by the agent may not be interpreted as serious misconduct if the principal was aware of said actions prior to contract termination but tolerated them.
(French Supreme court, Commercial chamber, decision dated 11 June 2002)
As per custom, under French law, the agent is often entitled to termination compensation equal to 24 months’ commission.
However, cross-border relationships are often governed by a national law other than French law, which entails application of differing rules regarding termination or compensation.
This issue will be dealt with as a separate topic.
Nasser Merabet
Attorney at law
avocat@nmerabet.fr