Commercial Agency Contract (Handelsvertretervertrag)

Within the framework of his business activities the entrepreneur enters into many contracts. In order to offer him guidance, the Chambers of Commerce and Industry from the Federal State of Hesse provides him with standard contracts.

As far as individual issues relating to contract law are concerned, professional advice should, however, be sought as a matter of principle either from the Chambers of Commerce and Industry, the Confederation of Commercial Agencies Hessen/Thuringia (CDH) e.V., the Professional Organisation of Commercial Agents or lawyers. A list of Chambers of Commerce and Industry in Hesse and the CDH Land Association together with its offices is enclosed as an Annex.

Note on the use of the Standard Contract:

This contractual form has been drafted with the utmost care but does not claim to be complete or accurate. It is to be seen as a checklist with formulation aids and merely offers suggestions as to how the differing interests of the parties can be reconciled in an appropriate manner. This does not, however, relieve the user of his responsibility to undertake his own careful examination. The Standard Contract is simply a proposal for a possible regulation. Many arrangements can be freely negotiated. The user may also choose other formulations.

Before adopting the unchanged content it must, therefore, be considered in one's own interest whether and to what extent an adjustment may possibly be needed to the concrete situation in hand . Furthermore, developments in legal provisions must be taken into account. The Chamber of Commerce and Industry does not have any influence on this and cannot, therefore, of course assume any liability for the impact on the legal position of the parties.

Furthermore, liability for slight negligence is, as a matter of principle, excluded. If you need a tailor-made contract, you should seek the advice of a lawyer you trust.

As at: January, 1^st 2022

Commercial Agency Contract*)

between ………. (business name and registered office of the principal)

- hereinafter referred to as Principal -

and

Mr/ ………. (name of the commercial agent, address)

- hereinafter referred to as Commercial Agent -

§ 1 Legal status of the Commercial Agent[1]

The Commercial Agent shall take over representation[2] of the Principal in the Contractual Territory …….. as the local agent. The right of the Principal to operate itself or through third parties in this Contractual Territory shall remain unaffected.[3] The exact delimitation of this Contractual Territory shall result from the extract from the map attached to this Contract as an Annex (Annex-Nr. …)[4]. Amendments to the Contractual Territory shall not be valid unless they are covered by an addendum to this Contract to be signed by the two contracting partners.

The representation shall cover all[5] products of the Principal which are currently part of its production and sales programme.

The Principal shall be obliged to list in an Annex ( Annex-Nr. to this Contract all customers with which it already has a permanent business relationship at the beginning of the Contract including the sales revenues generated with these customers during the 12 months prior to the commencement of the Contract.

The entire stock of customers in the Contractual Territory at the time of entry into force of this Contract shall be taken over by the Commercial Agent for further servicing.

§ 2 Obligations of the Commercial Agent

1 The Commercial Agent shall negotiate/conclude sales transactions in the Contractual Territory allocated to him on behalf of and for the account of the Principal[6]. In this connection he shall defend the interests of the Principal with the due diligence of a prudent businessman and use his best endeavours to enlarge and increase sales revenues. He shall entertain business relations with the prospective customers and develop them systematically. The Commercial Agent shall/not be an authorised collecting agent[7].

2 The Commercial Agent shall immediately notify the Principal of every negotiation of business transactions/conclusion of business transactions[8] and inform the Principal of existing initiations of business transactions by providing it with copies of the correspondence and/or memos. Furthermore, the Commercial Agent shall provide the Principal once a month with the necessary information. At the request of the Principal, the Commercial Agent shall, in special cases, be obliged to provide special information.

3 The Commercial Agent shall be obliged to keep a customer file and/or set up an electronic customer file and keep it up-to-date. Self-generated customer lists/customer files are to be made accessible to the e Principal to the extent of the statutory duty of disclosure.

