Obligations Must Be Fulfilled Until the End of the Contract – OLG Cologne, Case No. 19 U 150/22
A commercial agent cannot simply stop working after terminating their commercial agency agreement. They must at least make an effort to continue generating sales until the end of the contract. The Higher Regional Court (OLG) of Cologne made this clear in its ruling of September 22, 2023 (Case No. 19 U 150/22).
The rights and obligations of contracting parties are governed by law or stipulated in the commercial agency agreement. These provisions remain in force until the end of the contract, even if one party has already given notice of termination. Under Section 86 of the German Commercial Code (HGB), a commercial agent is obliged to make efforts to broker and conclude transactions while safeguarding the interests of the company. Termination does not release them from this duty. Until the contract expires, they must continue fulfilling their obligations, as noted by the commercial law firm MTR Legal Rechtsanwälte, which advises, among other areas, in commercial law.
Decline in Transactions After Termination
In the case at hand, the commercial agent worked on a part-time basis for the defendant company, brokering financial services such as home savings contracts, insurance policies, investment products, and real estate. They received a commission for each successful transaction.
In August 2020, the commercial agent terminated the contract effective February 28, 2021. From the moment of termination, the number of transactions they concluded dropped significantly. The commercial agent attributed this decline to the effects of the COVID-19 pandemic, which had prevented personal customer contact and made outreach via phone or email legally impossible.
The company, however, saw things differently. It argued that the commercial agent had ceased all sales activities after giving notice and had thereby breached their duty of effort. Consequently, the company filed a counterclaim for damages against the commercial agent.
Breach of Duty by the Commercial Agent
The legal dispute ultimately reached the OLG Cologne. The court ruled that the company was entitled to damages because the commercial agent had violated their contractual obligations. Specifically, the court found that the agent had breached their duty under Section 86 (1) sentence 1 HGB to make efforts to broker or conclude transactions.
This conclusion was based on a comparison of sales figures. Between September 2017 and August 2020, the commercial agent generated 16,327 so-called units, whereas between September 2020 and February 2021—after giving notice—they generated only 69 units. This indicated that after announcing their resignation, the agent only carried out their duties for the company to an extent that did not meet their contractual obligations.
While a commercial agent is not required to achieve a specific number of transactions, they are subject to a duty of effort. The significant drop in transactions after termination strongly suggested that the agent had not sufficiently fulfilled this duty, according to the court.
Company Entitled to Compensation
The commercial agent failed to provide a convincing alternative explanation for the decline in transactions. The OLG Cologne did not accept their argument that the decrease was due to the impact of the COVID-19 pandemic. The strict lockdown had occurred before the termination, while between September 2020 and February 2021, there were no continuous contact restrictions, the court noted.
Additionally, the commercial agent’s own statements confirmed the breach of duty. They had admitted to visiting only 13 customers in the six months following their termination, which further supported the company’s claims.
As a result, the company was entitled to compensation. However, the amount was not determined solely based on the difference in sales figures, as fluctuations in transaction success rates needed to be considered. The court ruled that, in assessing damages, a 30% deduction should be applied to the difference in generated units when comparing the periods before and after termination.
This ruling highlights the importance of commercial agents and companies taking their rights and obligations seriously. Commercial agents should document their efforts accordingly.
MTR Legal Rechtsanwälte advises on commercial law and commercial agency law.
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