Updated legal analysis on the application of Spanish legislation to fixed-term agency contracts, with a focus on recent case law, the agent’s rights, and the concept of loss of profits.
Atty. Roger Bordas Segura. Piero Viganego Abogados y Consultores
The Spanish Supreme Court (in Spanish, Tribunal Supremo) has established that a fixed-term agency contract that is extended remains a fixed-term contract, even if such extensions have been accepted.
We may cite the Judgment of the Supreme Court of 03/06/2015, which states as follows:
“(…) A contract with an initial duration of six months, tacitly extendable for successive six-month periods, up to a maximum of eighteen months, is a fixed-term contract and not an indefinite one, as claimed by the appellant, merely because the first extension has been carried out. We are not within the scope of application of either Article 24.2 or 25.1 and 2 of the Agency Contract Act (…)”.
More recently, the Madrid Court of Appeal (in Spanish, Audiencia Provincial) issued a Judgment dated 28/10/2022 recalling this criterion of the Spanish Supreme Court.
We may also cite the Judgment of the Barcelona Court of Appeal of 04/07/2019, which states as follows:
“(…) The transformation into an indefinite contract must refer only to cases in which a fixed-term contract expires without a new contract of fixed duration being agreed. To understand otherwise would run counter to the principle of party autonomy (…)”.
Law 12/92 does not provide for the possibility for the Principal to terminate a fixed-term agency contract early by giving notice, unless there are contractual breaches by the agent, which is not the case here.
Indeed, Article 24.1 of Law 12/92 establishes that a fixed-term agency contract shall terminate only upon the expiry of the agreed term. Article 25 of Law 12/92 provides for the possibility for the Principal to terminate an agency contract without just cause by giving notice, but this article applies only to contracts of indefinite duration.
In cases where the Principal terminates a fixed-term agency contract before its expiry without just cause, Spanish doctrine recognizes the agent’s right to claim damages under general law (Spanish Civil Code, Articles 1101, 1106, and 1124).
Such compensation would include both actual damage (damnum emergens) and loss of profits (loss of earnings / loss of profits), always subject to criteria of foreseeability and reasonableness.
We may cite the following judgments in this regard:
- Barcelona Court of Appeal, 19/12/2012
“(…) Regarding compensation under the provisions governing breach of contract, Articles 1101 and 1124 of the Civil Code (…)”. - Burgos Court of Appeal, 31/07/2020
“(…) Article 29 of the Agency Contract Act provides for compensation (…)”. - Asturias Court of Appeal, 01/07/2008
“(…) The appealed judgment is correct in starting from the premise that, in the case of an agency contract (…)”. - Valencia Court of Appeal, 05/02/2001
“(…) This does not prevent compensation for damages (…)”. - Barcelona Court of Appeal, 08/06/2012
“(…) must give rise to the corresponding compensation (…)”. - Madrid Court of Appeal, 15/11/2017
“(…) Although the provision refers to contracts of indefinite duration (…)”. - Madrid Court of Appeal, 10/06/2009
“(…) With regard to compensation for damages (…)”.
Conclusion
In accordance with the Spanish doctrine cited above, it is clear that the commercial agent would be entitled to compensation for damages due to the early termination of a fixed-term agency contract, and such compensation should also include “loss of profits” (lucro cessante), calculated on a reasonable basis.