The Provincial High Court (Audiencia Provincial) of Madrid in a judgement of June 17, 2014 has analysed the termination of an agency agreement due to the breaching of the Agent’s obligations. In this case, the interesting point was that the not respected obligation was agreed in a separate agreement different to the agency agreement but connected to it.
The Agent (Control Price Consulting SL) and the Principal (Banco Santander SA) signed an agency agreement in March 25, 2008 and connected to it, the same parties also signed a credit agreement (last update in March 18, 2010).
The Principal decided to terminate the agency agreement and the Agent asked for goodwill compensation (clientele) of 11.279,46 euros and an indemnity (lack of previous notice) for 2.819,86 euros.
Before the First Instance Court and this High Court (Court of Appeal) the Principal argued that that the termination of the Agency agreement was not due to its unilateral decision but to the previous breaching of the Agent’s obligations contained in the credit agreement.
The connexion between both agreements (agency and credit agreement) was clearly stated in the credit agreement and therefore the obligations of this one were considered essential for the existence of the Agency. Therefore, the courts accepted that the breaching of the obligation contained in the credit agreement was enough to justify the termination of the agency agreement for good reason and with no indemnities (clientele or lack of previous notice) dues.
Ignacio Alonso, IDI country expert for agency and distribution in Spain