This book provides a wide-ranging review of the European rules relating to distribution: exclusive purchase and exclusive supply, exclusive and selective distribution, motor vehicle distribution, franchises, commercial agents.

French Distribution Law

Article L. 134-12 of the Commercial Code provides for the payment of compensation to the commercial agent for the loss suffered because of the termination of the contract by the principal, but does not fix the amount thereof. The customary compensation granted to the commercial agent, to which the contract may refer by reference to usual practices , or where the parties make no express provision , amounts to two years of gross commissions  calculated on the basis of the average of the last three years' turnover . The compensation for the termination does not however constitute a lump sum equal to two years of commission but must correspond to the compensation of a loss that the agent can justify having suffered . In effect, no law or regulation imposes the payment of two years of commissions as compensation for the termination of a commercial agency contract . 

According to the Court of Cassation , determining the amount of the compensation for termination falls within the discretion of the trial courts. Consequently, the indemnity should not systematically and automatically be two years of commissions . The courts generally take into consideration the duration of the mandate, or the decrease in the turnover suffered by the agent due to the termination . In practice, the amount of the compensation for termination paid by the principal to his agent often amounts to two years of gross commissions , especially where their cooperation has been productive and loyal for long periods, such as three and a half , four , five ,seven , eight , ten , eleven  , sixteen , seventeen , twenty , twenty two , twenty five , twenty seven  or thirty  years. The sudden nature of the termination can also justify the payment of two years' commission. This is the case where the agency agreements is terminated early for serious breaches that have not been established . The amount of compensation may not, however, exceed the two-year indemnity on the grounds that the termination of the agency agreement occurred at a time when the agent was negotiating the transfer of his client base to a third party and allegedly lost that opportunity as a result . Nevertheless, a commercial agent who had canvassed for the same principal for thirty-four years, and for whom it was established that he would never find a comparable supplier in the highly restricted market for the products in question, was awarded compensatory indemnity equivalent to thirty months' commissions. Similarly, indemnity equivalent to three years' commissions  was granted to an agent who, over twenty years, had created and developed the principal's entire client base in his territory , or to another who not only represented the principal but also provided technical assistance throughout the fourteen-year duration of their relationship .

On the other hand, the short duration of the contractual relationships may deprive the commercial agent of the customary compensation  or give rise to an indemnity of less than the two-year compensation  , often calculated as the average of the commissions received during the course of the relationship even if some courts consider that, in the absence of proof of lesser harm, the indemnity owed to the agent must, in accordance with commercial practice, be set at two years' pay , or even that such indemnity is due regardless of the amount of loss claimed by the agent . This also applies to an agent who has committed a fault, the seriousness of which is not sufficient to deprive him of the severance indemnity . The small increase in the agent's turnover and the short duration of the activity  or the small amount of the investments made   may justify, in particular, the payment of one year of commissions instead of the customary two years. The same solution applies particularly where the commercial agent has not contributed to the creation of a genuine client base, but has merely benefited from the network belonging to the principal .  Finally, the fact that the agent very quickly found identical employment  or is not bound by a post-contractual non-compete clause may justify a reduced indemnity . Where the two-year compensation is granted for short periods of cooperation, it seems that the circumstances of the termination, i.e. sudden and without notice, have been the reason behind such remedy .

CA Nancy, 17 September 1997, LawLex200200005045JBJ: customs of the profession, to which the contract refers, generally fix the amount of the compensation for termination at two years of commissions.

CA Bordeaux, 3 December 1997, LawLex200200004983JBJ.

CA Angers, 21 June 2005, LawLex200600000343JBJ. The Paris Court of Appeal nevertheless specified that in such cases, the amount may not exceed the two-year indemnity unless the agent provides evidence of an exceptional contribution of clientele or the making of specific investments: CA Paris, 4 November 2010, LawLex201000001239JBJ.

CA Paris, 19 May 2022, LawLex202200003063JBJ; 16 November 2023, LawLex202300013759JBJ.

CA Paris, 19 September 2024, LawLex202400006851JBJ.

CA Paris, 25 February 2004, LawLex200400001603JBJ; CA Reims, 25 June 2013, LawLex201300001071JBJ; CA Montpellier, 12 February 2019, LawLex201900000229JBJ. 

CA Paris, 8 July 2021, LawLex202100004516JBJ; 29 June 2023, LawLex202300008669JBJ.

