German agency agreement

Agency Agreement

 

between the company ………………………. (name of the company and location of the headquarter)

 

– hereinafter referred to as company –

and

Mr. / Company ……………………………. (name of the sales representative, address)

 

– hereinafter referred to as commercial agent-

 

§ 1 Legal status of the commercial agent The commercial agent acts as district representative in order to represent the company in the district of…………………… The Company’s right to act in this district itself or through third parties remains unaffected. The exact delimitation of this district is given in the enclosed map attached to this contract (Annex …). Changes concerning the representative district require a supplement to this contract signed by both parties to be effective. The representation covers all products of the company that are currently part of their production and sales program. The Company is required to list in an appendix to this Agreement all customers with whom it had a continuing business relationship in the last 12 months prior to the commencement of the Agreement. The entire customer base existing in the Representation District at the time this Agreement will be taken over by the commercial agent for further support. 
§ 2 Obligations of the Commercial Agent The commercial agent has the task to mediate / conclude sales transactions in the name and for the account of the company in the assigned representative district. He has to take care of the interests of the company with the diligence of a proper businessman and to do his utmost to increase sales. He has to cultivate the business relations with the potential customers of the enterprise and process sales orders for them systematically. The sales representative is / is not entitled to collection.  The commercial agent shall promptly notify the company in case of any business brokerage / transaction and notify the company in case of initiation of a new business by sending copies of correspondence or file notes thereof. The sales representative also has to give the company the required updates once a month. At the request of the company, the commercial agent is obliged to provide specific information.    The commercial agent is obliged to keep a customer file or to set up an electronic customer file and always keep it up to date. The commercial agent is required to monitor the creditworthiness of existing or potential customers as much as possible and to support the company’s ability to pay. Doubts about the creditworthiness of an existing or potential customer must be reported to the company without delay. The commercial agent has no obligations against the credit report service. 

 

The commercial agent agrees to protect the company’s trade and business secrets and to keep the related documents and the commercial agent relationships not accessible to third parties. The commercial agent must keep confidential all those information acquired during the term of the contract, business transactions and internal, especially confidential matters, even after the end of the contract. The representation is personally transferred to the commercial agent. He is not entitled to transfer the commercial agency to a third party without the express consent of the company or to tacitly accept a commercial representation by a third party; however, he is entitled to employee auxiliary persons to carry out his commercial agency work. If the sole proprietorship of the commercial agent passes into other hands, this does not lead to an automatic transfer of the commercial agency contract to the new owner due to the lack of explicit consent of the representative.The same applies if the commercial agent, as contracting party of this agency agreement, converts his sole proprietorship into a company. In such cases, the contractual relationship will not automatically be transferred to the company without the express consent of the company owners.The commercial agent is entitled to sign agreements with subcontractors or travelling employers, whom he wishes to use as subcontractors to fulfill his contractual obligations. 

