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Commercial agent’s claim for compensation following voluntary termination

November 2017

A commercial agent may even be entitled to compensation if he or she voluntarily issues notice of termination. However, the company’s conduct needs to give rise to legitimate grounds for termination for this to happen.

When a commercial agency agreement is brought to an end, the commercial agent often has a right to compensation. This is because the company in a lot of cases continues to profit from the client contacts that the commercial agent secured. There may be a right to compensation if the commercial agent terminates the agreement himself, but only if certain conditions are met; the company’s conduct must give rise to legitimates grounds for terminating the agreement. We at the commercial law firm GRP Rainer Rechtsanwälte note that a ruling of the Oberlandesgericht (OLG) München [Higher Regional Court of Munich] from February 2, 2017 has clarified that this is not the case if the company has merely omitted of its own accord to offer the commercial agent a reduction in rent to enable the commercial agent to obtain sufficient profits (Az.: 23 U 2749/16).

In the instant case, a filling station tenant had himself terminated the commercial agency agreement due to poor profits and demanded compensation in his capacity as a commercial agent. However, the OLG München ruled that the tenant was not entitled to this claim, stating that a commercial agent cannot unilaterally shift his or her entrepreneurial risk onto the company.

The OLG went on to say that the requirements pertaining to “legitimate grounds” are less stringent than those in relation to good cause for termination, meaning that for these purposes no-fault or even lawful conduct on the part of the company may be enough. The Court held that it is necessary as well as sufficient for the company’s conduct to create a bona fide unacceptable situation for the commercial agent.

This was not the case here, it being irrelevant that the company had opened another filling station approx. 1.4 kilometres away. The Court ruled that this had not demonstrably led to profit losses, especially since both parties had agreed to a reduction in the rent. The company could also not be accused of having rejected an application brought by the tenant to take over another filling station, as the latter in his capacity as a commercial agent was subject to a legal prohibition on competition for the duration of the contractual period.

Before issuing notice of termination, commercial agents ought to carefully assess whether they are risking their right to compensation by doing so. Lawyers who are experienced in the field of commercial law can offer advice.

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