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Post-contractual non-competition clauses for commercial agents

Mar 31, 16 • Corporate LawNo Comments

The Federal Court of Justice (Bundesgerichtshof) ruled that a post-contractual non-competition clause contained in a non-negotiated commercial agency contract was ineffective because it violated the requirement of transparency (Section 307 (1) of the German Civil Code).

A company asserted claims against its former commercial agent for violation of a post-contractual non-competition clause. After the regional court (Landgericht) of Mosbach, which had first-instance jurisdiction, and the higher regional court (Oberlandesgericht) of Karlsruhe, in appeal proceedings, had dismissed the case, the legal dispute was submitted to the Federal Court of Justice for appeal on points of law. This appeal was not successful either.

Provisions are part of the general terms and conditions

First, the Federal Court of Justice held that the terms of the contract concluded between the company and the commercial agent constituted „general terms and conditions“, because no evidence had been produced to prove that the parties had negotiated said terms.

In addition, the Federal Court of Justice found the post-contractual non-competition clause agreed by the conflicting parties invalid. The specific provision was not worded clearly enough to show the factual conditions and the legal consequences. Neither the exact scope of the non-solicitation clause nor the details of the client base protection were clear.

Severability clause is insufficient

The Federal Court of Justice considered itself unable to save the post-contractual non-competition clause by supplementary interpretation of the contract or by the severability clause contained in the contract. For the former, it was not sufficiently clear, which of the different possible legal options had been selected by the parties to the contract. The severability clause in turn conflicted with the provisions on general terms and conditions set forth in the German Civil Code.

The court did not rule that post-contractual non-competition clauses were, in principle, inadmissible in standard commercial agency contracts. However, particular care should be given to the exact wording. Our experienced lawyers will be pleased to assist you.

Federal Court of Justice, Judgment of 12/3/2015, VII ZR 100/15

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Thomas Schwab

Attorney Thomas Schwab mainly handles general contract, corporate, civil, commercial, inheritance and international business law matters.

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