Thursday, August 26, 2010

Swedish Law - Severance Compensation to Sales Agents - 29 § Sales Agency Act

According to § 29, the sales agent is not entitled to severance compensation, if
1. the principal has terminated the agreement because the agent's breach of contract, provided the sales agent has acted intentionally or recklessly;
2. the agency agreement is terminated by reason of the agent's bankruptcy, or
3. the sales agent and the principal agree to transfer the agency to another party.

The provision is mandatory for the sales agent's favour in that the sales agent does not need to accept less advantageous conditions than those prescribed by law.

It should be noted that the requirements of 29 § paragraph 1 are narrower than those on the right of early termination due to breach of contract (according to § 26 of the Act), which is a direct departure from the EC Directive. This means that upon termination by the principal as a result of the agent's breach of contract, the sales agent may still be entitled to severance compensation. It should further be noted that the principal’s termination "due to an important reason" does not deprive the sales agent of his right to severance compensation.

The provision does not require that a termination for breach of contract is actually performed. It is, however, that the agency relationship is terminated by ordinary dismissal or by appointment in close connection to the breach of contract by the sales agent.

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