The risks of indemnifying those who generate clientele

The risks of having to indemnify those agents who generate clientele in the Agency contract are a reality. The Law 12/1992 on the Agency Contract in articles 25 to 29, regulates the so-called indemnities for clientele. But these indemnities correspond not only to those who have signed an Agency (or Distribution) Contract. They also affect those persons or companies that are remunerated for generating clientele. This is a transposition of Directive 86/653/EEC and is mandatory.

Article 25 of the LCA refers to the termination of the agency contract for an indefinite period of time: the notice period. The period of this notice will be one month for each year of validity of the contract, with a maximum of six months. If the agency contract has been in force for less than one year, the notice period shall be one month.

In addition, Article 28 deals with the Compensation for clientele and reads as follows.

“The indemnity may not exceed, in any case, the average annual amount of the remunerations received by the agent during the last five years. By the agent during the last five years. Or, during the entire duration of the contract, if this is less.”

Article 29 also refers to compensation for damages.

“Without prejudice to the compensation for clientele. The employer who unilaterally denounces the agency contract of indefinite duration, shall be obliged to compensate the damages. That, in its case, the anticipated extinction has caused to the agent. Provided that the same does not allow the amortization of the expenses that the agent. Instructed by the employer, has made for the execution of the contract”.

Regarding the latest Supreme Court Jurisprudence, we must quote several rulings:

According to, Judgment No. 256/2013 of the AP of León of 3 June. The requirements to pay compensation for clientele will be the following:

1) That there is a termination of the contract for a fixed or indefinite period of time, unless this is caused by the concessionaire. Also in this sense, the right to compensation for clientele has been denied in numerous rulings. In the event of termination by the grantor. In the case of a breach by the concessionaire or agent of the objectives set out in the contract. In this sense, the Provincial Court of the Balearic Islands (Section 3ª) sentence no. 125/2013 of March 19 JUR 2013/164901. The retirement is not an impediment to receive it as established by the Provincial Court of Madrid (25th Section). Judgment No. 137/2013 of March 15 JUR 2013/158539.

2) That new clientele has actually been brought in or that the operations of the previous clientele have been significantly increased.

3) That such clientele may continue to produce substantial advantages to the entrepreneur.

4) That the indemnity is equitably applicable due to the existence of covenants limiting competition. For the commissions lost or for any other circumstances that may arise.

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Compensation for clientele: gross or net? unamortized investments?

Certain precepts of the Agency Contract Law (ACL) apply analogically to distribution contracts. Among them is the indemnity for clientele

Within the case law in favor of the concessionaire’s right to be compensated for clientele, one current of thought  is based on the theory of unjust enrichment. In this sense the SAP Barcelona of 15/12/2011 that this line of jurisprudence is based on:

“the unjustified enrichment or advantage acquired by the grantor as a result of the termination of the contract, an enrichment correlated not so much to the impoverishment of the distributor as to the creation of a business asset, thanks to his efforts, which from then on will benefit only the distributor”.

Likewise, this same SAP Barcelona of 15/12/2011 recognizes that the indemnity for clientele is applicable to distribution contracts.

Regarding the quantitative limit of article 28.3 of the Agency Contract Law (ACL). It is advisable to read STS 341/2012 of May 31, 2012 (Ignacio Sancho Gargallo), in whose legal grounds we can read some very clarifying extracts:

“According to art. 3.2 CC “equity must be weighed in the application of the rules. However, the decisions of the courts may only rely exclusively on it when the law expressly permits it”. In our case, art. 28.1 ACL resorts to equity in the assessment of the appropriateness of the compensation for clientele”.

“It should be noted that the legislator does not quantify the compensation for clientele nor does it provide the parameters for its quantification. Rather, it limits itself to establishing a maximum limit, in section 3 of art. 28 ACL (…).  It is for this reason that the judgment of equity in the determination of the origin of the compensation for clientele. The amount of the indemnity provided for in section 1 of article 28.1 of the LCA must also be determined. Without prejudice to the fact that in any case it must respect the legal limit contained in paragraph 3”.

In conclusion, it should be noted that the indemnities provided for in articles 28 and 29 may be claimed jointly or separately. The limitation period is 1 year from the termination of the contract (art. 31 ACL). Jurisdiction in this type of contract corresponds to the judge of the agent’s domicile. And any agreement to the contrary is null and void, as established in the 2nd Additional Provision of the ACL.

If this article has been of interest, we also suggest you to read the following article published on our website: Is it possible to waive the compensation for clients in the agency contract?