Goodwill Indemnity

The goodwill indemnity compensates the agent for the customer base it built during the contract, which remains with the principal after the contract ends. It is regulated in TCC Article 122.

Conditions (TCC Article 122(1))

• The principal continues to derive substantial benefits after termination from new customers found by the agent
• As a result of termination, the agent loses commission it would have earned on business done, or to be done shortly, with those customers had the contract continued
• Payment is equitable in light of all circumstances

Cap and Deadline

• The indemnity may not exceed the average annual commission or other payments the agent received over the last five years of activity; if the relationship lasted less, the average over its duration applies (TCC Article 122(2)).
• The claim must be asserted within one year of termination (TCC Article 122(4)).
• The right cannot be waived in advance.

Exclusions (TCC Article 122(3))

• The agent terminates without the principal having given grounds justifying termination
• The principal terminates for just cause due to the agent’s fault

Distribution and Dealership

Under TCC Article 122(5), the provision applies, unless inequitable, to exclusive distribution and similar continuous contracts granting exclusivity. In Court of Cassation practice, exclusivity, the distributor’s integration into the supplier’s sales organisation and the transfer of customer information at the end of the contract are important criteria. See Distribution Agreement and Exclusive Distribution.

In Practice

To support a claim, customer lists, annual sales and commission records, and evidence of the principal’s continuing relationship with those customers after termination should be compiled. For the principal, documenting the grounds for termination and any fault of the agent is important. See Agency Agreement.