4 The Commercial Agent shall be obliged to monitor the creditworthiness of existing or prospective customers within the framework of his possibilities and support the efforts of the Principal to establish solvency. Any doubts concerning the creditworthiness of an existing or prospective customer must immediately be notified to the Principal. He shall not be obliged to call in credit rating agencies or the similar.

5 The Commercial Agent undertakes to treat business and trade secrets of the Principal as confidential and to store the documents which refer to them and the commercial agency in such a way that they are not accessible to third parties. He shall keep all knowledge about business procedures and internal, more particularly, confidential matters obtained during the term of the Contract secret even after the termination of the Contract.

6 The representation shall be awarded on a personal basis to the Commercial Agent. He shall not be entitled to transfer the commercial agency without the express consent of the Principal to a third party or to tolerate commercial agency services through a third party in a tacit manner; he may, however, resort to supporting staff to exercise his commercial agency. If the sole proprietorship of the Commercial Agent passes into other hands, this shall not lead, in the absence of consent of the Principal represented, at the same time to a transfer of the Commercial Agency Contract to the new owner of the sole proprietorship.

7 This shall apply mutatis mutandis if the Commercial Agent as a contracting partner under this Commercial Agency Contract transforms his sole proprietorship into a partnership. Without the express consent of the Principal, the contractual relationship does not pass automatically in such cases to the partnership.

8 The Commercial Agent shall be entitled to enter into contracts with sub-agents or employed commercial travellers that he wishes to use as vicarious agents to meet his contractual obligations.

§ 3 Obligations of the Principal

The Principal shall use its best endeavours to support the Commercial Agent in the exercise of his activity and always provide him with the necessary information and data. Within the framework of the exercise of its authority to give instructions, the Principal must take the self-employed status of the Commercial Agent into account. The necessary information and data shall be deemed to include whatever is of essential significance for the activities and claims to remuneration of the Commercial Agent (e.g. changes in respect of products, prices and/or standard terms and conditions, special advertising measures). The Principal shall, more particularly, be obliged to inform the Commercial Agent in due time before reorganisations of operations, work overload, manufacturing or raw material difficulties or the similar so that the Commercial Agent can adapt himself to the respective circumstances in terms of his negotiation and/or conclusion activity.

The Principal shall provide the Commercial Agent with the documents necessary to exercise his activity (samples, drawings, price lists, printed advertising matter, standard terms and conditions as well as … etc.) free-of-charge and shall supplement and update them permanently. These documents shall remain the property of the Principal unless they are properly used up.

The Principal shall provide the Commercial Agent with the necessary information. The Principal shall, more particularly, notify the Commercial Agent immediately of the acceptance or rejection of a negotiated business transaction as well as of the non-performance as a whole or in part of a concluded business transaction together with a statement of reasons for non-performance.[9] The Principal must inform him immediately if it probably can or wishes to conclude the transactions on a considerably lower scale than the Commercial Agent could expect under ordinary circumstances. The legal consequences of non-performance as a whole or in part are governed by § 6.

The Commercial Agent must immediately be provided with copies of the correspondence with customers or prospective customers from the Contractual Territory; the Commercial Agent must immediately be notified of negotiations and planned transactions with customers or prospective customers from the Contractual Territory which are conducted with the consent of the Commercial Agent or without the latter's participation.

The necessary information within the meaning of para 1 shall also be deemed to include informing the Commercial Agent about planned co-operations and/or mergers with other enterprises or an intended divestment or closing down of the Principal in due time in such a way that he is not impaired in his entrepreneurial planning – more particularly with a view to the exercise of his right to terminate the Contract.

§ 4 Transactions liable to commission

The Commercial Agent shall be entitled to a claim to commission for all transactions negotiated/concluded by him in respect of transactions in the Contractual Territory within the meaning of § 87 para 2 HGB (German Commercial Code) and for all transactions completed without his direct contribution with third parties which he acquired as customers for transactions of the same kind.[10] A prerequisite to the commission claim is that the conclusion of the transaction occurs during the existing Commercial Agency Contract without regard to the time of performance of the transaction by the Principal.