§ 3 Obligations of the Company The company must use its best endeavors to assist the commercial agent in carrying out its activities and to provide it with the necessary documentation and information at all times. In exercising its right to issue, the company must take into account the independent position of the commercial agent. The necessary information includes everything that is essential for the activity and remuneration claims of the commercial agent (e.g. changes in products, prices or terms of business, special advertising measures).  The company agrees to punctually inform the sales representative of any changes in the business, work overload, manufacturing or raw material difficulties etc., so that the sales representative can adapt to the respective circumstances with regard to his placement or conclusion.  The company must provide the sales representative with the documents required for the performance of his / her activity (samples, drawings, price lists, printed matter, terms of business and … etc.) free of charge, in each case supplementing and keeping them up to date. These documents remain property of the company, as far as they are used as it is not intended.The company always has to provide the commercial agent with the necessary news and information. The company must promptly notify the commercial agent in case of acceptance or rejection of a mediated business or in case of complete or partial failure of a concluded transaction and the reasons for the non-execution. The company must inform the commercial agent without delay if it can or will probably conclude business only to a much lesser extent than the sales representative could expect under normal circumstances. The legal consequences of the total or partial non-execution are determined under Section 6 of this agreement.Copies of the correspondence kept with district-related customers or interested parties must be sent to the sales representative immediately; the sales representative has to be immediately informed on facts regarding negotiations and planned transactions with district-related customers or prospects, which are conducted with the consent of the commercial agent or without his participation.According to paragraph 1, the commercial agent has to be punctually informed about a planned cooperation or mergers with other companies or intended sales or decommissioning of the company so that his business dispositions – in particular with regard to the exercise of his right of termination – will not be affected. 
§ 4 Transaction subject to commission The commercial agent has a commission entitlement for all transactions mediated / concluded by him for all district business transactions within the meaning of Section 87 (2) of the German Commercial Code HGB and for all transactions that occur without his direct involvement with third parties those have been customers for similar kinds of business. Prerequisite for the commission claim is that the business transaction takes place without regard to the time of the execution of the business by the entrepreneur during the existing agency contract. For trades arising after the termination of this Agreement, the Agent is entitled to commission only if he arranges, initiates or prepares the transaction so that the transaction is predominantly due to his activity and the business within a reasonable time is concluded after termination of the contractual relationship or if the offer of the customer to conclude the respective business before the end of the agency agreement has been received by the company. The commercial agent also does not acquire a commission claim for such transactions for which a predecessor can claim commissions in accordance with § 87 (3) HGB. 

If a transaction with a new customer is not attributable to the sole activity of the sales representative but has been co-created by other commercial agents, the commission claim is to be divided pro rata. This distribution depends in particular on the extent of the contribution made by the respective party to the transaction. Whether a division is to be made and in what proportion the commission is to be divided, is decided by the company in its sole discretion after consulting the representatives involved, taking into account the conflicting interests and avoiding legal recourses, unless the parties agree on the division of the commission.The commission claim of the commercial agent arises as unconditional claim, as soon and as far as the company has carried out the commissionable transactions. In the case of pre-delivery duty of the customer, the right to commission arises already if and as far as the customer satisfies his pre-payment obligation. 

