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Agency Agreement

Agency contract and trial period

According to the recent EU Doctrine, the Directive 86/653/EEC makes no reference to the concept of a ‘trial period’. Given that no provision in that directive regulates the trial period, it must be considered that such a provision, which falls within the scope of the freedom of contract of the parties to the commercial agency contract, is not as such prohibited by that Directive.

However, the provision for a trial period is intended to facilitate the termination of a commercial agency contract, the fact remains that the termination of such a contract during the trial period provided for in the contract constitutes a ‘termination of the agency contract’ or a ‘termination of the commercial agent’s relations with the principal’, within the meaning of Article 17(1) and (3) of Directive 86/653.

In that regard, it should be noted that the interpretation according to which the commercial agent has no right to indemnity where the termination of the commercial agency contract occurs during the trial period, is based on the premise that, during that period, the commercial agency contract has not yet been definitively concluded.

There is no basis for such an interpretation in Directive 86/653. On the contrary, relations between a commercial agent and a principal, as defined in Article 1 of Directive 86/653, subsist as from the time when a contract, the purpose of which is either to negotiate the sale or purchase of goods, or to negotiate and conclude such transactions on behalf of the principal, irrespective of whether that contract provides for a trial period. It follows that the provisions of that Directive are applicable as soon as such a contract is concluded between the principal and the commercial agent, even if that contract provides for a trial period.

Agency contract: trial period and indemnity 

It is apparent from Article 17(2)(a) of Directive 86/653 that the commercial agent is entitled to an indemnity, inter alia, if he has brought the principal new customers or has significantly increased the volume of business with existing customers and the principal continues to derive substantial benefits from the business with such customers. Furthermore, according to Article 17(2)(b) of that Directive, the amount of the indemnity depends on the performance of the commercial agent during the term of the contract. Similarly, it is clear from the wording of Article 17(3) of that Directive that the commercial agent is entitled to compensation for damage suffered, in particular where such damage is deemed to occur when the termination of the contractual relations takes place in circumstances depriving that agent of the commission which performance of the contract would have procured him whilst providing the principal with substantial benefits linked to the agent’s activities and/or in circumstances which have not enabled the commercial agent to amortize the costs and expenses that he incurred for the performance of the contract on the principal’s advice.

Therefore, it is clear from the wording of Article 17(2) and (3) of Directive 86/653 that the indemnity and compensation regimes laid down by that provision are not intended to penalize termination of the contract but to indemnify the agent for his past services from which the principal will continue to benefit beyond the termination of the contractual relationship or for the costs and expenses he has incurred in providing those services. Consequently, the agent cannot be denied the indemnity or compensation on the sole ground that the termination of the commercial agency contract occurred during the trial period, if the conditions set out in Article 17(2) and (3) are satisfied.

Accordingly, it follows from the wording of that article that the right to indemnity and to compensation for damage suffered is applicable even if the termination of the contractual relationship between the principal and the commercial agent occurs during the trial period.

 

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