The concept of power of negotiation within the framework of sales agency relations
In a recent case of 12 May 2021, the French Cour de cassation ruled again on the interpretation of the sales agent’s bargaining power. In this case, the question asked was whether an intermediary without the power to modify prices, can be considered as having the power to negotiate contracts and be qualified as a sales agent as defined in article L.134-1 of the French Commercial code.
In this case, the company X, was responsible for the sale of wine produced by the company Z in Russia, although no written contract had been concluded between them. Company Z, as a producer, decided to end their commercial relationship and was sued by company X, the distributor, which invoked the benefit of the sales agent’s status and requested the payment compensation relating to the notice and the breach of contract, in accordance with the rules applicable to sales agent.
The court of appeal rejected claims from the distributor, because according to the court he didn’t have the status of sales agent because he didn’t have any negotiating power allowing him to modify the prices and contract’s conditions, because the producer had kept control of them. The Cour de cassation cancelled the decision of the court of appeal by refusing to assimilate the power to modify prices with the concept of negotiation: the fact for an intermediary not to be able to modify the prices of transaction which for he is responsible, is not sufficient to consider that he cannot have the quality of sales agent.
In this case, the Cour de cassation confirmed the jurisprudential reversal made in a previous case of the December 2, 2020 (Com, n°18-20.231) which had taken over a case of Court of justice of the European Union (June 4, 2020, aff. C-828/18, Trendsetteuse).
Given the interpretation of negotiation’s concept, it is important to be vigilant in commercial intermediation relations and in drafting contracts, especially with regard to the delimitation of intermediary’s powers.