The Assignment of the Commercial Agent Contract: Practical and Legal Guide
The assignment of the commercial agent contract is a common but nonetheless important act in the life of the commercial agent contract.
This operation allows the transfer of the rights and obligations held by a commercial agent under a contract to a successor.
However, it is subject to precise legal rules that must be respected to ensure its full effectiveness.
This article examines the essential elements of the assignment of the commercial agent contract in light of the current legislation.
1. The Legal Framework of the Assignment of the Commercial Agent Contract
The principle in this matter is that the commercial agent has the right to assign their contract. However, the assignee must be approved by the principal. This approval cannot be refused abusively by the principal; they must therefore provide justification for their refusal, especially if the assignee possesses the necessary professional skills to succeed the commercial agent wishing to assign their card.
Transparency and Preparation in Advance
Like any assignment, the assignment of the commercial agent contract implies that the assignor correctly informs the acquirer of all important elements they are aware of, which may affect the contract. The assignor must thus ensure to inform their potential successor of the principal’s reorganization plans, clients who may no longer order the principal’s products, ongoing disputes with the principal, etc.
Formalization of the Assignment
Once a successor is found, their skills and solvency verified, and the main terms of the agreement to be concluded between the parties settled, it will be necessary to formalize it in writing.
Indeed, to ensure the legal security of the transfer of the commercial agent contract, it is highly recommended to formalize the assignment through a document signed by all parties. This document specifies the conditions of the assignment (price, effective date of the assignment…), the obligations of the assignee, and any rights retained by the assignor. This includes the issue of commissions on ongoing business at the time of the assignment, any overpaid commissions that may be revealed later, samples, etc.
At the same time, the commercial agent who has identified a qualified successor to whom they wish to assign their contract must approach their principal to have the intended successor approved as indicated above. In case of refusal, the principal must justify their decision with precise and valid arguments to avoid a recourse by the assigning commercial agent. The timing of requesting such approval can be delicate.
Ignoring the principal’s approval would almost irreparably vitiate the assignment of the contract.
To be valid, the principal’s refusal of approval must be motivated by serious reasons, such as a lack of experience or antecedents incompatible with the principal’s expectations. This approval is therefore often conditioned on an evaluation of the assignee’s experience, skills, or even reputation.
Both the assigning commercial agent and the assignee must obviously retain proof of the principal’s agreement to the assignment. For this purpose, obtaining a written agreement from the principal is strongly recommended, if not indispensable.
2. The Issue of the Assignment Price of the Commercial Agent Contract
The assignment price of the commercial agent contract is a delicate subject.
Assignment Value in France
In France, it is customary for the price to be calculated based on the end-of-contract indemnity due in case of contract termination, which is approximately two years of commissions. However, this price will be subject to negotiation between the assignor and the assignee, who remain free to set the amount.
Assignment Value in Other European Union Countries
In other European Union countries, subject to the specific legal rules of these countries regarding contract assignment, the assignment value of the contract is generally lower.
This is mainly due to the lower end-of-contract indemnity (eviction indemnity) to which the commercial agent can claim in these countries.
For example, a contract subject to French law with an end-of-contract indemnity usually set at two years of commissions will thus have a higher assignment value than a contract governed by Belgian or German law, knowing that the eviction indemnity in these two countries cannot exceed one year and may even be significantly lower than this amount.
3. Effects of the Assignment: Contract Takeover and Consequences in Terms of Right to Indemnity
Due to the assignment, the assignee replaces the assigning agent and benefits from the contract’s seniority.
Thus, for example, the assignee of a contract with four years of seniority will benefit from a three-month notice period in case of contract termination by the principal after the assignment, even if the contract assignment occurred only one or two years ago.
Furthermore, in case of assignment of the commercial agent contract, it should be noted that it is the same contract that continues between the successor and the principal. This element is important since the issue of the assignee’s seniority can influence the amount of indemnity they may claim later in case of contract termination by their principal, as well as the resale price they may request if they decide to assign the card to a successor later.
Obviously, the assignor cannot claim the end-of-contract indemnity provided for by Article L 134-12 of the Commercial Code, since the contract continues with the new commercial agent.
Ultimately, the assignment of the commercial agent contract is a technical act that must be correctly carried out.
In this regard, based on their experience in the matter, AUMANS Avocats is at your disposal for any information you may wish on the subject and more generally to assist you in your operations of assignment or acquisition of commercial agent contracts.
