Commercial agents that do not leave the building?

05 Dec 2018

The Court of Justice of the European Union decided in its decision of 21 November 2018 that a person who has continuing authority to negotiate (and conclude) the sale or the purchase of goods on behalf of another person can do so from the latter’s business premises. Such person can be considered a “commercial agent” provided that he can perform such activities in an independent manner, even if he fulfils other functions within such company.

An independent service provider was responsible for the fitted kitchen department of its principal, selling fitted kitchens in the name and for the account of the principal. The principal terminated this oral agreement without notice or compensation.

Initially, the person in question claimed before the labour courts that he was a sales representative.  However, his claim was rejected on the grounds that the agreement was not that of a sales representative, but rather a contract for work.

Almost four years after the start of the legal proceedings, he brought court proceedings before the commercial court (now, called the business court). There, he based his claims on the grounds of having a contract for work. The principal argued that a commercial agency agreement existed between the parties. All claims in relation to commercial agency agreements are to be initiated within a one-year time limit, which made this claim inadmissible.

It is within this framework that the business court submitted questions on the characteristic elements of a commercial agency agreement to the Court of Justice.

To the question whether the place where the services are performed is a crucial element to determine if a commercial agency agreement exists, the Court of Justice responds that no legal provision makes the status of “commercial agent” dependent on having to perform the commercial activity from outside the premises of the principal.

The Court recalls that the only three criteria that need to be scrutinised to uphold the status of commercial agent, are: (i) the person must be a self-employed intermediary, (ii) the contractual relationship must be of a continuing character (but not necessarily exclusive) and (iii) the person must exercise, on behalf of and in the name of the principal, an activity which consists in being an intermediary for the sale or purchase of goods.

However, the Court of Justice concludes that the place of performance of the services is taken into consideration to determine the “independence” and autonomy which this person must possess in order to be able to invoke the status of “commercial agent”.

> Key message

Take note that an independent service provider who acts as an intermediary for the sale or purchase of goods and services, even from within the premises of the principal, could invoke the status of a commercial agent, and with it the protective rules which could justify among others claiming a goodwill indemnity.