FRANCE: French agency case law overturned and aligned with EU case law: a principal can no longer rely on a serious breach discovered after the termination to deprive the agent of the benefit of the termination indemnity (Comment of the decision of the French Cour de cassation, Commercial Chamber, 16 November 2022, LawLex202200009995JBJ).

Joseph VOGEL | FRANCE | 15 March 2023

Joseph VOGEL

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In this case, a principal accused his agent of having engaged in the representation of a competitor in parallel with his mandate. The agent argued that this activity had been known to the principal for many years. However, several years after the beginning of their collaboration, the principal amended the contract to prohibit the agent from representing a competing undertaking. According to the Commercial Chamber of the Court of Cassation, the introduction of such a clause had the effect of nullifying the tolerance that the principal had shown in the past. Therefore, the pursuit of the activity on behalf of the competitor, after the modification of the contract, constituted a serious breach by the agent.

At the stage of the characterization of the fault, the solution brings nothing new since it is long established that a commercial agent who represents a competitor of his partner in violation of his contractual commitments, commits a serious fault justifying an immediate termination of the relationship (Cass. com., 11 Dec. 2001, LawLex200200004864JBJ; 7 Oct. 2008, LawLex200800001825JBJ; 6 Sept. 2016, LawLex201600001416JBJ).

The novelty of this ruling lies elsewhere. The Court of Cassation considered that the serious breach committed by the commercial agent prior to the termination of the contract could not deprive him of his right to an indemnity as there was no reference to that breach in the termination letter, since it had been discovered afterwards by the principal. This solution contrasts with the classic French jurisprudential line, according to which the fact that the principal sought to rely on breaches discovered after the termination of the agency contract does not prevent the latter from relying on them, as long as they were committed during the performance of the contract (Cass. com, 1 June 2010, LawLex2010000678JBJ; 24 Nov. 2015, LawLex201500001634JBJ; 19 June 2019, LawLex201900000836JBJ; Paris, 30 June 2022, LawLex202200006364JBJ).

To justify this turnaround, the French Court of Cassation stated that it had extracted the legal consequences in the national context of the Court of Justice’s Volvo judgment of 28 October 2010 (LawLex201000001196JBJ), in which it had held that a commercial agent could not be deprived of his right to an indemnity for a breach of contract established by the principal after the service of the termination of the contract with notice. The need for alignment of French law was reinforced by a subsequent ruling of the CJEU according to which any interpretation of Article 17 of the Directive, relating to the right to indemnity, which might prove to be to the detriment of the commercial agent, is excluded (CJEU, Case C-645/16 Conseils et Mise en Relations (SARL), Judgment of 19 Apr. 2018, LawLex201800000760JBJ). With the vice tightening more and more around the Court of Cassation, it had no choice but to bow and apply the principle of precedence of Union law.

By excluding the consideration of any reason for termination other than the one stated in the letter of termination, the solution brings the status of the commercial agent closer to that of an employee and contributes to making it even less attractive. This means that the principal must closely monitor the agent’s activity and scrupulously document any breach of his contractual obligations in order to be able to rely on it if necessary in the letter of termination and to dispense with the payment of an indemnity. It is therefore strongly recommended that activity reports be requested or that they be drawn up more frequently.


Joseph Vogel, IDI Country Expert for distribution in France

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