Agent’s Commercial Commissions and Client Fraud: If the parties to a contract must execute the obligations incumbent upon them in good faith, This is not always the case in practice. And the relationships between a client and his commercial agent do not make an exception to the rule.
Indeed, it is not uncommon that during a collaboration, the the relationships between principal and commercial agent deteriorate. This is often the case when, after several years of collaboration, the principal considers that the client base on the territory assigned to the agent is sufficiently developed and stable. And therefore, that services can be provided by the agent and thus ensure the commission economy of the agent…
Thus, some clients do not hesitate to resort to various strategies in order to to reduce the amount of commissions due to their agents, even worse, in order not to have to commission them at all. Such behavior is obviously untrustworthy and to this extent they can be fined by the courts.
The AUMANS AVOCATS you present today some examples of conduct of clients deemed disloyal pursuant to judicial decisions.
Examples of behaviors constituting a fraud by the principal infringing on the commercial agent’s commissions
It is impossible to list exhaustively all the situations constituting a un dishonest conduct or fraudulent in relation to the commercial agent.
It is nevertheless possible, by studying various decisions made in this area by the French courts, to gain a more precise understanding of what constitutes or does not constitute breach of fidelity by the principal.
It was thus ruled as constitutive of fraud, for the principal, in order not to have to commission the commercial agent to do so, in particular:
- to inform the agent that several clients now fall under his own remit lead generation,
- to invite clients identified by the agent to to address directly to its staff employee,
- de to divert clientele regularly approached by the agent thanks to the intervention of his salespersons employed, without this intervention being justifiable by any failure of the representative,
- to propose to subsidiary companies of its group to participate in his place at/in tenders/bids,
- to entrust the manufacture and distribution of its products to a sister company,
- to create a third party company selling products identical to or comparable to those entrusted to the sales agent, etc.
Creation of a third-party company by the client and termination of contractual relations
Clients may also be tempted to implement a particular legal structure in order to avoid paying the agent the commissions due to him.
Frequently, some Third-party companies are created for these purposes. These companies have the particularity of often having the same registered office, the same management, as well as the the same shareholder as the principal. The products sold are identical or competing products of which the commercial agent markets. Numerous judicial decisions have reported such behavior on the part of the principals.
This practice is illegal given that it compromises the contractual relationship as agreed originally between the principal and the commercial agent. This is indeed a dishonest and fraudulent behavior which may lead to the breach of contract initiated by the commercial agent. Judges indeed believe that the principals are then responsible of a wrongful termination of contractual relations. The commercial agent is indeed entitled to invoke the termination of contractual relations, on the basis of Article L.134-13-2 of the Commercial Code.
If you believe you are the subject of a fraud attempt by your client against you trade representative rights or if you have any doubts regarding the legality of certain practices of your client, the AUMANS LAW FIRM is at your disposal to answer all of your questions and represent your interests before the competent courts.
AUMANS AVOCATS (formely FOUSSAT AVOCATS): our expertise in commercial agent law at your service
Specialized for nearly thirty years in commercial agent law and, to that effect, fully mastering the issues related to the status of the commercial agent, Jean-Charles FOUSSAT and his team advise and assist its clients throughout the life of their commercial agent contracts, including in the event of an international contract, whether it concerns their conclusion, their qualification, their execution, their termination or still their cession.
Jean-Charles FOUSSAT and his team are at your disposal for any information you may require.
