Serious fault of the commercial agent discovered after the termination and compensation
The Court of Cassation confirms that only serious misconduct directly causing the breach of contract can deprive a commercial agent of his compensation. Increased protection for agents, but more complex management for principals.
The Court of Cassation confirms that only serious misconduct directly causing the breach of contract can deprive a commercial agent of his compensation. Increased protection for agents, but more complex management for principals.
The Court of Cassation confirms that only serious misconduct directly causing the breach of contract can deprive a commercial agent of his termination indemnity. Increased protection for agents, but more complex management for principals.
Case law strengthening the legal certainty of commercial agents
The decision of the Court of Cassation of 4 December 2024 commented on (No. 23-19.820) intervenes in the context of a dispute between a commercial agent and its principal, the company Waterpro. The commercial agent contract between the two parties was terminated by Waterpro on 15 October 2019, which relied on serious faults committed by the agent, consisting of repeated and accumulated errors by the agent, in particular during several projects, as well as errors in the calculation of commissions. The agent disputed this termination and claimed payment of his remaining commissions as well as compensation for termination.
Should serious misconduct on the part of the commercial agent be the direct cause of the breach?
The central question raised by this case is whether a commercial agent can be deprived of his right to severance pay when serious misconduct occurred prior to the breach of contract but was discovered after notification of termination and was not mentioned in the termination letter.
First of all, the Court of Cassation recalls the principle according to which a commercial agent may be deprived of his right to compensation for breach only if the serious misconduct actually caused the breach of contract.
A requirement of strict motivation of the seriousness of the faults of the commercial agent
This principle, resulting from a reversal of case law in 2022, is in line with Directive 86/653/EEC and the interpretations of the CJEU. It strengthens the protection of commercial agents, but could also complicate the management of contractual relations for principals.
Applying this principle, the Court partially quashed the judgment of the Bordeaux Court of Appeal of 12 June 2023, finding that it did not provide sufficient reasons for its decision concerning serious misconduct. She stressed the importance of providing evidence that each breach constitutes serious misconduct. This rigor in the assessment of misconduct is essential to ensure fairness, but it could also make termination procedures more complex and contentious.
The importance of motivation in the letter of termination of the commercial agent contract
It also stressed that serious misconduct discovered after the termination cannot be used to deprive the commercial agent of his termination indemnity if it was not the cause of the termination.
The Court’s requirement is to ensure that the commercial agent is informed of the precise reasons for the termination. However, there is concern that this requirement could lead to excessive formalism, making termination for serious misconduct more difficult to justify.
Also, it will be necessary for the principal to clearly specify the serious faults in the termination letter. The principals must be more vigilant in the drafting of termination letters and accurately document serious misconduct. It is recommended that they record events affecting the business relationship in a register to avoid future disputes.
(Court of Cassation of 4 December 2024 )
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