BGH gives verdict on commission advances in the event commercial agency agreement is terminated

News  >  Trade law  >  BGH gives verdict on commission advances in the event commercial agency agreement is terminated

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Restrictions, whether they be direct or indirect, must not be placed on the commercial agent’s freedom to terminate the commercial agency agreement. That was the finding of Germany’s highest court for civil disputes – the Bundesgerichtshof (BGH) – in a ruling from January 19, 2023 (case ref.: VII ZR 787/21).

Commercial law in Germany stipulates that both businesses and commercial agents are entitled to terminate a commercial agency agreement for cause without having to observe a notice period. And Section 89(a) of the German Commercial Code (HGB) provides that this right cannot be restricted, notes commercial law firm MTR Legal Rechtsanwälte.

In its judgment from January 19, 2023, the BGH has now gone one step further and declared that even clauses that only indirectly restrict the commercial agent’s freedom to terminate are invalid.

The defendant in the case in question had acted as a commercial agent on behalf of the plaintiff. They had contractually agreed that the former would receive advances on commission payments, which he was then supposed to offset against commissions he would go on to earn. Unfortunately, the commercial agent was not able to settle this ongoing imbalance. This led the two parties to conclude a loan agreement, one of whose clauses stated that should the commercial agency agreement be terminated, the outstanding loan debt and the interest accrued as of the effective date of termination would become immediately due for payment in one sum, regardless of who terminated the agreement.

Once the balance had grown to nearly 55,000 euros, the company demanded payment from the commercial agent. However, the latter only wired the value of the interest owed and also terminated the commercial agency agreement. In response to this, the company sued for payment.

Despite being initially dismissed at first instance, the lawsuit was later partially successful before the OLG Düsseldorf, whose recognition of the company’s claim was conditional on it providing the defendant with an extract from the financial records. This ruling was subsequently overturned by the BGH, which held that the agreement to immediately pay back the loan might amount to an obstacle to the commercial agent’s right to terminate, particularly given the serious, albeit indirect, drawbacks it entailed for the commercial agent, namely the immediate repayment of the loan. The BGH would go on to conclude that even indirect restrictions on the right to terminate without notice are not permissible.

One possible consequence of this unlawful restriction is that the commercial agent may not have to pay back the loan at all. With the case having been referred back to the OLG Düsseldorf, it now falls to that court to reach a decision on the matter.

The team of seasoned commercial lawyers at MTR Legal can advise on all aspects of commercial agency agreements.

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