Is a goodwill fee due upon termination of the commercial agency due to exceptional circumstances?

When a commercial agency agreement is terminated because the cooperation has become impossible (exceptional circumstances), this does not automatically mean that the commercial agent loses his right to an extraction fee. In a ruling of 29 April 2020, the Antwerp Court of Appeal confirmed that such a termination is not covered by the legal grounds for exclusion, unless there is a specific serious deficiency attributable to the agent. As long as the agent has brought clients from which the principal still enjoys benefits, the right to compensation remains in principle.

The facts and context

The dispute in this case revolved around a 13-year long collaboration between a principal and a commercial agent. The cooperation broke down, after which the principal terminated the contract on the grounds of “exceptional circumstances” that made any professional cooperation permanently impossible.

The principal believed that no goodwill fee was due, as the termination was allegedly due to the agent's conduct. The agent disputed this and claimed a goodwill fee equal to one year's compensation, including the fixed fees paid in addition to commissions.

The key question before the Court was twofold:

1. Does the right to a goodwill fee lapse when the contract is terminated due to “exceptional circumstances” (Art. X.17 CEL)?
2. May fixed fees be included in determining the amount of this compensation?

The Court's decision

The Court of Appeals ruled in favor of the commercial agent on the essential points.

First, the Court noted that although termination for impossibility of cooperation (exceptional circumstances) was justified, this did not exclude the goodwill fee. Article X.18 CEL exhaustively enumerates when the compensation is not due, namely in the event of a “serious breach” by the agent. The Court held that while the circumstances in this case caused a breach, they could not be attributed solely to the agent as a serious default.

Second, the Court ruled on the calculation. The principal argued that the fixed fees should not count because they would be for “engineering duties” and not agency duties. The Court rejected this: the contract made no distinction and the fixed fee is an integral part of the agent's compensation. It must therefore be included in the calculation base.

Ultimately, on the basis of fairness, the Court awarded a goodwill fee equal to six months of compensation.

Legal analysis and interpretation

This decision of the Antwerp Court of Appeal provides an important nuance in commercial agency law, specifically with respect to Articles X.17 and X.18 of the Code of Economic Law (CEL).

The distinction between X.17 and X.18 CEL There is sometimes confusion about the concurrence between the termination due to exceptional circumstances (Art. X.17 CEL) and the loss of the goodwill fee. The Court clarifies that Article X.18, paragraph 5, 1° CEL requires a strict interpretation. Only a termination due to a serious breach attributable to the agent results in forfeiture of compensation. “Exceptional circumstances” (such as an irreparable breach of trust or quarrel) are not necessarily equivalent to a serious deficiency within the meaning of the grounds for exclusion.

The rebuttable presumption in competition clauses An interesting legal aspect in this case was the presence of a competition clause. This triggers a legal presumption: the principal is deemed to still enjoy substantial benefits from the clientele brought in, subject to proof to the contrary. In this case, the principal failed to rebut this presumption, also considering the long duration of the cooperation (13 years) and the expansion of the business.

Definition of compensation (Art. X.7 CEL) The ruling confirms the broad interpretation of the term “fee.” All amounts received by the agent under the agreement - commissions as well as fixed fees - count toward the calculation of the goodwill fee, unless explicitly agreed otherwise or when it is clear that they cover costs unrelated to the intermediation.

What this specifically means

This ruling has direct implications for the practice of both commercial agents and principals.

• For the commercial agent:
  • Protection in case of conflict: Even if a partnership ends “in feud” and the principal terminates the partnership due to “exceptional circumstances,” in many cases you retain your right to a goodwill fee.
  • Full calculation: When calculating your compensation, be sure to include all income, including fixed monthly fees, not just variable commissions.
  • Proof of clientele: Having a non-compete clause in your contract significantly strengthens your position because the burden of proof is then on the principal to show that he no longer benefits from your work.
• For the principal:
  • Risk at termination: Be careful about invoking “exceptional circumstances” (Art. X.17 CEL) to avoid a notice period. This does not automatically relieve you of the obligation to pay a goodwill fee.
  • Contract drafting: If you allocate a fixed fee for tasks unrelated to the sale/mediation (e.g., purely administrative or technical), specify this very clearly in the contract to avoid these amounts becoming the basis for a costly goodwill fee later.

Frequently Asked Questions (FAQ)

What is the difference between exceptional circumstances and a serious deficiency
Exceptional circumstances (Art. X.17 CEL) are situations that make cooperation permanently impossible, such as illness or a breach of trust. A serious deficiency is a serious fault on the part of the agent. Only a proven serious deficiency voids the right to a goodwill fee.

Do fixed fees count toward the calculation of the goodwill fee?
Yes, in principle it does. Fee means all amounts (commissions and fixed fees) received by the agent for his mediation, unless it is clearly stipulated that the fixed fee is for totally different tasks.

What is the maximum amount of the goodwill fee?
The goodwill fee may not exceed the amount of one year's compensation calculated based on the average of the last five years (or the duration of the agreement if shorter). The court determines the final amount based on fairness and the actual contribution of clients.

Conclusion

The termination in Belgium of a commercial agency is legally complex. As shown by the Antwerp Court of Appeal, the label attached to the termination (“exceptional circumstances”) is not decisive for whether or not a goodwill fee is due. The composition of the fee (fixed vs. variable) can also make a big financial difference.