Commercial Law – Payment of Commission – Commercial Agency Regulations – Commercial Agent

The case of Heirs of Paul Chevassus-Marche v Groupe Danone and Others (Case C-19/07) [2008], involved a determination on community laws relating to commercial agents. According to Article 7(2) of Council Directive (EEC) 86/653 (On the coordination of the laws of the member states relating to self-employed commercial agents) (“the Directive”):

“A commercial agent shall also be entitled to commission on transactions concluded during the period covered by the agency contract either where he was entrusted with a specific geographical area or group of customers… And where the transaction has been entered into with a customer belonging to that area or group…”.

Article 10 provides as follows:

“(1) The commission shall become due as soon as and to the extent that one of the following circumstances obtains:

(a) the principal has executed the transaction; or the principal should, according to his agreement with the third party, have executed the transaction; or…

(c) the third party has executed the transaction.

(2) The commission shall become due at the latest when the third party has executed his part of the transaction or should have done so if the principal had executed his part of the transaction, as he should have”.

In 1987, the first respondent in this case concluded an exclusive mandate with C. The applicants in this case were heirs to C’s estate. The exclusive mandate concerned the first respondent’s representation of C’s subsidiaries, namely the second and third respondents, in their dealings with the importers, wholesalers and retailers of their goods in a specific geographical area.

Before the termination of that contract, C requested payment of various sums. Such sums included commissions relating to purchases made by two companies established in his geographical area.

The requests for payment were refused on the ground that the purchases concerned had been made from central buying officers or dealers in metropolitan France, an area outside the control of the respondents, and without any action on C’s part.

C then brought an action concerning payment of commission.

The national court made a reference to the Court of Justice of the European Communities. The question concerned a request for a preliminary ruling on the interpretation of Article 7(2) of the Directive. The question referred by the national court was as to whether Article 7(2) of the directive was to be interpreted as meaning that:

“A commercial agent entrusted with a specific geographical area was entitled to commission where a commercial transaction between a third party and a customer belonging to that area had been concluded without any action, either direct or indirect, on the principal’s part”.

It was held as follows:

The court was of the opinion that

· Article 7(2) of the Directive had to be interpreted as meaning that a commercial agent entrusted with a specific geographical area did not have the right to a commission for transactions concluded by customers belonging to that area without any action, direct or indirect, on the part of the principal.

· Article 7(2) merely refers to any transactions concluded during the period covered by the agency contract. There is no requirement that those transactions had to be entered into with a customer belonging to a geographical area or a group of customers for whom the commercial agent was responsible.

· There is not an express requirement for action on the part of the principal, and there is no requirement for action on the part of the commercial agent.

· However, it should be noted that when considering Article 7(2) in conjunction with Article 10, the commercial agent’s right to commission arises either:

§ when the principal has (or should have) carried out his obligation; or

§ when the third party to the agency contract, namely, the customer, has (or should have) carried out his obligation.

· The presence of the principal in the transactions for which the commercial agent could claim commission was indispensable. It therefore followed that the commercial agent could claim commission. The commercial agent’s claim for commission could be made on the basis of a transaction only to the extent that the principal had acted, directly or indirectly, in the conclusion of that transaction.

· As a result, this meant that it was for the national court to establish:

“Whether or not the evidence before it, assessed in the light of the aim of protecting the commercial agent and of the obligation on the principal to act dutifully and in good faith, allowed it to establish the existence of such action, be that action of a legal nature”.

© RT COOPERS, 2008. This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it constitute legal advice. It is intended only to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances.

Short Sales: Can A Bank Make A Realtor Cut His Commission?

Can a bank force a real estate agent to reduce his commission on a short sale? When you talk to a bank negotiator reviewing a short sale package, one of the first things you’re likely to hear is “you’re going to have to cut your commission or closing fee”. This is to be expected from professional negotiators trained to use scare tactics in an attempt to minimize a bank’s losses. As of March 1, 2009, Fannie Mae loan servicers cannot require real estate brokers to reduce commissions below 6 percent as a condition for a short sale approval. Even without this recent rule change (which banks often ignore anyway), banks have no authority to alter the terms of a listing agreement, which is a binding legal contract.

