10 fundamental aspects of the agency contract
In this article we briefly analyze the fundamental issues of the agency contract from a general point of view.
To delve into some of them, you can read any of our articles that we will cite later in which we address the detailed study of this specialization, related to the agency contract, to which we have dedicated part of our trajectory as a firm in the more than 40 years dedicated to commercial law.
We wanted to highlight the 10 fundamental aspects of the agency contract so that those interested in signing an agreement of this nature understand the basic issues that will affect the contractual relationship, the rights and obligations underlying this contract, and the consequences that may arise from an agreement of these characteristics.
As a first piece of advice, it is advisable that the agency relationship and the agreements adopted between the agent and the employer be included in writing in a contract signed by the parties.
Ideally, both parties have the proper advice from their trusted lawyers, and it is also important that the law firm in charge of the drafting of the agreement and advice to any of the parties has experience in the field of agency relations, commission, distribution, etc. and in commercial law in general.
Many of the problems that often arise in a commercial relationship of this nature could have been solved if they had received the appropriate advice before signing the agreement. agency contract.
The parts
In an agency contract, two parties agree, which are usually named as follows:
The employer or client
It is the physical or legal person who entrusts a third party with the execution of certain works to attract customers and increase their billing.
The agent or commission agent
It is the natural or legal person who assumes the commercial order of getting new clients for the entrepreneur or principal.
The agent may, in turn, instruct other subagents, part of the activities that have been entrusted to him, provided he has the authorization of the employer. The agreement between agent and subagent will also be that of an agency, so that relationship will be subject to the regulations applicable to said matter
The Rules of the Game
The relationship between the employer and the agent will be regulated by the Agency Contract Law, approved on May 27, 1992.
The parties themselves may also set their own rules in the agency contract, although none of them may reduce the rights of the agent that by law are not available to the parties.< /p>
Agent independence
The agent must be independent of the business structure. If you act as his representative or as an employee, the rules of the agency contract will not apply.
This question is important because the figure of the agent is sometimes used by companies to hide a true employment relationship. It is the so-called figure of the “false self-employed”. The independence of the agent will be presumed if he can organize the activity and his time with his own criteria.
Agent action
The action of the agent includes the promotion of the entrepreneur’s product or service and other commercial acts to increase the entrepreneur’s client portfolio and increase the turnover of him.
The agent must promote commercial operations but may only conclude them on behalf of the entrepreneur if he has his authorization for that purpose.
The agent’s remuneration
There is freedom of agreement between the parties to establish the remuneration criteria of the agent, which may include a fixed, a variable commission according to results or a mixed system fixed plus variable.
The agent will not be entitled to the commission for operations that would have been promoted by a previous agent. On the other hand, he will have the right to commission, after having concluded the agency contract, the operations completed in the three months following the end of the contract.
The agent may require the businessman to show his accounting to verify what corresponds to verify the correctness in the payment of commissions.
Unless otherwise agreed, the employer shall have no obligation to reimburse the agent’s expenses for his professional activity.
Exclusivity
The parties may demand exclusivity understood in a double direction:
- Geographical exclusivity: The agent will have the right, in the event of an agreement, to promote the product or service in question in a given location, zone or region on an exclusive basis. So that the businessman may not market his products either by his own means or on behalf of third parties without authorization from the agent.
- Exclusivity of the agent: The parties may agree that the agent works exclusively for the employer. In this case, the agent will be prohibited from promoting third-party products or services.
Obligations of the parties
Essential obligations of the agent:
- Act in good faith as a loyal businessman in the interests of the businessman.
- Provide the employer with relevant information for the promotion of the product or service.
- Follow the employer’s instructions, provided they do not affect his independence.
- Receive customer complaints regarding possible vices or defects of the marketed product.
- Keep independent accounting for the operations of each entrepreneur.
Obligaciones más importantes del empresario:
- Make available to the agent the documentation of the product or service necessary for their commercialization (catalogues, rates, etc.).
- Provide the agent with the information necessary for their activity. Especially advise of contingencies that foresee a reduction in the volume of planned operations.
- Make the payment of the agreed remuneration.
Agency contract duration
The duration can be of two types: determined or indefinite.
It is understood that the contract is of fixed duration when a specific term is agreed, once it has arrived, the relationship between the parties will be extinguished.
On the other hand, the contract will be of indefinite duration when an end date is not agreed.
Termination of the agency contract
The agency contract will be terminated in the following cases:
- End of the period provided for fixed-term contracts.
- Termination at the request of any of the parties, is what is called in the Law the “denouncement” of the contract. The advance notice that would have been agreed in the contract must always mediate. In the absence of an agreement in this regard, the notice must be one month for each year of validity of the contract, with a maximum of 6 months.
- Breach by one of the parties with respect to its obligations, when requested by the party that has not breached.
- Termination of the contract at the request of one party when the other has entered into competition.
- Due to death of the agent. On the contrary, the termination of the contract due to the death of the employer is not contemplated.
More information in our article < strong>Causes for termination in the agency contract.
Compensation for clientele or damages
The issue of compensation is the one that generates the most controversy once the relationship between the agent and the employer has ended.
When the agency relationship is extinguished, the agent has the right to request in some cases two types of compensation: compensation for clientele, and compensation for damages.
Compensation for clientele.
The agent may claim compensation when the entrepreneur can obtain a future benefit thanks to the client portfolio obtained by the agent.
Since the law does not establish a quantification criterion, the specific circumstances of each case must be taken into account, considering issues such as the prestige of the brand, the real relevance that the mediation of the agent, or the future volume of business for the benefit of the employer due to the intervention of the agent.
We analyze how to quantify compensation for clientele in our article How to quantify compensation for clients.
Compensation for damages
Other compensation is provided for expenses not amortized by the agent, lack of notice or any other circumstance that has caused property damage to the agent.
For more information on the compensation derived from the termination of the agency contract, you can read our article Compensation for ending the agency contract
