Agreement on Non-Compete Clauses in Commercial Agent Contracts
A frequent point of contention between companies and commercial agents concerns whether a commercial agent is bound by a non-compete clause. This aspect is not explicitly regulated by law. In practice, however, it is assumed that such a non-compete clause exists unless otherwise agreed in the commercial agent contract. The non-compete clause is a critical issue in commercial agent contracts, and it must also be considered whether the non-compete obligation should continue after the termination of the contract. If this is the case, the commercial agent is generally entitled to so-called non-compete compensation (“Karenzentschädigung”) for the duration of the restriction, as explained by the business law firm MTR Legal Rechtsanwälte, which provides advice on commercial law, among other areas.
Non-Compete Clause for Business Protection
Companies typically have an interest in imposing a non-compete clause on commercial agents to protect know-how and avoid indirectly strengthening competitors. Commercial agents, on the other hand, may believe they are free to decide whom to work for as independent traders. However, it is not that simple. Although a non-compete obligation during the contract term is not explicitly regulated in the German Commercial Code (HGB), case law assumes that such an obligation exists under the principle of good faith (§ 242 BGB). During the contract term, the commercial agent should refrain from any activities that could harm the company. If other arrangements are to apply, they must be contractually specified. Another crucial factor is whether the companies the commercial agent works for are in direct competition. In case of doubt, the commercial agent should seek clarity and, if necessary, obtain the company’s consent.
Scope of the Non-Compete Clause
The extent of a non-compete clause is subject to debate. According to the Federal Court of Justice (BGH), it must be proportionate and take into account the circumstances of the individual case. In principle, the parties are free to agree on the scope of a non-compete clause. These provisions should be defined as clearly as possible in the commercial agent contract to ensure legal certainty for both parties. When agreeing on non-compete clauses, it is essential to ensure that the provisions remain proportionate. If a commercial agent breaches the non-compete clause, causing economic damage to the company, they may be liable for damages. Furthermore, the breach could result in a warning and could even justify the company’s extraordinary termination of the contract.
Post-Contractual Non-Compete Clause Must Be Agreed
Post-contractual non-compete clauses are handled differently. After the contract ends, the commercial agent is generally free to decide whom to work for. However, companies may have an interest in ensuring that the agent does not immediately start working for a competitor. To safeguard against this, a post-contractual non-compete clause can be included in the commercial agent contract. However, certain conditions must be met. The non-compete clause must not exceed two years from the end of the contract. It may only apply to products, territories, or customer groups that the agent was responsible for during the contract term. As compensation for the restriction, the commercial agent is entitled to reasonable non-compete compensation (“Karenzentschädigung”). If the commercial agent breaches the agreed post-contractual non-compete clause, they may lose their claim to compensation or part of it. Furthermore, they may be held liable for damages caused to the company.
Key Points to Regulate in a Commercial Agent Contract
To avoid legal disputes, the commercial agent contract should be drafted to provide legal certainty for all parties. Key elements to include are the definition of the commercial agent’s territory, a description of the products or services to be mediated, the obligation to maintain a customer list, handover and takeover of the customer base, the agent’s usage rights for protected trademarks, commission entitlements, contract duration and termination options, claims for compensation or indemnification, non-compete clauses, and non-compete compensation.
With extensive experience in commercial law, MTR Legal Rechtsanwälte advises companies and commercial agents on non-compete restrictions and other issues related to commercial agent law.
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