Nobody can force an agent to lower his commission, but a bank rep can try to bully an agent or broker into lowering it voluntarily. Here are some of the phony reasons and intimidation tactics bank reps often cite or use to get an agent to lower his commission:

1. “The investor guidelines don’t allow us to pay more than X% for a commission.” Investor guidelines have no bearing on the legal contract a broker signs with a seller. The bank can’t cut your commission, but they have a huge incentive to try to scare you into doing it yourself.

2. “We’re not or our investor is not going to pay for that.” The reality is that in a short sale, the seller’s lender is not paying for anything. The seller’s lender actually receives a check at closing-the buyer or the buyer’s lender actually pays for everything.

3. “If you won’t lower your commission, then the seller will need to get another agent.” It’s up to the seller not the bank to choose an agent to represent them. If someone says this to you, turn the conversation around and ask the bank rep “Are you suggesting that the seller break the legally binding listing contract they signed?” They usually back off real fast.

Real estate is a people business and Realtors are accustomed to trying to make everyone happy. For this reason, agents frequently give in too quickly to unreasonable demands and banks know and exploit this tendency. When you stand up to the bank and calmly explain that under no circumstances are you going to lower your commission, the bank will normally give in. If the bank does not give in, tell them that they can continue paying the taxes and insurance on the property for a few more months or they can get this bad mortgage loan off their books by honoring the terms of your listing agreement.

Why should you accept a lower commission for doing more work? As soon as you start reducing the commission you are contractually owed, the bank is likely to ask you for a bigger concession later on. If the bank believes that they can take advantage of you, they will! Take your stand at the beginning of the negotiation. Banks usually back down-sometimes immediately, in other cases it may take some time. Regardless, as long as you have a good working relationship with your client, you can wait for the bank to come to its senses. Miraculously, banks tend to be much more cooperative and less likely to try to cut commissions the closer a property gets to a foreclosure sale, so stand your ground and get paid the amount that you have earned and are entitled to receive.

Is Pre-Paid Legal a Legitimate Opportunity?

Pre-Paid Legal was started from a tragedy that happened on July 11, 1969. Harland Stonecipher was involved in a serious head-on collision that damaged his car, required medical care, and a stay in the hospital. Harland had auto, health, and life insurance to cover the costs, but no protection the legal bills that accumulated.

Frustrated from this experience, Harland Stonecipher started Pre-Paid Legal on August 8,1972 offering legal expense reimbursement services as a motor service club. Ten years later, Prepaid started the network marketing business model. Today Pre-Paid Legal is listed on the NYSE and is a monster of a company.

The Service

Pre-Paid Legal offers a service that connects their customers to qualified attorneys and law firms when they need it. Anyone can become a customer for $26 per month or less depending on the plan they want. There are many plans to choose from based on your need and the state you are located in.

The Business Opportunity

The entry cost is low. You can join Pre-Paid Legal and become an associate for $49. Pre-Paid Legal offers three ways to make money. The first source of income is receiving immediate commissions from individual memberships, employee benefit memberships, and other plans.

Override commissions are the second source of income. Override commissions are paid when you and your team enroll other associates. Pre-Paid’s compensation plan is a Stair-Step Breakaway. They pay out 1 year advanced commissions on all their plans. Every time a distributor personally sponsors someone into the business, the associate receives a commission ranging from $69-$250. Associates earn the override commissions when certain qualifications and levels are met. Here are the levels and override commissions based on 26$ Expanded Family Plan enrollments.

· Bronze $7.00
· Silver $5.00
· Gold $4.00
· Platinum $2.00
· Platinum 2 through 7 $0.50

The third source of income is Executive Director Breakaway Bonus Advance, Director Breakaway Bonus Advance, and Platinum Breakaway Bonuses.

Pre-Paid Legal has passed the acid test. The company will continue to grow while providing excellent legal services to their customers. Learning how to market in this business is key if you want to become successful. You need the right skills and knowledge if you want to generate the kind of momentum the top producers do. The top marketer know a simple strategy that keeps people in the game by making money of leads even if they do not join your business. These strategies and tools are a must if you’re serious about building a large sales team and creating lifetime residual income.