For business transactions which are concluded after the termination of this Contract, the Commercial Agent shall be entitled to a commission claim if he has negotiated, initiated or prepared the transaction in such a way that the conclusion of the transaction is primarily attributable to his activity and the transaction is entered into within an appropriate period after the termination of the contractual relationship or if the offer by the customer to enter into the respective transaction has been received before the termination of the Commercial Agency Contract by the Principal.[11] The Commercial Agent shall not acquire any claim to commission for transactions for which a predecessor can claim commission in accordance with § 87 para 3 HGB.

If the conclusion of a transaction with a new customer is not attributable to the exclusive activity of the Commercial Agent but has been brought about by other commercial agents as well, the claim to commission must be apportioned accordingly. This apportionment shall, more particularly, be governed by the scope of the service which has been contributed by the participating party to the conclusion of the transaction. Whether an apportionment has to be made or not and the proportion in which the commission is apportioned shall be decided by the Principal after hearing the agents concerned at the Principal's own discretion with an equitable consideration of conflicting interests and to the exclusion of recourse to courts if the participating parties cannot reach an agreement on the apportionment of the commission.

The claim to commission of the Commercial Agent is established as an unconditional claim as soon as and to the extent that the Principal has performed the transaction liable to commission. In the event of an obligation of advance payment by the customer, the claim to commission is already established if and to the extent that the customer meets his obligation to make an advance payment.

§ 5 Amount of commission

The commission to which the Commercial Agent shall be entitled for all transactions liable to commission referred to in § 4, shall amount to ….%. Statutory value added tax shall be added to this commission and shall be owed if the Commercial Agent is subject to value added tax.

The basis for the calculation of the commission shall be the net invoiced amount (invoiced amount without value added tax)[12], minus all price reductions granted by the Principal and accepted by the customer. Cash discounts shall not be deducted. The same shall apply to ancillary expenses (e.g. for freight, postage, customs duties, taxes etc.) unless the ancillary expenses are separately invoiced to the customer.

The commission rates and calculation bases referred to in the foregoing paragraphs for the calculation of the commission may only be amended by way of contractual agreements.

§ 6 Loss of commission claim

The commission claim shall not apply if a transaction concluded is not performed as a whole or in part if and to the extent that this is attributable to circumstances which are not the responsibility of the Principal.

The claim to commission shall likewise not apply if it is established that the customer does not pay; it shall be reduced if the customer makes only a partial payment. Any amounts already received must be refunded by the Commercial Agent to the Principal.

The Principal shall only be obliged to assert and execute the claim to performance vis a vis the customer if this measure has any prospect of success. In all other cases the Principal is only obliged to assert and execute the claim to performance before a court if the Commercial Agent demands this and contributes appropriately to the costs of the proceedings.

§ 7 Commission settlement

The Principal shall settle the commission to which the Commercial Agent is entitled for each calendar month no later than by the 10th day of the following month.[13] The commission settlement shall cover the claims to commission (net commission) which have arisen up to end of the previous month following the performance of the transaction by the Principal as unconditional claims.

Any advance payments must be taken into account in the settlement of the commission; in the settlement of the commission the VAT on the commission must be separately shown.

A claim to commission shall become due at the end of the settlement month.[14]

§ 8 Expenses of the Commercial Agent

The Commercial Agent shall be entitled to reimbursement of the following expenses:[15] ................................................................

§ 9 Illness of the Commercial Agent[16], vacation

The Commercial Agent must inform the Principal immediately if he is prevented from exercising his activity for reasons of illness or other reasons for more than a week.

In the event of an illness of more than one week the Principal shall be entitled to act itself or through mandatories in the Contractual Territory of the Commercial Agent, unless the Commercial Agent secures the servicing of his customers through an appropriate substitute.[17] The activity of the Principal or third parties in the Contractual Territory must not result in a reduction of the commission to which the Commercial Agent is entitled if the duration of the illness does not exceed four weeks.

