Agent-Sales representative

While the terms trade agent and trade representative are very similar and can mean the same in terms of duties, in particular mediating and possibly concluding agreements in the name and on behalf of one (or several) clients (the "principal"), there are still very many significant differences between the two, so that it is advisable to have a clear understanding of both matters.

Wooden wine tap in Bruges (miniature from 1515 book of hours Simon Bening)

Trade Agent vs Trade Representative :

1. To begin with, a trade agent has an independent character. He therefore does not work under the authority of one boss and has the freedom to work for different clients / principals. He will invoice his services.

The sales representative, on the other hand, does work under the authority of one manager and must therefore be regarded as an employee (with all its consequences, and the protection provided for).

2. The trade agency is regulated in the commercial agency law (currently included in the Economic Law Code - book X-), while the provisions of the employment contract law will apply to the trade representation. In practice, more and more recourse is made to trade agency contracts. It is essential that the latter is charged permanently and for a fee with mediating and possibly closing cases in the name and for the account of the principal (Article X.1, 2nd paragraph CEL). The fact that the parties have renamed it (eg "Collaboration agreement" with a consultancy company) does not matter.[1]

3. One of important the points is the compensation. The scope and burden will be smaller for the principal with a trade agent. He pays his fee plus VAT, while for the trade representative employee and employer contributions are added. The compensation can be fixed, variable or a combination of both. The trade agent will also be encouraged to find new clients, because once they have been introduced, and they place their orders directly with the principal, he will be entitled to his commission on what is actually sold. If it is suspected that not everything is being passed on, the trade agent has the option to request accounting information.

If the principal reduces your commission and continues to do so, he can later appeal with a trade agent that an implied agreement has been reached.

So respond in time.

4. Both the trad agency and the agreement with a trade representative can be terminated unilaterally, subject to a notice period. These notice periods, however, differ in both areas. In the case of the trade agent, this must be done within 7 days from the time when the existence and seriousness of the facts are known to the party invoking them (the fact that the investigation could have taken place earlier does not matter).[2]

5. In addition, the agreement can also be terminated on the basis of serious shortcoming, due to exceptional circumstances (trade agency) or for urgent reasons (trade representative).

6. Another possibility of termination is the unilateral termination without notice, but then a fair termination compensation will have to be provided. Here, too, a different method of calculation applies, whereby for a trade representative one starts from the gross annual wages, while for a trade agent one looks at the semi-gross profit (ie the net profit (without deduction of taxes) to be increased by the " incompressible costs "- the ones he continues to incur later)).

7. In the event of termination, both the trade agent and trade representative are, under certain conditions, entitled to a foreclosure fee in the event that they have brought in new customers or if they have (significantly) expanded the business with the existing customers. If there is a non-competition clause, there is automatically a suspicion that the clientele has expanded. The employer then has the heavy burden of proof to the contrary. At that time, the trade agent can obtain compensation for the amount of the difference between this damage and the foreclosure compensation (Article X.19 CEL). It is essential, according to the ECJ, that the damage can be distinguished, it isn’t required to be causally related to the fault of the principal.[3]

8. A non-competition clause (which must be described very precisely, if not it can later be considered non-existent or invalid) of a trade agent can only be included with a maximum duration of 6 months, while for a representative it applies for 12 months. In case of infringement, compensation will be awarded, which is also different. For example, in the case of trade representation, the employer can be awarded up to three months' salary, while in the event of a violation by a trade agent, no calculation method is provided for in the commercial agency law.

It will therefore always be a question of carefully examining which system would suit you best, taking into account the advantages and disadvantages and defining the contracts very well.

Our office has extensive knowledge of both matters and can assist you in all aspects. From the conclusion of the agreement on its implementation, to settlement at the termination of the agreement.

[1] Ghent 5.9.2018, RAGB 2020/5, page 335, with note

[2] Court of Cassation .14.11.209, RAGB, 2020/5, p. 361

[3] Judgement Quenon, 3.12.2015, C-338/17