The agency contract is one of those types of contracts that are governed by the mandatory rules of the law. Specifically, Agency Contract Law 12/1992, of May 27, is applicable. This law not only determines the contractual relations between the company and the agent during the duration of the contract, but also foresees the consequences of its termination.

One of the important points that the company must bear in mind at the point of the terminating the contract with the commercial agent are the mandatory payments of a compensatory nature that the agent is entitled to by law.

Specifically, there are two main types of compensation: for clients and for damages.

Compensation for clients:

This type of compensation is due when the agent has increased the size of the company client portfolio, and from which the latter can continue to benefit.

The requirements that must be met for the agent to claim this compensation are the following:

  • That the agent has brought new clients to the company or has significantly increased the volume of operations with the pre-existing clients;
  • That the agent's previous activity may continue to produce substantial advantages to the company after the termination of the contract;
  • That this compensation is equitable due to the existence of clauses restricting competition, commissions that are lost by the agent on business transactions or other circumstances that arise.

Compensation for damages and losses:

This type of compensation can be claimed by the agent only when it is a permanent contract and it has been terminated unilaterally by the company.

The requirements to be met for this compensation are the following:

  • That the agent has incurred investments and expenses to carry out his activity trusting in the continued effectiveness of the contract;
  • That it is not possible to apply the investments and expenses to any other activity of the agent.

In many cases, the obligation to pay the compensation mentioned to the agent is debatable in many instances. not only in relation to the type of requirements to be met for his claim, but also in relation to quantifying the amount of compensation to be paid, since there are no standard criteria.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.