§ 5 Commission The commission paid to the commercial agent for all commissionable transactions (referred to in Section 4 of this agreement) is …%. On this commission, the statutory VAT is added and owed, as the sales representative is subject to VAT.The commission calculation is based on the net invoice amount (invoice value excluding VAT), less all price reductions granted by the entrepreneur or used by the customer. Cash discounts are not deductible. The same applies to incidental costs (e.g. for freight, postage, customs, taxes etc.), unless the additional costs are billed separately to the customer.The commission rates and calculation bases for commission calculation mentioned in the preceding paragraphs can only be changed by way of contractual agreements. 
§ 6 Elimination of the Commission Claim In the event of the complete or partial non-execution of a concluded transaction, the right to claim the commission shall only lapse if and insofar as this is based on circumstances for which the entrepreneur is not responsible.The commission entitlement is also waived if it is established that the customer does not pay; it diminishes if the customer only partially performs. If a certain amount of money has already been paid, the sales representative has to repay the company.An obligation of the company to assert and enforce the claim for performance against the customer exists only if this measure offers the prospect of success. In other cases, the company is only required to enforce the claim on request of the commercial agent and if it appropriately participates in the costs of the proceedings. 
§ 7 Commission Settlement  The Company must settle the commissions due to the Agent for each calendar month, no later than the 10th of the following month. In the commission statement, those claims (net commission) which have arisen as unconditional claims until the end of the previous month as a result of the execution of the business are to be collected by the company. In the commission statement, advance payments made must be taken into account; In the commission statement the VAT deducted on the commissions have to be shown separately.The commission claim is due at the end of the billing month. 
§ 8 Costs of the Commercial Agent The commercial agent is entitled to reimbursement of the following costs:……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
§ 9 Sickness/Holiday leave of the Commercial AgentIf in case of illness or for other reasons, the commercial agent is exempt from his business duties for more than one week, he shall inform the company without delay.  In the event of a sick-leave longer than one week, the entrepreneur is entitled to act on his own behalf or can be represented by other sales representative in the district of the commercial agent, unless the sales representative ensures the care of his customers by means of a suitable substitute. If the sick-leave of the commercial agent excess 4 weeks of permit, the activity of the company or third parties in the district must not result in a reduction of the commissions due to the commercial agent. Insofar as the commercial agent does not provide a suitable substitute, he must pay for the proven costs (salary, travel expenses etc.) of a substitute provided by the company; he must pay up to 50% of the commission claims incurred during this period during the interruption of the activity. However, this rule only applies to the period from the 5th week to the expiration of 6 months since the beginning of the sick-leave. At the end of the 6th month, a further discussion of the situation has to be considered.  The commercial agent is obliged to coordinate his holiday with the company at least 6 weeks before the start of your holiday season. The same applies with regard to other temporary interruptions of activity. 
§ 10 Competition Agreements The commercial agent will operate for the companies listed in the Appendix…..in the mentioned activities from the entry into force of this agreement. The commercial agent shall notify the company immediately in case any changes or addition to the product / delivery program of other companies will occur. If, by supplementing and / or changing the product / delivery program, these representatives become competitors to the company, the commercial agent is obliged to immediately take distances from the competitor. During the term of the contract, the commercial agent is obliged to refrain from any competition activity against the company. It is only entitled, with the express written consent of the company, to take over representations for other enterprises, to participate directly or indirectly in another companies or to support another company itself, provided that the other company manufactures and / or distributes products and / or other offers services that are the same or similar to those of the company.  If the commercial agent also wants to take over the representation of a company that does not manufacture or sell the same or similar products, he shall accordingly inform the company.The commercial agent hereby undertakes to refrain from any commercial activity within the contract territory within the meaning of Section 1 (1) of this agreement with regard to the products and services mentioned in Section 1 (3) for a competitor for a period of 2 years after termination of the contract. This obligation covers employment as well as self-employment (such as a sales representative or authorized dealer). The commercial agent is also prohibited from directly or indirectly participating in a competitor during the specified period.    For the period of validity of the post-contractual non-competition clause, the company pays the sales representative a competitive compensation, which is subsequently payable monthly. The compensation shall be 50% of the monthly remuneration, calculated on the basis of the average of the last 3 years – in the case of a shorter contract period during this period – in favor of the commercial agent. 
§ 11 Contract period, Termination The contractual relationship begins on …. The parties agree on in an indefinite period of time.The agreement may be signed by either party for a period of one month in the first year of the agreement, two months in the second year, three months in the third to fifth year, and six months thereafter at the end of a calendar month be terminated. The mutual right of termination for good cause remains unaffected.The termination must be presented in written form. Upon termination of the contract, the commercial agent must return the documents, the customer records and any other material provided by the company to him at the beginning or during the contractual relationship, within 14 days, unless otherwise used as intended, as well as all other for the maintenance and operation of the business necessary information.
§ 12 Other Provisions

 

All claims arising from this contract become time-barred twelve months after the claimant becomes aware of the alleged infringement. However, for a claim regarding Section 89b HGB, this twelve-month limitation period does not commence until the one-year period of application has expired (Section 89b (4) sentence 2) HGB). Excluded from the abovementioned regulations for shortening the limitation period are claims which may not be restricted by mandatory statutory provisions, e.g. of claims from liability for intentional acts under § 202 BGB.

Exclusive local jurisdiction for disputes arising out of this Agreement is the location of the Company.

 

Subsidiary agreements to this contract are not existent. Contractual supplements must be presented in written form in order to be valid and must be signed by both contracting parties. This formal requirement can be waived only by written agreement.

If this section of the contract does not contain a point that needs to be regulated, the statutory provisions of sections 84 et seq. HGB and the principles developed by the case law will apply.

 

The nullity of a provision of this contract does not lead to the nullity of the entire contract. The void provision shall be replaced by an agreement which comes closest to the purpose of the contract and the will of the contracting parties.

This contract concerns investments….that are integral parts of this contract.

This contract is made in duplicate. Each party has received a copy signed by the other party.

 

______________, the _________ ________________________________

(Place) (date) (signature of the representative company)

 

 

______________, the _________ ________________________________

(Place) (date) (signature of commercial agent

 

Note: An English translation is provided herein for mutual convenience. In the case of any dispute or discrepancy between the German and English texts, the German text shall be taken as most correct.

