Is the agent entitled to goodwill indemnity in the event of termination of the agency agreement?

In a termination of an agency agreement, the agent is in principle entitled to clientele compensation (also referred to as goodwill indemnity). This concerns compensation in the event the activities of the agent during the term of the agreement have led to an expansion of the customer base of the principal and the principal is likely to benefit from this expansion after the termination of the agreement.

However, the principal doesn’t owe the agent goodwill indemnity if:

  • No new transactions can be expected from the clients acquired by the agent
  • The agent himself terminates the agreement
  • The agent transfers the agreement to a third party

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Related questions

  • What’s the difference between distribution and agency?

    Distribution agreements and agency agreements are often confused. That’s logical, as there are many similarities. However, there are a number of significant differences between distribution and agency:

    • The agent acts in the name and for the account and risk of the supplier of the product or manufacturer (the principal), whereas the distributor is considered to be a self-employed entrepreneur who acts on behalf of himself and at his own account and risk.
    • Upon termination of the agency agreement, the agent is usually entitled to clientele compensation (goodwill indemnity). The distributor does not have this right.
    • The agency agreement is governed by law providing the agent with a certain protection, whereas the distribution agreement is not governed by law. As a result, parties to a distribution agreement are free to make the agreements they want to, and they specifically have to do so as otherwise nothing will be established.
    • The period of notice for a distribution agreement is usually much longer than the statutory notice period for an agency agreement.