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Settlement Claim: Commercial Agent

German Commercial law, Company law, Agent law, Business law, Corporate law, Finance law, Sales representatvive law, Transport law, Shipping law, CSIG, INCOTERMS, Tax law, European Commercial law

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.