NEWS JUNE 2015: No indemnification for the commercial agent under trial period
The trial period as a way to avoid the commercial agent’s indemnification (Decision of French Supreme Court dated June 23, 2015, n° 14-17.894)
The indemnification due to the French commercial agent, upon the contract’s termination, is most difficult, nearly impossible to escape from. Pursuant to article L. 134-12 of the French commercial code – which is a « public order » rule – such indemnification is « legally due », as soon as « the termination of the relation » is initiated by the principal and is not attributable to the agent (serious misconduct, transfer of rights).
Such indemnification applies to any type of contractual situation – indefinite term contract or fixed term contract – and regardless of the type of « termination » (non-renewal of the fixed term contract or termination during the performance of the contract).
The compensatory indemnification granted to the commercial agent in France generally amounts to two years of gross commissions, regardless of the effective duration of the contractual relation (which may sometimes last only a few months).
Therefore, this « legally due » indemnification represents a substantial financial risk for the principal that cannot, most of the times, be avoided – unless the principal is able to evidence the agent’s serious misconduct (which concept is appraised quite restrictively by courts)
The French Supreme Court’s decision dated June 23, 2015 (aligned with a prior decision dated 2001) is of a great interest for both French and foreign principals, contractually bound to commercial agents which activity is in France.
In the present case, two companies had entered into a commercial agency contract including a trial period of 8 months. After the 6 first months, the principal terminated the contract and the commercial agent claimed for the compensatory indemnification before courts.
Unsurprisingly, the Court of appeal granted the commercial agent with a compensatory indemnification of 123.307,48 euros stating that « Articles L.134-12 et L.134-13 of the French commercial code, that are public order rules, expressly provide the indemnification to be settled to the commercial agent and also the events when such a compensation is not due. Consequently, even though the trial period within a commercial agency contract may not be regarded as illegal, such trial period should not, in any case, deprive the commercial agent of its right to such indemnification ».
By overruling the Court of Appeal’s decision pursuant to articles 1134 and 1184 of the French civil code, the French Supreme Court grants the principal with an additional possibility to terminate the agency contract with no indemnification being due ; as a matter of fact, the Supreme Court confirms that it is absolutely legal to provide for a trial period with a commercial agency agreement : « the statutory protection of the commercial agent implies beforehand that the agency contract has been definitely entered into and does not prohibit a trial period to be included in such contract”.
Consequently, instead of a fixed-term contract which termination shall necessarily lead to a compensatory indemnification, the principal’s best interest may be to enter into an agency contract including a trial period that will allow him to appraise, with no financial risk, the agent’s efficiency.
However, the provision related to such trial period shall be carefully drafted (as regards both its duration and termination) so that such trial period shall not be construed as exclusively meant to circumvent the agent’s statutory rights, which may be regarded as a violation to the law.
by Sarah Temple-Boyer
Attorney at law
Article L.134-12 of the French commercial code: « in case of termination of its relation with the principal, the commercial agent is entitled to an indemnification in compensation for the suffered damage ».
 Cass.com. 23 juin 2015, n°14-17.894
 Cass.com. 17 juillet 2001, n°97-17.539