The French Court of Cassation has confirmed the interpretation given by the European Court of Justice in a decision of 4 June 2020 regarding the meaning of the term « negotiate »: it is not necessary to have the power to modify the prices of products sold on behalf of the principal in order to benefit of the commercial agent’s status.
By a decision of 2 December 2020, the Commercial Chamber of the French Court of Cassation has put an end to its restrictive interpretation of the qualification of commercial agent by aligning itself with the position adopted by the ECJ in the Trendsetteuse SARL/DCA SARL ruling.
French Court of Cassation, Civil, Commercial Chamber, 2 December 2020, 18-20.231, Published in bulletin
The facts were as follows:
On 20 December 2006, EDITIONS ATLAS, a company specialized in the publishing and marketing of leisure products, had concluded an agreement with Mr O. entrusting him with the prospecting of its customers in a geographical area within the district of Sens for an indefinite period.
This agreement had been amended nine times, allowing the geographical area allocated to Mr O. to be extended.
On 1 July 2011, Mr O. ceased to perform the contract.
On 4 July 2011, Mr O. entered into an employment contract for an indefinite period as exclusive sales representative with a third party, the company ANAVEO.
On 16 December 2011, claiming the status of commercial agent, Mr. O. summoned EDITIONS ATLAS sto terminate the contract at the exclusive fault of the Company and to pay various indemnities.
In a judgment issued on 26 August 2015 (no. 12/00029), the French High Court of Sens qualified the agreement between Mr. O. and EDITIONS ATLAS as a commercial agent contract.
The High Court also pronounced the judicial termination of this agreement to the exclusive detriment of Mr O., ordering him to pay the sum of 5,000 euros under article 700 of the French Code of Civil Procedure and to pay all the costs of the proceedings.
Mr O. appealed against this decision.
In accordance with articles L.134-1 and following of the French Commercial Code regarding the commercial agency contract, Mr O. reiterated his request of first instance: termination of contract to the exclusive detriment of EDITIONS ATLAS for failure to fulfil its obligation to enable the agent to carry out his mandate normally and to fulfil his mission to the best of its ability.
In its ruling of 3 May 2018 (no. 15/19214), the Paris Court of Appeal first of all recalled that the commercial agent’s contract is assessed with regard to the conditions under which the activity is actually carried out and that the person claiming to be an agent bears the burden of proof.
The Court then applied the restrictive approach to the qualification of commercial agent arising from the case law of the French Court of Cassation. Indeed, « the absence of power to negotiate contracts in the name and on behalf of one’s principal and to represent the latter excludes any application of the status of commercial agent« .
Consequently, facing Mr. O.’s failure to demonstrate that he had the power to negotiate contracts of sale in the name and on behalf of EDITIONS ATLAS, the Paris Court of Appeal confirmed that the disputed agreement was not a commercial agency contract. It also confirmed the judicial termination of the agreement to the exclusive detriment of Mr. O.
Mr. O. then appealed to the French Court of Cassation.
The question, underlying and recurring in practice, is then to know whether the status of commercial agent necessarily implies the ability to modify prices.
On this question, a ruling by the French Court of Cassation was eagerly awaited by the doctrine and practitioners in view of its divergent interpretation from the one of European case law, an interpretation that was recently confirmed by a ruling of the European Court of Justice.
Indeed, in a previously commented ruling of 4 June 2020 (C-828/18, Trendsetteuse SARL/DCA SARL), the European court of justice (ECJ) had clarified the meaning of the term « negotiate » in Article 1 (2) of Directive 86/653/EEC of 18 December 1986 on commercial agents, following a preliminary question from the Paris Commercial Court.
Thus, the term « negotiate » does not necessarily include having the power to modify the prices of products sold on behalf of the principal in order to benefit from the status of commercial agent.
The question then arose as to whether the French Court of Cassation would agree to abide by this interpretation.
The ruling of 2 December 2020 (no. 18-20.231) therefore put an end to the suspense.
The Commercial Chamber of the French Court of Cassation applied the jurisprudential interpretation of the term « negotiate » by the ECJ.
The Court firstly referred to the French and European provisions relating to commercial agency and admitted that it had adopted a restrictive approach to the qualification of a commercial agency contract.
The Court then cited the judgment of 4 June 2020 and drew the following conclusion:
« It follows that the qualification of commercial agent must henceforth apply to an agent who is a natural or legal person who, as an independent profession, without being bound by a contract for the hire of services, is permanently responsible for negotiating and, where appropriate, concluding contracts of sale, purchase, hire or provision of services in the name of and on behalf of producers, manufacturers, traders or other commercial agents, even though he does not have the power to change the prices of those products or services ».
Applied to the facts of the case, it follows from this interpretation that by relying on the impossibility for Mr. O. to negotiate prices to determine whether he was a commercial agent or not, the Paris Court of Appeal violated the European and French provisions on the qualification of the commercial agency contract.
Consequently, the Commercial Chamber overruled the Paris Court of Appeal’s decision.
French practitioners will now have to take into account the fact that being a commercial agent does not necessarily imply having the power to change prices.
The alignment of the interpretation of the French Court of Cassation on the Court of Justice of the European Union’s position is therefore a significant change of the French case law. The French Court of Cassation will no doubt hear similar cases in the future and will clarify the content of this new interpretation.
Article cowritten by Morgane BONNARDOT and Olivier VIBERT