A brokerage agreement, which enables a company to expand its customer base, must meet certain specific criteria in order to avoid falling under the scope of the applicable protective regulations governing commercial agents.
The brokerage agreement, or business referral agreement, is the contract under which the business referrer seeks out clients and prospects and connects them with a company with a view to concluding business transactions.
They act as an independent intermediary, without any relationship of subordination, and are generally compensated by a commission when the referred prospect signs a contract with the company in question or orders its products or services.
The broker’s role is limited to simply connecting the two parties, without any authority to negotiate. In fact, they cannot negotiate purchase or sale transactions with the client or prospect on behalf of the company, nor do they have the authority to enter into contracts on behalf of the company. Their role is limited to (i) providing the prospect’s contact information to the company and (ii) informing the prospect of the company’s terms of sale.
The commercial agent, on the other hand, is the agent who, as a self-employed professional, is permanently responsible for negotiating and, where applicable, concluding contracts for the sale, purchase, lease, or provision of services in the name and on behalf of producers, manufacturers, merchants, or other commercial agents (Article L. 134-1 of the French Commercial Code).
Three criteria arise from this definition:
- the intermediary plays a role in negotiating commercial transactions concluded between prospects and the company, even without the power to modify prices;
- they carry out a negotiating activity in the name and on behalf of a principal, the company;
- carried out on a permanent basis.
Judges base their decisions on the reality/actual performance of the relationship and not on the title of the contract (business referral, brokerage, etc.).
The commercial agent has the power to negotiate transactions in the name and on behalf of the company, unlike the business referrer.
This status is mandatory: if a business introducer actually performs duties broader than simply facilitating contacts, which meet the criteria for the definition of a commercial agent, the relationship may be reclassified as an agency agreement, with significant consequences for the company, the principal, including :
- the right, in the event of termination of the agent agreement, to compensation equivalent to the average of the commissions received over the last two years of the contract;
- increased protection regarding the commissions owed to the agent and the non-compete clause.
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