Termination of a commercial agency agreement

If a commercial agency agreement is terminated without notice, the commercial agent faces the prospect of financial losses and should therefore respond by weighing up and acting on their legal options.

Both parties to a commercial agency agreement are entitled to terminate the agreement by giving due notice and without having to provide a justification, provided they observe the notice period. This is in contrast to termination without notice, notes commercial law firm MTR Rechtsanwälte, which requires good cause.

Termination without notice entails the commercial agent losing out on commissions that they could have earned, at least until the notice period expired. The agent can defend themselves and take legal action to obtain a declaratory judgment with the aim of enforcing compliance with the ordinary notice period, meaning that the contractual relationship will persist until said period comes to an end. As for the loss of commissions that the commercial agent could have earned, the agent may be entitled to claim compensation. If the court finds that there was no good cause justifying the termination of the agreement, the commercial agent is entitled to bring claims for commission and for compensatory adjustment.

The latter is a common point of contention between the parties when a commercial agency agreement is terminated. Such a claim may exist with respect to business relationships that the commercial agent has established with new customers, but also with regard to existing business relations that have been expanded. The company already derives a benefit just from the possibility of being able to continue to capitalize on these business relations. Whether this benefit actually materializes is irrelevant to the commercial agent’s claim for compensatory adjustment.

The claim does not automatically lapse as a result of termination without notice. This is only the case if the termination is due to culpable conduct on the part of the agent. The company bears the burden of proof here.

Apart from the upper limit set by the German legislature, the value of any claim for compensatory adjustment is not regulated by law. In practice, the commissions from business with new customers or the expansion of business relations in the last 12 months of activity are often taken as a basis and then projected over a period of between three and five years.

Lawyers versed in commercial agency law can provide counsel.