If the Commercial Agent does not provide an appropriate substitute, he shall pay - during the interruption of activity for the proven costs (salary, travel expenses etc.) of a substitute made available by the Principal - up to 50% of the claims to commission arising during that period. This provision shall, however, only apply for the period from the fifth week up to the expiration of six months since the beginning of the illness. After the expiration of six months a new agreement must be entered into which takes due account of the prevailing situationat that time.

The Commercial Agent shall be obliged to take his vacation, as far as possible, during a period with fewer business transactions and to co-ordinate the date of vacation at least six weeks before its commencement with the Principal. This shall apply mutatis mutandis to any temporary interruption of activity.

§ 10 Agreements restricting competition

The Commercial Agent acts upon the entry into force of this Contract for the principals referred to in Annex-Nr … and/or exercises any other gainful activities referred to therein. The Commercial Agent shall inform the Principal without delay of any change in and supplement to the product/supply programme of the other companies or the scope of the other gainful activities. If, as a result of a supplement to and/or change in respect of the products/supply programme, these representations become competitors for the Principal, the Commercial Agent shall be obliged to discontinue immediately his activities with the competing companies.[18]

During the term of the contract the Commercial Agent shall be obliged to refrain from any competition vis a vis the Principal. He shall only be entitled with the express written consent of the Principal to take over representations for other undertakings, to take a share directly or indirectly in other undertakings or to support another undertaking if said other undertaking manufactures products and/or distributes them and/or offers other services which are the same or equivalent to those of the Principal.[19]

If the Commercial Agent intends to take over the representation of another undertaking which does not produce or distribute the same or equivalent products he must inform the Principal.

The Commercial Agent hereby undertakes to refrain, for a period of two years after the termination of the contractual relationship, from any commercial activity within the Contractual Territory within the meaning of § 1 para 1 of this Contract concerning products and services referred to in § 1 para 3 for a competing company.[20] This obligation shall include activities in an employed relationship as well as those in a self-employed capacity (e.g. as a commercial agent or authorised dealer). The Commercial Agent shall also be prohibited from acquiring a direct or indirect shareholding in a competing undertaking during the stipulated period.

For the period of the post-contractual prohibition of competition, the Principal shall pay the Commercial Agent competition compensation which shall be subsequently payable on a monthly basis. The compensation shall amount to 50 %[21] of the monthly remuneration established for the benefit of the Commercial Agent as the average for the last three years – in the event of a shorter contractual period, during such period.[22]

§ 11 Term and termination

The contractual relationship shall commence on … and shall be entered into for an indefinite period of time.

The Contract may be terminated by either contracting partner during the first contractual year subject to a period of notice of one month, during the second contractual year subject to a period of notice of two months, during the third to fifth contractual year subject to a period of notice of three months and then subject to a period of notice of six months, in each case to the end of a calendar month.[23]

The right of the contracting partners to terminate the Contract on good and sufficient grounds shall not be affected.

The termination must be in writing.

In the event of the dissolution of the contractual relationship the Commercial Agent shall return any documents (s. §3.par 2.2), the customer file and other material made available to him by the Principal at the beginning or during the contractual relationship within 14 days unless it has been properly used up, together with all other information necessary to maintain and perform the operations.

§ 12 Other provisions

All claims under this Contract shall become statute-barred within 12 months after the beneficiary obtains information on the circumstances establishing the claim.[24] For any claim under § 89 b HGB this 12 month period of limitation shall, however, only begin on the expiration of the one year assertion period (§ 89 b IV 2 HGB). The afore-mentioned provisions to shorten the period of limitation shall not apply to claims which may not be restricted according to coercive statutory provisions, such as claims under liability for wrongful intent in accordance with § 202 BGB (German Civil Code).

