Commercial Agency and Distribution in Greek Law – Complete FAQ Guide

A commercial agency contract is a continuing contractual relationship under which a third party, called the commercial agent, undertakes, for remuneration (commission), on a permanent basis (for a fixed or indefinite term), in the capacity of an independent intermediary, either to negotiate on behalf of the principal the sale or purchase/supply of goods/services, or both to negotiate and conclude such transactions in the name and on behalf of the principal. In contrast to parties who deal with a business on an occasional basis — as in instantaneous contracts such as sale contracts — the agent’s cooperation with the principal is permanent, and it already follows from the nature of the relationship that a critical element for the proper functioning of the commercial agency contract is the existence of trust between the parties. The contract is primarily governed by Presidential Decree 219/1991.
Read more: Termination of Intermediary Contracts

An exclusive distribution contract is a sui generis continuing obligatory contract under which one party (the supplier) undertakes to sell to the other (the distributor) the contractual goods, which the latter then resells to third parties in its own name, for its own account and at its own business risk. That last element distinguishes the commercial agency contract from distribution and franchise contracts, since the distributor/franchisee acts in its own name and for its own account, assuming all the risks arising from the relevant transactions. The distributor is, however, under an obligation to promote the interests of the supplier, while the supplier incorporates the distributor into its commercial organisation in the sense of exercising supervision and control.
Read more: Termination of Intermediary Contracts

The commercial agency contract is governed by PD 219/91, enacted to implement EU Directive 86/653/EEC on self-employed commercial agents. The exclusive distribution contract has no dedicated statutory provisions; however, Greek courts consistently held that PD 219/91 and the Civil Code provisions on mandate apply by analogy. That case-law was subsequently codified in Art. 14(4) of Law 3557/2007: “The provisions of PD 219/1991 apply by analogy to exclusive distribution contracts, provided that, as a consequence of the contract, the distributor acts as part of the supplier’s commercial organisation.” As for the franchise agreement, it is not regulated by specific legislation in Greek law: a franchise contract cannot be subsumed under the legal type of any existing obligatory contract, since it combines features found across a range of contractual forms.
Read more: Franchisee Defense on Transfer Refusal

A franchise agreement is a continuing obligatory contract between two parties — the franchisor (δικαιοδότης) and the franchisee (δικαιοχρήστης) — under which the franchisor grants the franchisee a set of distinctive signs and continuously updated know-how, and provides a range of services through the exercise of ongoing supervision, with the aim of shaping the franchisee’s outlet and integrating it into the franchisor’s system; the franchisee, in turn, undertakes to pay the agreed consideration and to follow the franchisor’s instructions. The prevailing position of Greek case law classifies the franchise agreement as a mixed contract that combines elements of a lease of a profit-generating right, a services contract, and a mandate. Critically, the legal classification of a contract is not determined by the label the parties attach to it in the contractual text; it is the court that determines the legal classification based on the nature and extent of the obligations assumed by the parties, and accordingly applies the corresponding legal consequences.
Read more: Franchisee Defense on Transfer Refusal

In commercial agency contracts of indefinite duration, termination without cause or contractual breach (ordinary termination) requires observance of the following periods under Art. 8(4) of PD 219/91: one month during the first year, two months from the beginning of the second year, three months from the beginning of the third year, four months from the beginning of the fourth year, five months from the beginning of the fifth year, and six months from the beginning of the sixth year and beyond. Termination without observing these periods is lawful only where there is serious cause or a contractual breach (extraordinary termination). The same periods apply by analogy to exclusive distribution contracts under Law 3557/2007 Art. 14(4) (for the methodology for calculating resulting claims see Goodwill Compensation Calculation).
Read more: Goodwill Compensation Calculation

Serious cause for termination exists when exceptional circumstances arise or when one of the parties breaches obligations so fundamental that, in accordance with the principles of good faith, it becomes intolerable for the other party to continue the contract until its normal expiry (Supreme Court 778/2019). Representative case-law examples include: (a) breach of a term of the exclusive distribution contract (TrEfAth 1308/2021); (b) unilateral and culpable interference with the contract resulting in a reduction of remuneration (PPrAth 1618/2016); (c) an increase in the selling prices of the contractual products by the principal/supplier (SC 751/2019); (d) breach of an exclusivity clause and a non-competition obligation (SC 455/2015, MonEf 249/2020).
Read more: Athens Court of Appeal — Goodwill Compensation Ruling

The objective fact of a breakdown of trust on the part of one of the parties suffices for the contract to be terminated for serious cause. The closer the ties between two partners, the more necessary it becomes to maintain a climate of mutual trust throughout the duration of their cooperation; in ongoing contracts in particular, close cooperation and good faith between the parties is of paramount importance. By way of illustration, the Athens Court of Appeal found that serious cause and an exceptional circumstance for termination had been established because it had been proved with certainty that, following the departure of a key partner from the plaintiff and the plaintiff’s already reduced performance in new connections, a reasonable suspicion arose that other partners of the plaintiff were potentially cooperating with the competing company (EfAth 1996/2021).
Read more: Defense in Goodwill Compensation Lawsuit

Where the terminating party (acting on grounds of serious cause) intervenes unilaterally in the legal sphere of the recipient of the termination, it is entitled to exercise that right only to the extent that it is strictly necessary to protect its legitimate interests. In other words, if the desired change in the conduct of the defaulting counterparty can be achieved by giving notice of the breach under threat of legal consequences, then termination will not be the measure required by the principle of proportionality. Furthermore, the terminating party must exercise due care, as an untimely termination without serious cause gives rise to liability in damages towards the recipient; the recipient of the termination, for their part, must assert their rights within the applicable limitation periods.
Read more: Defense in Goodwill Compensation Lawsuit

The term “goodwill compensation” (αποζημίωση πελατείας) refers to the compensation to which the agent is entitled upon termination of the contract for handing over the client base built up during the years of cooperation with the principal. Article 9 of PD 219/91 provides: “The commercial agent is entitled, after termination of the commercial agency contract, to compensation if and insofar as, during the duration of the contract, the agent brought in new clients or significantly expanded the business with existing clients and the principal continues to derive substantial benefits from those clients, and payment of such compensation is equitable having regard to all the circumstances, in particular the commissions lost by the commercial agent.” As to its legal nature, goodwill compensation is a form of reasonable compensation/sui generis remuneration claim for the services rendered by the agent and for the agent’s contribution to building a stable client base that remains with the principal.
Read more: Goodwill Compensation Calculation

The calculation of goodwill compensation proceeds through three stages. Stage A: (a) new clients introduced to the business are identified; (b) the benefits the business is likely to derive from those clients over the coming years are estimated; (c) the “client attrition rate” (φύρα πελατείας) — the percentage of clients expected to leave gradually over the following years — is determined; and (d) a discount rate is deducted. Stage B: the equitable nature of the compensation is assessed, taking into account various factors that either increase or decrease the final amount. Stage C: the figure produced by the first two stages is compared with the statutory cap — the equivalent of one year’s average remuneration over the last five years — and the lower of the two amounts is the sum actually paid. Client retention typically ranges between two and three years. Illustratively, in TrEfThes 312/2015 the court arrived at a final compensation figure of €27,418.39, which did not exceed the five-year average annual remuneration of €35,961.52.
Read more: Athens Court of Appeal — Goodwill Compensation Ruling