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LITHUANIA

LITHUANIA: An interesting case law about the right of compensation after termination of a service contract.

On 12th of February 2016, the expanded panel of judges of Lithuanian Supreme Court has stated that after the termination of the service contract, mobile services and phones intermediate has the right to compensation, which is usually paid only to the commercial agents.

Inga KARULAITYTË-KVAINAUSKIENË - 15.03.16
Country expert

Lithuanian Supreme Court has ruled that trading intermediate has a right to get a compensation, even if the contract does not meet all features of the commercial representation agreement.

Lithuanian Supreme Court has ruled that the commercial agency legal relationship could be established if there are met all of the following criteria:

 1) The core function of the agent is to negotiate or conclude contracts on behalf of another person (the principal) - in the name and account of that principal;

 2) Independence of the agent;

3) Commercial representation is the main activity of the agent;

4) Commercial representation is the constant and regular activity of the agent;

5) Renumaration of the agent.

 

Lithuanian Supreme Court has stated that the contractual relations between Telecommunication Company and mobile services and phones intermediate, questioned in this civil case, did not meet the criterion of independence. Under the contract, telecommunication company had the right to control representative of the business hours of the trading showrooms, number of employees, employee functions, qualifications etc., as well telecommunication company could give binding instructions to the representative.

On the other hand, Lithuanian Supreme Court stated that it does not mean that if the contract does not meet all the criteria of the commercial representation, the compensation after termination of the contract should not be paid.

Under Lithuanian Civil code (Article No. 2.167), the compensation after termination of the contract shall be paid to commercial agent if:

1) after termination of the contract the principal has substantial benefits from the business relationship with customers, which have found by an agent or with whom the agent has significantly increased the level of business scale; and

2) in the light of all the circumstances, the payment of compensation satisfies the principle of fairness.

Lithuanian Supreme Court has decided that the Article No. 2.167 of Lithuanian Civil code could be applied to legal relationship substantially similar to commercial representation by analogy, in cases where a legal representative is functionally and economically comparable to the commercial agent's legal situation.

Lithuanian Supreme Court has recognized a right to compensation to mobile services and phones intermediate as

  • the activity of mobile services and phones intermediate by its nature and functions carried out is in line with essence of the commercial legal representation and the functions performed by the agent, and
  • the added value created by mobile services and phones intermediate after the termination of the legal relationships, remained to the principal. 

In summary, Lithuanian Supreme Court decision means that, despite the fact that the contract does not meet all the criteria of the commercial representation, commercial intermediate has a right to compensation if (i) after the termination of the contract the principal has substantial benefits from the business relationship with clients found by the intermediate and (ii) the payment of compensation is in line with the principle of fairness.

 

Inga Karulaityte-Kvainauskiene, IDI country expert for agency & distribution in Lithuania

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