How to manage the termination indemnity of sales agents?  

How to manage and negotiate the termination indemnity of sales agents?  

In accordance with Article L134-12 of the Commercial Code, the commercial agent is entitled, in the event of termination of his relations with the principal, to a customer compensation allowance in some cases and when we want to know if a sales agent is entitled to a customer allowance and we want to avoid it as much as possible how should we do it?  

It is necessary to analyze the agency contract, the circumstances of its execution, its termination to be able to identify the faults of each party, the faults of the commercial agent in particular to know if they are serious without compensation and we will build a strategy of termination if we are seized upstream of the termination what is to be recommended or a strategy of management of the consequences of the termination occurred if we are seized downstream so as to avoid as much as possible the exit costs and to reduce them. 

What is the principle of compensation at the end of the sales agent’s contract? 

The principle is that of Article L134-12 of the Commercial Code that you recalled earlier, the agent is in principle entitled to a customer compensation upon termination of the effects of his contract since his principal will continue to exploit a customer base that the agent has contributed to constitute and on which he will be deprived of the right to compensation as soon as the contract has ceased to produce its effects therefore compensation and therefore this compensation is normally due at the end of the agency contract. 

Is the commercial agent entitled to compensation if the principal company decides to terminate the commercial agent contract? 

First of all, if his contract is for a fixed term, the occurrence of the term of the agency contract will allow him to collect the customer compensation except for serious misconduct. If the agency contract ceases at the initiative of the principal, the general principle is that the agent is entitled to customer compensation. 

What happens when the termination of the agency contract occurs at the initiative of the principal  ? 

It is his right the mandate is revocable, it is said that he is revocable from a nod to nutum according to the expression still used in law faculties and therefore he no longer wishes to continue contractual relations with the agency and this is his fullest right but in this case, the termination at the initiative of the principal opens the right to compensation at the end of the contract. 

When the termination occurs at the initiative of the commercial agent because of the principal, what happens? 

This case is provided for in Article 1134-13 of the Commercial Code and again there is a right to compensation, what does it mean: it is the commercial agent who will take the initiative for the termination, but it does so because the principal has a determined attitude, the cases are as follows:  

• the principal no longer implements the commercial agent to perform its contract,  

• the principal’s faults justify the termination of the contract, 

• where the principal imposes on the commercial agent a unilateral modification of its contract. 

What happens if the principal refuses to approve the successor of the commercial agent? 

This case is also referred to in the status of the commercial agent in Article 1134-13 paragraph 3 of the Commercial Code and therefore it is provided that when the commercial agent assigns his rights to a third party, if there is a refusal for a non-objective reason, such as:  

• lack of competence or  

• suitability of the presented successor,  

The principal cannot refuse to approve the successor proposed by the agent, if he refuses to do so then he must nevertheless pay the termination indemnity since in this case the mandate will end. 

What are the exceptions to this right to the indemnity to which the commercial agent is entitled  ? 

These are the cases in which the principals seek to place themselves at the end of the contract to avoid paying compensation when this is their objective :  

• this is the serious misconduct (so here I will refer you to our video and we have also written a white paper that I recommend you download on the subject) of the agent, who is deprived of his right to customer compensation, 
• then if the agent ceases the performance of the contract without any justification, so they break it without justification  
• and in the event of transfer of the contract by the agent, that is to say when he transfers his card, this is the option offered to him by the law to proceed with the transfer of the agency contract to a third party.