The IT-Distribution Law has specific features. Cloud computing, mobile-computing, sales-Apps and the distribution of standard software have been implemented online by (for instance) handling over keys or orders for key activation. IT-Distribution Law remains a core area of every IT-entrepreneurial activity. However, distribution contracts have numerous pitfalls that are still to clarify, especially in distribution partners’ contracts, franchise agreements, dealers’ agreements, commercial agent contracts etc.

Online Sales and Internet Distribution

Online sales are subject to far-reaching regulations due to the extensive transparency of IT sales. The legal requirements have grown steadily and the global permanence of the information on the Internet distribution is particularly susceptible to warnings of every kind. Also, data protection aspects in connection with the collection and processing of personal data intensify the attention of authorities and competitors.

Characteristics of Commercial Agents

Sections 84 to 92 c of the German Commercial Code (Handelsgesetzbuch – HGB) regulate the rights and obligations of commercial agents and of the company they represents. According to § 84 HGB (German Commercial Code), a commercial agent is the one who is permanently entrusted with the task of arranging business for another entrepreneur or completing it on his behalf as an independent trader.

A Trade Representative is a self-employed who is able to determine his / her activity and working hours freely and carries his own entrepreneurial risk, thus not an “employee”. There are trade representatives in all conceivable industries and sectors, regardless of the type of legal form, e.g. also as OHG, KG or GmbH. The actual nature of the activity and of the commercial agent contract is decisive for the existence of a commercial representative property, and not the designation by the parties. Persons who do not use the term “commercial/trade representative” are also to be regarded as commercial agents if the characteristics of a commercial representative are fulfilled:

  • Permanent contractual relationship with the represented company
  • Mediation / conclusion of transactions and customer care in the name and on account of the represented company
  • Self-employment (own business, entrepreneurial or cost risk, trade taxes)
  • Free organization of work and free choice of working hours (freedom of instruction)
  • Payment of remuneration without deduction of taxes and social security contributions

The IT official distributor is usually also to be judged as a commercial agent; Depending on the nature of the partnership, the IT contract partner may also have a corresponding application of commercial law regulations.

IT Official Distributors or Commercial Agents

Official distributors or trade agents typically buy goods on the basis of a permanent contract with a manufacturer / supplier, which they sell in their own name and on their own account. Individual clauses in dealer contracts are similar to those regarding a commercial agent contract. If the trader has similar rights and obligations of a commercial agent and is incorporated into the sales organization of the manufacturer or supplier, the right to trade may be partly applicable, in particular for the establishment of a compensation claim by the trader.

 

IT- Franchise Companies

 

Between franchisor and franchisee there is generally a long-term agreement with extensive mutual rights and obligations. The franchisor usually provides the franchisee with a business concept for the distribution of goods or services, with a uniform business name and often other requirements for the Cooperate Identity, for which the franchisee must pay a so-called franchise fee. The franchisee, however, is acting in his own name and on his own account (in contrast to a trading agent).

 

IT- Agency Agreement

 

Commercial contracts may be concluded verbally. However, a contract should be concluded in written form in order to avoid further confusion and for reasons of evidence. The creation/preparation/design/implementation of a contract is often really difficult. Sample or models of IT-contracts can be a point of reference for the contractual parties.

 

Entitlement to commission of the IT Commercial Agent/ Official Distributors/ IT Partners

 

An IT commercial agent is entitled to pay a commission for the conveyed or concluded transactions. The amount of the commission (percentage, calculation basis) depends on the regulations of the contracting parties in the individual case and varies in the individual sector.

The amount of the commission is regularly determined as remuneration for the income subject to commissioned payments. Most of this is based on the amount invoiced to the customer. The commission has to be paid on a monthly basis. The billing period can be extended to a maximum of three months. In order to verify the commission statement, the commercial agent may request information on the circumstances which are important for the commission claim as well as a book extract. In special circumstances, he also has a claim to access to booking and account.

Restraint on competition

Restriction of competition during the contract term

 

The obligation to pursue the interests of the parties results in a ban on competition. Even without express regulations, the commercial agent in the business of the represented company may not convey or distribute competing products without his express permission. However, the prohibition of competition can be more restricted in written contracts. Such clauses should be legally checked in ordered to prove their admissibility.

 

Restriction of competition after the termination of the contract

Basically, the principle of free-competition applies after the termination of the commercial agent agreement. If a “post-contractual non-competition clause” shall apply for the commercial agent, this should be previously agreed in the contract. It does not already result from the statutory obligations of the commercial agent. In § 90a HGB; the preconditions for a restriction on competition after the termination of the contract are standardized by the contracting parties:

  • Agreement before the termination of the contract;
  • A written form oft he competition agreement as well as a certificate with the complete content of the agreement
  • Agreement for a period of 2 years from the date of termination of the commercial agent agreement
  • Reference to the prohibition only in the district or customer group assigned to the sales representative
  • Extended only for particular items (products, services, insurance contracts etc.) which are subject to the obligation of mediation or business initiation of the commercial agent
  • Appropriate compensation (in money, so-called in German Karenzentschädigung), whereby the appropriateness is based on the disadvantages of the commercial agent arising from the competition offense. On the other hand, the previous remuneration has also to be taken into account.

The agreement of a post-contractual competition agreement should be well balanced and calculated in contrete cases from the entrepreneur´s view.

Termination of the commercial agent agreement

Both parties may terminate the commercial agent agreement in good faith, in compliance with the statutory deadlines. The termination deadline is 1 month in the first year, 2 months in the second year, 3 months in the third to fifth year, 6 months from the fifth year; the termination has to be presented at the end of the month, unless otherwise agreed. More extended termination periods can be agreed upon in the contract. In the case of justified termination for important reasons, the deadlines have not to be respected.

If a fixed-term contract is concluded, this automatically terminates with a deadline, if the contract parties have not agreed an automatic renewal clause. However, the contract can always be terminated by consensual cancellation. In any case, the termination of every contract shall always been agreed in writing, for reasons of further evidences. 

Claim for compensation for  IT-commercial agents/authorized dealers

The commercial agent may be entitled to compensation upon termination of the contract. This compensation constitutes remuneration for the services of the agent, which will also have a profitable effect on the entrepreneur after the contract has been concluded. The appropriate compensation therefore related to the expected sales with the customers, whom the commercial agent has promoted either himself or with which he has considerable intensified the business relationship.

The compensation claim may not be excluded by the contract; an agreed exclusion is not effective.