The exclusive local place of jurisdiction for any disputes under this Contract shall be the registered office of the Principal/ Commercial Agent.[25]

No ancillary agreements have been entered into under this Contract. Amendments shall not be valid unless in writing and signed by the two contracting partners. This requirement as to form may only be waived by written agreement.

If the contractual text fails to cover an item which needs to be regulated, the statutory provisions under §§ 84 ff. HGB or the principles established by case law shall apply by way of supplement.

The invalidity of a provision of this Contract shall not result in the invalidity of the entire Contract. The invalid provision shall be replaced by an agreement which comes closest to the object of the Contract and the intention of the contracting partners.

This Contract has … Annexes which shall constitute an integral part of this Contract.

This Contract shall be executed in duplicate. Each contracting partners has received an office copy signed by the other contracting partner.

…… this …………… ………………………………………………

Place, Date Signature of the represented Principal

…… this ……………… .…………………………………………....

Place, Date Signature of the Commercial Agent

[1] The Standard Contract is tailored to the full-time commercial agent for goods (not for insurance agents); for part-time commercial agents the law provides for special provisions, § 92 b HGB (German Commercial Code) (shorter periods of notice; no compensation claim under § 89 b HGB, deviation from the obligation to make advance payments under § 87 a para 1 HGB). If these legal consequences are to be implemented, the commercial agent must be expressly entrusted with the negotiation or conclusion of transactions as the "Part-time Commercial Agent" (§ 92 b para 2 HGB). The representation must then, however, be actually exercised as a secondary occupation. Special provisions also govern insurance agents and agents of home savings banks (§ 92 HGB) and commercial agents with an employee-like status within the meaning of § 92 a HGB.

[2] The allocation of a contractual territory to a commercial agent does not mean, as opposed to the granting of an exclusive agency, that the principal must only enter into transactions in the contractual territory through the commercial agent. According to § 87 para 2 HGB direct transactions also establish claims for commission of the commercial agent, which can, however, be excluded (see comment on § 4 para 1).

[3] Alternatively, an exclusive agency can be agreed upon which leads to a comparatively strong position of the commercial agent. An exclusive agent is a commercial agent to whom a certain contractual territory or group of customers is allocated subject to the proviso that in the respective contractual territory the principal may only act through the commercial agent.

Drafting proposal: "As a local agent the Commercial Agent shall take over the exclusive agency for the Principal in the Contractual Territory … . The Principal shall not be entitled to appoint additional Commercial Agents for this Contractual Territory or acquire itself or through mandatories customers in this Contractual Territory."

[4] Here it is recommended to define the contractual territory not only by means of an extract from a map but also based on postal codes.

[5] Alternative: "The representation shall cover the goods specified in the Annex to this Contract. Concerning the inclusion of products of the Principal which will in future belong to its production and sales programme, an addendum to this Contract must be entered into at the appropriate point in time."

*) Please read the note on the use of the standard contract!

[6] Delete if inappropriate! It must be considered whether the commercial agent is only to be granted authority to negotiate (Þ ".... negotiate") or authority to conclude (Þ ".... conclude").

[7] The authority to collect granted to the commercial agent leads to a claim to collection commission (§ 87 para 4 HGB) which may, however, be excluded.

[8] Delete if inappropriate! See footnote 6

[9] If necessary, the following additional formulation is recommended in these cases: " ... non-performance. Otherwise, the Contract shall be deemed to be accepted vis a vis the Commercial Agent."

[10] § 87 para 2 HGB establishes claims to commission of the commercial agent for direct transactions of the principal which may, however, be excluded.

Drafting proposal: "The Commercial Agent shall be entitled to a claim to commission for all transactions negotiated/concluded by him in his Contractual Territory; the Commercial Agent shall have no claim to commission under § 87 para 2 HGB."