CA Lyon, 16 January 2018, LawLex20180000128JB.

CA Besançon, 10 September 1997, LawLex200200004989JBJ.

CA Paris, 29 March 2018, LawLex201800000545JBJ.

CA Lyon, 27 February 2020, LawLex202000000295JBJ.

CA Paris, 1 October 2020, LawLex202000002214JBJ.

Cass. com., 28 May 2002, LawLex200200004168JBJ. See also, for example, CA Pau, 14 December 2009, LawLex201000000213JBJ; CA Reims, 6 September 2004, LawLex200500005664JBJ; CA Bordeaux, 22 April 1997, LawLex200200005659JBJ.

CA Reims, 9 November 2021, LawLex202100005976JBJ; CA Paris, 29 February 2024, LawLex202400002010JBJ.

CA Paris, 8 February 2024, LawLex202400001484JBJ.

CA Paris, 7 June 2018, LawLex201800000884JBJ; 10 October 2019, LawLex201900001211JBJ.

CA Versailles, 22 November 2012, LawLex201200002393JBJ.

CA Agen, 12 June 2013, LawLex201300001015JBJ, ordering the principal to pay to the agent, in addition to the two-year compensation, an indemnity covering the loss of commissions up to the end of the contract and damages for sudden and vexatious termination.

CA Rouen, 6 December 2012, LawLex201200002468JBJ.

CA Reims, 14 September 2021, LawLex202100005321JBJ.

CA Lyon, 21 February 2019, LawLex201900000247JBJ; CA Besançon, 1 August 2023, LawLex202300011349JBJ.

CA Reims, 24 October 2023, LawLex202300012884JBJ.

See excluding entitlement to the two-year indemnity for periods of service: of 7 months, CA Aix-en-Provence, 27 February 1997, LawLex200200005646JBJ; of 10 months: CA Chambéry, 26 February 2019, LawLex201900000286JBJ; 12 months: CA Saint-Denis de la Réunion, 26 June 2019, LawLex201900000876JBJ; CA Montpellier, 8 October 2024, LawLex202400007610JBJ; for 14 months: CA Lyon, 13 December 2018, LawLex201900002032JBJ; CA Paris, 27 June 2024, LawLex202400005011JBJ; 17 months: CA Douai, 12 December 2012, LawLex201300000014JBJ; 18 months: CA Lyon, 6 February 2019, LawLex201900000818JBJ; CA Paris, 4 February 2021, LawLex202100000356JBJ; CA Poitiers, 7 November 2023, LawLex202300013387JBJ; 24 months: CA Rennes, 3 May 2016, LawLex201600000911JBJ; CA Riom, 30 June 2021, LawLex202100004364JBJ; CA Chambéry, 2 July 2024, LawLex202400005010JBJ; 29 months: CA Paris, 3 April 2014, LawLex201400001832JBJ; 30 months: CA Grenoble, 6 October 2011, LawLex201100001769JBJ; CA Paris, 25 May 2023, LawLex202300007629JBJ; 36 months: CA Paris, 29 March 2012, LawLex201200002180JBJ; Chambéry, 2 May 2023, LawLex202300006243JBJ; 48 months: CA Grenoble, 26 February 2015, LawLex201500000293JBJ; CA Paris, 6 September 2018, LawLex201800001246JBJ; 60 months: 30 June 2022, LawLex202200006364JBJ.

T. com. Paris, 7 January 2003, LawLex200400002184JBJ.

CA Versailles, 6 December 2012, LawLex201200002467JBJ, stressing that the loss actually suffered by the agent may be lower because of the brevity of the duration of the contractual relationship due to the fact that he is a multi-brand representative and that has not shown proof of having made investments specific to the performance of the contract; CA Rennes, 6 March 2018, LawLex201800000417JBJ, granting one year of commissions for a two-year relationship; CA Reims, 3 July 2018, LawLex201800001058JBJ ; CA Rennes, 3 March 2020, LawLex202000000340JBJ. CA Paris, 12 October 2020, LawLex202000002479JBJ, granting one year of commissions for two years of relations.

