Who benefits from commercial agent status?

A commercial agent is an agent who, in a self-employed capacity, without being bound by a contract for the hire of services, is responsible, on a permanent basis, for negotiating and, where appropriate, concluding contracts for the sale, purchase, hire or provision of services, in the name and on behalf of producers, manufacturers, traders or other commercial agents.

This is the definition of a commercial agent in article L 134-1 of the French Commercial Code.

In order to work as a commercial agent, it is compulsory to register with the special register of commercial agents (RSAC) held at the office of the clerk of the commercial court in the jurisdiction in which they are domiciled, before starting work.

A commercial agent agreement will also usually be signed between the agent and the principal.

However, the status of commercial agent is not subject to the signing of a commercial agent’s contract or to the agent’s registration with the RSAC.

In a landmark decision dated 10 December 2003, which is now the subject of settled case law, the Cour de cassation ruled as follows:

“Application of the status of commercial agent does not depend on the intention expressed by the parties in the contract, nor on the name they have given to their agreements, but on the conditions under which the activity is actually carried out.”

(Cass. Com., 10 December 2003, n°01-11.923, published in the bulletin. See also: Cass. com. 21 June 2016, no. 14-26.938; Cass. com. 27 September 2017, nos. 16-10.873 and 16-11.507).

The High Court therefore leaves plenty of scope for the possible reclassification of certain contracts or situations for the benefit of unknowing commercial agents.

So what are the criteria for qualifying as a commercial agent, and why is it such a protective status?

1/ HOW DO I QUALIFY AS A COMMERCIAL AGENT?

Three cumulative conditions must be met to qualify as a commercial agent:

Carry out your activity independently and autonomously, and not be bound to your principal by a relationship of subordination,

Works as a commercial agent on a permanent basis,

To have the power to negotiate and/or conclude contracts in the name and on behalf of its principal.

The commercial agent’s power to negotiate is being interpreted increasingly broadly by the Cour de cassation, under the impetus of the Court of Justice of the European Union.

In its ruling of 4 June 2020, the CJEU held that a person did not necessarily have to be able to change the prices of goods sold on behalf of his principal in order to qualify as a commercial agent.

The Cour de cassation has followed this interpretation. (Cass., com., 11 January 2023, n°21-18.683, published in the bulletin)

So even if the agent’s task is simply to ensure that his principal’s offer is accepted by the customer, he will enjoy commercial agent status.

On the other hand, the simple business contributor should not be confused with the commercial agent, as the difference is sometimes tenuous.

2/ WHAT ARE THE ADVANTAGES OF COMMERCIAL AGENT STATUS?

On termination of their contract, commercial agents are entitled to severance pay.

In principle, this compensation is equivalent to two years’ gross commission.

The following may be added to this allowance :

Compensation in lieu of notice if the principal does not respect the notice period to which the agent is entitled.

The agent will then be entitled to the same number of months’ commission as the number of months’ notice due and not served.

A re-investment indemnity corresponding to the potential tax consequences of the termination indemnity.

Additional damages in the event of fault on the part of the principal.

Please note: commercial agents lose their right to compensation if they do not notify their principal within one year of the termination of the contract of their wish to assert their right to compensation.

This indemnity must also be paid in the event of the death of the commercial agent.

The only cases of termination of the contract in which he is not entitled to this indemnity are listed exhaustively in article L 134-13 of the French Commercial Code, namely :

The contract is terminated because serious misconduct on the part of the commercial agent was committed (and discovered!) before the contract was terminated,

The termination of the contract occurs because the commercial agent himself terminates his contract… unless such termination is justified by circumstances attributable to the principal or due to the age, infirmity or illness of the commercial agent, as a result of which the continuation of his activity can no longer reasonably be required,

The commercial agent assigns his contract to another commercial agent.

European law on commercial agents, with Directive 86/653/EEC, has established a specific legal framework for this key profession in national and international trade.

The CJEU plays a key role in the interpretation and application of the status of commercial agent, the contours of which are often clarified or redefined, and sometimes poorly understood.

Given the major financial stakes involved for both the principal and the commercial agent in the event of termination of the contract, it is impossible to overemphasise the need for both parties to seek sound advice in the event of termination.