Agent Axed in Trial Period Can Sue, EU Court Says

(CN) – Europe’s highest court opened the door for a lawsuit Thursday from a commercial real estate company that got the boot after selling only one property halfway through a trial run in which it was supposed to sell 25.

The dispute here arose several years ago in France when the company Demeures Terre et Tradition contracted Conseils et Mise en Relations to sell 25 houses a year on its behalf. Demeueres Terre et Tradition translates in English to Home Earth and Tradition, while the latter company’s name means Advice and Relationship.

In June 2012, halfway through a 12-month trial period, the principal DTT terminated its contract with CMR, noting that the agent had sold just one house.

CMR filed suit the next year in Orleans, saying that the contract had been illegally terminated, causing it damages.

DTT balked when the court partially upheld CMR’s application, and the Court of Appeal found in 2014 that compensation was not available since the contract termination occurred during the trial period. That ruling also upheld DTT’s basis for terminating the contract: the one sale, 24 short of the contract objective.

France’s Court of Cassation ruled next that there is no right to compensation where the commercial agency contract is terminated during the trial period, but it stayed the proceedings and invited EU authorities to weign in.

On Thursday, the Luxembourg-based European Court of Justice found that commercial agents would be unfairly penalized if they could not seek indemnity after a contract was terminated in the trial period.

“On the contrary, … relations between a commercial agent and a principal, … subsist as from the time when a contract, the purpose of which is either to negotiate the sale or purchase of goods, or to negotiate and conclude such transactions on behalf of the principal, irrespective of whether that contract provides for a trial period,” the opinion from the court’s fourth chamber states. “It follows that the provisions of that directive are applicable as soon as such a contract is concluded between the principal and the commercial agent, even if that contract provides for a trial period.”

The ruling goes on to say that commercial agents are entitled to an indemnity if they have brought new customers to the principal “or have significantly increased the volume of business with existing customers and the principal continues to derive substantial benefits from the business with such customers.”

“The amount of the indemnity depends on the performance of the commercial agent during the term of the contract,” the ruling continues.

As for damages, the court said compensation should be available, specifically if termination of the contract will deprive the agent of commissions it has earned.

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