CA Caen, 25 October 2007, LawLex200800001939JBJ; CA Pau, 14 December 2009, LawLex201000000213JBJ: in accordance with established practice, the commercial agent is entitled to termination indemnity calculated on the basis of two years’ commissions, regardless of the duration of the contractual relationship: CA Nancy, 23 March 2016, LawLex201600000702JBJ: in this case, the agent had acted on behalf of the principal for only thirteen months, but had been marketing the brand covered by the agency agreement for several years before it was taken over by the principal, who failed to demonstrate that the loss resulting from the termination was less than two years’ commissions; CA Toulouse, 20 July 2022, LawLex202200006358JBJ: granting the two-year indemnity after only eleven months of contractual relationship.

T. com. Paris, 9 December 2003, LawLex200400002170JBJ.

CA Bordeaux, 9 January 2017, LawLex201700000086JBJ; CA Bordeaux, 30 April 2018, LawLex201800000675JBJ.

CA Rouen, 18 October 1990, LawLex200200004986JBJ; CA Montpellier, 11 June 2019, LawLex201900000815JBJ.

CA Besançon, 18 May 2011, LawLex201100001056JBJ.

CA Versailles, 20 March 2014, LawLex201400001820JBJ; CA Paris, 11 December 2014, LawLex201400001488JBJ; CA Caen, 19 November 2015, LaxwLex201500001697JBJ; CA Paris, 24 May 2018, LawLex201800000784JBJ; CA Lyon, 13 June 2019, LawLex201900000814JBJ; CA Versailles, 11 January 2024, LawLex202400000415JBJ. Similarly, CA Dijon, 5 September 2024, LawLex202400006074JBJ, emphasized that when the acquisition of new customers by the commercial agent depends largely on coupons sold by his or her principal, which are themselves obtained as a result of advertising campaigns and mailings carried out by the latter, the compensation may be limited to fifteen months' commissions.

CA Toulouse, 22 February 2017, LawLex201700000438JBJ: held that the fact the commercial agent was able, after termination of the contract, to resume business relationships with certain clients he had previously canvassed on behalf of his former principal justified a 20% reduction in the two-year indemnity; 25 June 2024, LawLex202400004868JBJ; Contra: CA Amiens, 14 September 2023, LawLex202300011730JBJ, considered that, for the purpose of calculating the two-year indemnity, no account should be taken of events occurring after termination of the contract, such as the agent’s finding of new partners.

CA Paris, 8 October 2020, LawLex202000002674JBJ, granting one year's commission to an agent who had worked for his principal for ten years, in the absence of a non-compete clause. Cf. CA Paris, 5 November 2020, LawLex202000003047JBJ, holding that an agent who has represented the principal for four and a half years may claim the two-year indemnity even if he is not bound by a post-contractual non-compete clause.

Cass. com., 14 May 2002, LawLex200200004162JBJ, upholding CA Paris, 24 September 1999, LawLex200200004167JBJ: a commercial agent who has only been active for 7 months and whose contract has been terminated suddenly and without notice is entitled to the customary two-year compensation, irrespective of whether, after temporarily being an employee, he could re-establish himself, without the non-compete clause in the contract being relied upon against him; CA Nancy, 22 September 1999, LawLex200200005237JBJ: the sudden termination of the commercial agent's open-ended contract entitles him to compensation which may be equal to two years of gross commissions.

CA Nîmes, 3 April 2003, LawLex200300004438JBJ.

CA Paris, 20 January 1995, LawLex200200005437JBJ; 25 February 2004, LawLex200400001603JBJ.

Cass. com., 14 June 2005, LawLex200500006644JBJ.

CA Versailles, 27 October 2005, LawLex200600000758JBJ; CA Grenoble, 25 June 2008, LawLex200900002836JBJ: the commercial agent whose fixed-term contract is not renewed is not automatically entitled to the two-year indemnity but only to an indemnity intended to compensate his actual loss.

Cass. com., 22 September 1999, LawLex200200006312JBJ, approving CA Lyon, 26 March 1999, LawLex200300000664JBJ; CA Paris, 20 October 2004, 3 judgments, LawLex200400003390JBJ, LawLex200400003391JBJ, LawLex200400003393JBJ: given the length of the parties' relationships, the virtually exclusive nature of the agent's activity and the existence of a non-compete clause, the compensation for termination must be two years of commissions.

See, for example, CA Pau, 22 May 2006, LawLex200600001837JBJ; CA Besançon, 30 September 2009, LawLex201000000203JBJ; CA Versailles, 7 January 2010, LawLex201000000393JBJ.

517. Two-year compensation.