Commercial agent compensation

The commercial agent may have the right for a settlement claim at the end of the contractual agreement. This settlement represents the compensation for services provided by the commercial agent, which also have a beneficial effect on the entrepreneur after the contractual relationships has ended. The appropriate compensation therefore related to expected sales to the customers, which the sales representative either recruited himself or with whom he substantially intensified the business relationship. Also sub-dealers and employee-like commercial agents within the meaning of § 92a HGB can be entitled to compensation. Depending on the individual case, compensation claims can also be made by dealers, travel agencies, petrol station lessees and owners of lottery agencies. However, no settlement for compensation can be made, if the concerned person has been expressly commissioned only as commercial agent as secondary occupation (§ 92b HGB). The individual eligibility requirements are regulate in § 89b HGB and are briefly presented in the following overview.

Termination of the contractual agreement

A claim for compensation arises only after the termination of the contract, expiration of the deadline, death of the interested person or mutual termination agreement. It is always important to consider which was the party who wanted the termination of the contract and for which reasons this happened. If the one terminating the agreement is the sales representative, there is usually no claim that can be arisen, unless the conduct of the company he was working for has been the cause of such a termination, or if the sales representative can not reasonably be expected to continue his work because of his age (statutory retirement age) or illness. On the other hand, if the company does want to terminate the contractual relationships for important reasons concerning the culpable behavior of the sales representative, possible claims for compensation will lapse. The claims will also lapse in case of agreed termination of the contract and a third party enters into the contractual relationship replacing the commercial agent (successor clauses). In case of death of the commercial agent, the right for compensation will be transferred to the heirs.

Amount of the compensation claim

As a matter of fact, the common idea that the agent´s compensation claim would generally amount to an annual commission is wrong. The average annual commission from the last five years represents a maximum limit. The following conditions have to be taken into consideration when calculating the compensation claim:

New clients: Within the scope of forecasting, it must be determined what kind of significant economic advantage the business is likely to have after the termination of the contractual relationship from those business relationships that the sales representative has established or significantly intensified. The law assumes a significant increase in the turnover of the old customer by at least 100 %. Disputes about new customers can be restricted if, at the beginning of the contractual relationship, a list of existing customers with turnover is created.

Business connections with new customers: The customer relationships (new or old customers) must be of certain duration. Customers recruited by the sales representative who are not interested in placing further orders (so-called “one time customers”) are not relevant for a further development of the company. Connection with old customers could however be a problematic asset. A forecast for succession or replacement orders has to be created.

Benefits of the company: The benefit of continuing the business relationship with customers is the expected future profit of the company. A concrete period within which these profit possibilities must be taken into account does not name the law; decisive are the circumstances of the individual case. Even with a (partial) sale of the company, the right to compensation is not excluded in principle. The benefit of the company may be reflected in the share of the customer base included in the purchase price.

Commission losses of the commercial agent: The commission losses of the commercial agent are formerly an independent fact.  Since 2009, provision losses are to be considered only in the context of the fairness and equity.

Criteria ensuring fairness: Numerous other circumstances can influence the level of equalization in terms of fairness. These may include for instance, an entrepreneur-financed supplementary pension for the commercial agent, the economic and social situation of the contracting parties or the economic situation.

Maximum limit of compensation claims

The resulting crude adjustment shall be compared with the maximum amount of compensation. The maximum compensation amount must take into account both the total annual revenue of the sales representative from the last five contractual years, including agency fees for existing customers, administrative commissions, collection commissions and surplus commissions. If the equalization exceeds the maximum amount of compensation, the right shall be reduced to a maximum of one annual compensation. If the contractual relationship lasted less than five years, the average is decisive for the duration of the contractual relationship.

Enforcement of the compensation claims

The claim can be filed legally only within one year after the termination of the contractual relationship.

Exclusion of the compensation claim

The right for compensation applies only after the termination of the contract. Upon or after termination of the contract however, agreements on the payment and on the amount of compensation claims are possible.