[11] The appropriateness of the period is governed, inter alia, by the kind of goods negotiated. In the event of consumer goods the deadline is certainly much shorter than, for instance, for capital goods or investments. A limitation in time can possibly be added: "For business transactions which are entered into after the expiration of three months following the termination of the contract, the Commercial Agent shall not be entitled to any claim to commission."

[12] If the net invoiced amount is not expressly agreed upon as the assessment basis for the commission, the value added tax included in the invoiced amount shall likewise be liable to commission, § 87b para 2 HGB.

[13] The relevant period for the settlement cannot exceed three months (see § 87 c para 1 HGB)

[14] Alternative: The commission to which the Commercial Agent is entitled plus VAT must be paid together with the settlement.

[15] Alternative: "The Commercial Agent shall have no claim to compensation for customary expenses incurred in the ordinary course of business".

Statutory provision: "The Commercial Agent may only demand a refund of expenses incurred in the ordinary course of business if this is customary trade practice".

[16] Depending on the configuration and interests other provisions can be drafted.

[17] This provision is only necessary in contracts in which the commercial agent has an exclusive agency (see § 1 para 1 of the Contract; see Note 3)

[18] Alternative: "... the Commercial Agent shall be obliged to immediately discontinue the competition situation."

The dissolution of the competitive situation usually requires a termination of the contractual relationship with one of the competing companies. The commercial agent's own termination of the contract always jeopardises the claim to compensation under § 89(3) HGB! In order to assess alternative courses of action, it will always be necessary to obtain advice in individual cases from professional associations and/or a lawyer familiar with this matter).

[19] Alternative: He shall not acquire any direct or indirect shareholding in a competing undertaking or otherwise support such an undertaking. He may not act as a commercial agent within or outside his Contractual Territory for an undertaking which manufactures or distributes the same or equivalent products even if they are only used objects. Exceptions shall require the written consent of the Principal.

[20] If a post-contractual prohibition of competition is not intended by the contracting parties, para 4 is to be deleted.

[21] The stated rate of 50% is only mentioned by way of example; in a concrete case it may be higher or lower. The law only provides for the competition compensation to be "appropriate".

[22] From the principal's point of view the following addition might be advisable: "Concerning the offsetting of any other gainful activities, the provisions applying to the prohibition of competition of commercial employees shall apply mutatis mutandis (§ 74 c HGB)".

[23] This is the statutory provision for full-time commercial. Any shortening of these deadlines is not admissible but a prolongation is admissible which must not, however, be shorter for the principal than for the commercial agent.

The provision is not suitable for not for insurance agents in a secondary profession. § 92b Absz1. 2 HGB states: "If the contractual relationship has been entered into for an indefinite period, it may be terminated with a notice period of one month for the end of a calendar month; if a different notice period is agreed, it must be the same for both parties. In this case, the extension of the notice periods is also subject to review according to the law on general terms and conditions. Excessively long notice periods are invalid if they prevent the commercial agent from taking up a main profession that secures his livelihood (BGH ruling of 21 March 2013, ref.: VII ZR 224/12)

[24] This provision deviates from the statutory period since the statutory period may be inappropriately long. According to §§ 193,199 BGB claims under the contractual relationship become statute-barred after three years beginning with the end of the year in which they have become established ,and the rightful claimant was aware or was grossly negligently not aware of the facts establishing the claim. Regardless of such knowledge the claims become statute-barred after 10 years. If this long statutory period is intended, the first paragraph is to be deleted. At any rate agreements should apply to the claims of the two contracting parties.

[25] Alternative: "The exclusive local place of jurisdiction for disputes under this Contract shall be the registered office of the plaintiff."

Both the wording chosen in the text and the alternative can only be entered into in a legally binding manner if the two contracting partners are merchants within the meaning of § 1 para 1 and 2 HGB. If one of the parties is not a merchant, the place of jurisdiction is governed by the Code of Civil Procedure; any deviating agreements on places of jurisdiction are then invalid.