Meaning
Codified provision in the German Commercial Code that entitles a commercial agent to a financial indemnity upon the termination of their contract. The right to compensation under section 89b hgb arises when the agent has acquired new customers for the principal and these relationships will continue to generate benefits after the agent departs. This rule is mandatory and cannot be waived in advance by the agent.
Calculation Formula
Indemnity amounts are determined by looking at the commissions lost by the agent and the value of the ongoing business to the principal. Application of section 89b hgb involves a forecast of how long the customers will remain loyal and what the migration rate will be. The final sum is capped at the average annual commission received over the previous five years of the relationship.
Equitable Consideration
Payment is only due if it is deemed fair under the circumstances of the case. When evaluating a claim under section 89b hgb, courts consider whether the agent was at fault for the termination or if they received other benefits like a pension. The equity test ensures that the principal is not unfairly penalized when the agent has already been adequately rewarded for their work.
If the agent terminates the contract without a compelling reason, the right to the indemnity is usually lost.
Expansion Case
German courts have extended these protections to distributors through the use of analogy. This makes section 89b hgb a central pillar of distribution law for any company operating in the German market.
