Many companies that are eyeing the French market will call upon a commercial agent (agent commercial), also known as a commercial representative, in France. The commercial agent will look for customers or suppliers on behalf of the company and can negotiate and in some cases sign contracts on behalf of the company (the principal). This can be a good way to help boost sales on the French market. A local commercial agent often knows the market and the key players and can thus help develop a commercial activity. However, it is important to keep in mind that a commercial agency agreement creates a legal relationship between the company and the commercial agent which results in a number of obligations for the company that may have serious financial consequences. In this article we will go over the main aspects of the French commercial agency agreement. The French legal provisions that are applicable to the commercial agent are based on European directive 86/653/EEC of 18 December 1986. The directive has been implemented in French national law in the articles L.134-1 to L.134-17 of the code de commerce. As these articles are derived from the European directive, the legal rules applicable to French commercial agents are not fundamentally different from those in other EU member states, such as the Netherlands. However, there are a few French specificities due to the margin of appreciation that member states have in implementing European law into national law, and the interpretation of that law by the French courts.
1. Entering into the agreement
Both parties have the right to request a document that sets out the contents of the contract at any time. This is one reason why it is recommended to always enter into a commercial agency agreement in writing. Moreover, in a written agreement it is easier to determine the contractual relations between the parties, which may prevent misunderstandings and disagreement about the content of the parties’ obligations.
2. Obligations of the principal and the agent
Each party must provide the other party with all relevant information and act in good faith. Among other things, the commercial agent must inform the principal about the progress of sales in his appointed market while the principal must make all relevant information about the products available to the commercial agent.
It also follows from the obligation of good faith that the commercial agent may not work for competitors without the company’s permission. The company must also ensure that the agent is not already working for a competitor and is subject to an exclusivity obligation.
3. Payment of the commercial agent
The commercial agent is not an employee of the principal. He is usually paid by means of a commission on the sales to reward him for bringing in new customers or contracts. This commission may also be due for customers who enter into a contractual relationship with the principal after the end of the commercial agency agreement, provided that the contract is signed thanks to the efforts of the commercial agent.
The principal has the obligation to send the commercial agent a statement of the commissions due for the applicable quarter no later than one month after the end of each quarter. This statement should also contain accounting information that will enable the commercial agent to verify that the amounts are correct.
4. Termination of the relationship
The commercial agency agreement may be entered into for a fixed term or for an indefinite term. A fixed term agreement ends on the agreed date. If the parties nevertheless continue to perform the agreement after the end of the term, the agreement shall be deemed to have been renewed for an indefinite term from the time of continuation.
A commercial agency agreement with an indefinite term may be terminated by either party at any time, after a notice period. The law provides a minimum duration for the notice period, depending on the prior duration of the relationship.
The first year the notice period is at least one month, the second year at least two months, and from the third year or longer at least three months. The parties are free to agree on a longer notice period. However, the parties may not agree on a shorter notice period.
5. After termination: settling the accounts
The commercial agent is usually entitled to a goodwill indemnity upon termination of the contract by the principal.
In France, the indemnity is generally calculated based on two years of commissions (Cour d’appel de de Paris – Pôle 05 ch. 05, 14 février 2013 / n° 11/05973). This is considerably more than the indemnity to which a commercial agent is entitled in Dutch law, which caps the indemnity at one year’s commissions. The French practice of granting two years of commissions is an indicative amount. In specific cases, the indemnity may be higher or lower. The main factor that determines the amount of the indemnity is again the duration of the contractual relationship (Cour d’appel de Douai – Chambre 2 Section 2, 30 juin 2022 / n° 21/04230).
Niet elke beëindiging geeft de handelsagent recht op deze vergoeding. In de volgende gevallen heeft de handelsagent géén recht op een klantenvergoeding.
- The commercial agency agreement was terminated in response to serious misconduct by the commercial agent.
- The commercial agent is the one who terminated the agreement, except if he does so because of illness or retirement. In that case the commercial agent is also entitled to compensation.
- The commercial agent assigned the agreement to another party.
The commercial agent must claim the goodwill indemnity within one year after the termination of the agreement. If he fails to do so, his right to indemnity will lapse.
Finally, if the agreement is terminated by the death of the commercial agent, his heirs are entitled to the claim the indemnity. This is another major difference with Dutch law, which does not grant the heirs a right to the agent’s goodwill indemnity.
6. Non-compete clause
It is possible to preclude the commercial agent from working for competitors after termination of the agreement by including a non-compete clause in the agreement. However, this clause must meet two requirements to be valid. First, it must be made in writing. Second, the non-competition clause must be limited to a certain sector and a certain geographical area.
If these requirements are met, a non-compete clause may be valid for up to two years after the end of the contract.
September 13th 2022
If you have any questions about a commercial agency agreement, feel free to call me on +33 (0)1 85 09 34 80 (landline) or +33 (0)6 76 60 35 61 (mobile phone) or send an e-mail to email@example.com.