Key points
- Serious misconduct (faute grave) by the commercial agent (agent commercial) is the main ground for removing the end-of-contract indemnity, but it is interpreted strictly.
- Article L134-13 of the French Commercial Code (Code de commerce) excludes the indemnity where the termination is caused by the agent’s serious misconduct.
- Serious misconduct requires conduct that makes it impossible to maintain the relationship: diversion of customers, unfair competition, breach of exclusivity or of a non-compete obligation.
- Poor results, falling turnover or a disagreement over strategy do not, in themselves, amount to serious misconduct.
- The burden of proof lies with the principal, who must produce concrete, dated and documented evidence.
- The misconduct must be raised in good time and expressly stated as the ground for termination, or the indemnity may be owed despite a genuine breach.
Serious misconduct by the commercial agent is the principal’s main way out of the end-of-contract indemnity. But it is a narrow one: the concept is interpreted strictly, the burden of proof lies with the principal, and raising it late or without proper reasons causes the defence to fail. Understanding what does, or does not, amount to serious misconduct is therefore decisive for both parties.
The principle: an exhaustively defined exclusion
The agent’s compensatory indemnity, laid down by Article L134-12 of the Commercial Code, is not due in the cases listed in Article L134-13. The first of these cases is where “the termination of the contract is caused by the serious misconduct of the commercial agent” (unofficial translation). This exclusion is interpreted strictly: it is not presumed and must be established by specific facts.
What is serious misconduct by a commercial agent?
According to the French Supreme Court (Cour de cassation), serious misconduct is misconduct that “undermines the common purpose of the mandate in the common interest and makes it impossible to maintain the contractual relationship” (unofficial translation; French Supreme Court (Cour de cassation), commercial chamber, 3 June 2026, No. 24-14.748, published in the Bulletin). A simple breach or underperformance is not enough: the conduct must be serious enough to justify immediate termination. Depending on the circumstances, the matters typically debated are diversion of customers, unfair competition, breach of an exclusivity or non-compete obligation, or repeated and serious breaches of the duties of loyalty and reporting.
Conversely, poor results, falling turnover or a disagreement over strategy do not, in themselves, amount to serious misconduct. The line is factual and turns on the evidence.
Who bears the burden of proof?
The principal who relies on serious misconduct must prove it. This evidential requirement is demanding: it calls for concrete, dated and documented evidence, not mere assertions. A file built up as events unfold, through letters, formal notices and official reports (constats), is far stronger than a justification pieced together after the termination.
Raising the misconduct in good time
Serious misconduct must be raised at the right moment. A principal who terminates without mentioning the misconduct, or who discovers it and raises it late, considerably weakens its position. Prolonged inaction may also be analysed as tolerance, but the court assesses this according to the circumstances: a delay of nearly three months was not regarded as tolerance where the principal had expressed its disagreement up to the termination (French Supreme Court (Cour de cassation), commercial chamber, 3 June 2026, No. 24-14.748). Granting a notice period does not, as a matter of principle, rule out serious misconduct either (French Supreme Court (Cour de cassation), commercial chamber, 3 June 2026, No. 23-20.129, published in the Bulletin). The termination must therefore be formalised with care, setting out the grievances explicitly, or the indemnity may be owed despite a genuine breach.
Points to watch
- Reserve serious misconduct for breaches that are genuinely serious, specific and proven.
- Document the grievances as they arise (letters, formal notices, official reports).
- Expressly base the termination on serious misconduct.
- Do not let time pass between discovering the facts and terminating.
- On the agent’s side, challenge the qualification and point to the strict interpretation.
Serious misconduct and the mandate in the common interest
The agency contract is a mandate in the common interest (mandat d’intérêt commun): agent and principal share the goal of developing a customer base from which both benefit. This particular nature explains how strictly serious misconduct is assessed. What the agent is accused of must have compromised this common interest: betraying trust, diverting customers to a competitor, or seriously breaching the loyalty that runs through the whole relationship. A mere commercial disagreement, a reorganisation or a drop in activity is not enough.
The qualification is all the more strategic because its effects are binary: if it is upheld as the cause of the termination, it deprives the agent of any compensatory indemnity; if it is rejected, the agent’s right remains intact. There is no middle ground, which explains how fiercely this point is argued.
When did the misconduct occur: before or after the termination?
A delicate question is misconduct discovered after the termination. Since a reversal of case law in 2022, an agent who committed a serious breach before the termination, which was not mentioned in the termination letter and which the principal discovered afterwards, cannot be deprived of the indemnity, because that breach did not cause the termination (French Supreme Court (Cour de cassation), commercial chamber, 16 November 2022, No. 21-17.423, published in the Bulletin). Conversely, misconduct that was known but not raised at the time of termination may be regarded as tolerated. Chronology is therefore essential: serious misconduct is prepared and formalised at the very moment it justifies the termination, not after the event.
Serious misconduct checklist
- Establish specific, serious and dated facts, not mere underperformance.
- Build up the evidence as events unfold (letters, formal notices, official reports).
- Expressly base the termination on serious misconduct, without delay.
- On the agent’s side, point to the strict interpretation and to the principal’s burden of proof.
- Assess the risk before terminating without an indemnity.
FAQ
Is poor performance serious misconduct?
In principle, no: underperformance does not, on its own, amount to serious misconduct depriving the agent of the indemnity. A breach of particular seriousness is required.
Who must prove serious misconduct?
The principal who relies on it. The evidence must be concrete and documented, which means having built up a file before the termination.
Can the principal rely on serious misconduct discovered after the termination?
No, not to deprive the agent of the indemnity: a breach not mentioned in the termination letter and discovered after the termination did not cause it (French Supreme Court (Cour de cassation), commercial chamber, 16 November 2022, No. 21-17.423). A termination without stated grounds therefore seriously weakens the defence.
The practical consequences when serious misconduct is upheld
Where serious misconduct is upheld, the agent not only loses the end-of-contract indemnity but may also be held liable for the loss caused to the principal, depending on the nature of the facts. Conversely, a principal who wrongly relies on serious misconduct risks owing the indemnity, plus damages where applicable if the termination proves wrongful. The stakes are therefore symmetrical: misjudging serious misconduct is risky for both parties.
That is why the decision to terminate for serious misconduct, without an indemnity, should never be taken lightly. It requires a prior analysis of the strength of the grievances, the available evidence and the financial exposure if the defence fails. A clear-sighted assessment is better than a hasty termination that the court could find unjustified.
Official sources
- Article L134-13 of the Commercial Code, cases where the indemnity is excluded: Légifrance (in French)
- Article L134-12 of the Commercial Code, termination indemnity: Légifrance (in French)
Every situation is different and we make no promise of outcome. To rely on or challenge a commercial agent’s serious misconduct, our commercial law lawyers assist you.
