Obligations of an Agent and the Principal

The contract of commercial agency

By a contract of commercial agency the agent shall assume the obligation to take permanent care that third persons enter into contracts with his principal, and to mediate in that respect between them and the principal, as well as to enter into contracts, after obtaining authorisation, with third persons on behalf and for the account of the principal, while the principal shall assume the obligation to pay to him, for each contract concluded, an agreed fee (brokerage).

A principal may have several agents in the same area for the same kind of business. One agent shall not, without his principal’s consent, assume the obligation to work for another principal regarding the same kind of business in the same area.

A contract of commercial agency must be concluded in written form. Concluding Contracts on Behalf of a Principal An agent may conclude contracts on behalf and for the account of his principal only after obtaining from him a corresponding particular or general authorisation.

An agent shall not demand nor accept fulfilment of a claim of his principal, unless particularly authorized.

Should a contract of commercial agency be concluded by mediation of the agent, then a contracting partner of the principal may validly make statements to the agent concerning defects in the subject of contract, as well as other statements relating to such contract – with the purpose of preserving or relizing rights from the contract.

In order to preserve the rights of his principal, an agent shall be authorized to make necessary statements to his contracting partner.

In order to protect the interest of the principal, an agent may demand necessary security measures.

Obligations of an agent

Taking Care of the Interests of the Principal

An agent shall be obliged to take care of the interests of the principal and shall proceed in all transactions undertaken by him with the care of a good businessman. In doing that, he shall conform to the instructions given by the principal and supply the principal with all necessary information concerning the market situation, and particularly those significant for each particular transaction.

Participation in Concluding Transactions

An agent shall be bound to participate, according to the instructions of the principal, both in concluding transactions and in their complete execution.

Confidentiality

An agent shall keep those business secrets of his principal which become known to him in connection with the transaction entrusted. He shall be liable if he uses them or discloses them to another even after the termination of the contract of commercial agency.

Restitution of Objects Given to Be Used

After termination of the commercial agency contract, the agent shall be bound to restitute to the principal all objects handed over by him for use in the course of the contract.

Particular Case of Liability

An agent shall be liable to the principal for fulfilment of obligations arising from the contract concluded through his mediation, or concluded by his authorisation on behalf of the principal, only if he gives a particular written guarantee in that respect. In such case he shall be entitled to a special fee (del credere fee).

Obligations of the principal

Material and Documentation

Should specific material or specific documentation be necessary for the agent to do his business, the principal shall be obliged to provide them to him.

Duty of Informing

A principal may accept or reject as he pleases the conclusion of a contract transacted by the agent, but shall be obliged to inform the agent about his decision without delay.

A principal shall be bound to inform the agent without delay on the need to reduce the scope of transactions concluded through his mediation, the scope being reasonably expected by the agent, so that the latter can reduce his own business efforts to an adequate degree on time; the principal shall otherwise be liable for loss sustained by the agent in this respect.

Remuneration (Brokerage)

A principal shall be bound to pay to the agent remuneration (brokerage) for contracts concluded through his mediation, as well as for contracts concluded by the agent himself, if authorized accordingly and for contracts concluded directly by the principal with clients found by the agent.

Acquiring the Right to Compensation

Unless otherwise stipulated between the contracting parties, the right to remuneration shall accrue to the agent after the contract has been performed, but such right shall belong to him even if the contract remains unfulfilled, if this is due to a reason for which the principal is to blame.

Level of Remuneration

Should the amount of remuneration be not agreed either by contract or a tariff, the agent shall be entitled to usual remuneration.

Should remuneration in a specific case be excessively high in comparison to the service rendered, the court may, at the principal’s request, reduce it to an equitable amount.

Particular Remuneration

An agent successful in collecting the principal’s claims after being authorized accordingly, shall be entitled to particular remuneration from the amount collected.

Expenses

An agent shall not be entitled, unless otherwise stipulated, to reimbursement of expenses originating from regular performance of broker’s transactions. He shall, however, be entitled to remuneration for special expenses incurred by him to the benefit of the principal or at his order.

The right of lien

In order to secure collection of his due claims originated in connection with the contract, an agent shall have a right of lien against the amounts collected for the principal after his authorisation, as well as well as regarding all objects of the principal received from him, or from another person, in connection with the contract while these objects remain in his possession, or in possession of another holding them for him, or while he remains in possession of a document enabling him to dispose of them.

Termination of contract

Repudiation of Contract Concluded for an Indefinite Period of Time

Should the period of validity of a contract of commercial agency be not determined by contract, or if it cannot be determined by circumstances of the transaction, each party may repudiate the contract of commercial agency at the end of each calendar quarter.

Notice shall be communicated to the other party at least one month prior to expiration of the calendar quarter, and if the contract of commercial agency has lasted for three years, the other party must be given notice two months prior to expiration of the calendar quarter.

Contracting parties may provide for different time limits of notice and of repudiation of contract, but a minimum one month time limit must be left between the notice and the termination of contract.

Repudiation of Contract without Time Limit for Notice

Each party may repudiate the contract of commercial agency without a period of notice on the ground of serious causes, which must be stated. Should the statement of repudiation of contract be made with no serious reasons, it shall be considered as a notice with the regular period of notice.

An agent whose activity is interrupted due to an unfounded notice shall be entitled to compensation to cover his lost commission, and should he cancel the contract without grounds, the right to redress shall belong to the principal.

An unfounded notice shall entitle the other party to repudiate the contract without notice.

Termination of Contract Concluded for a Definite Period of Time

Should a contract of commercial agency be agreed for a definite period of time, it shall be terminated by the expiration of the time specified. Should such contract of commercial agency be implicitely extended, it shall be treated as a contract agreed for an indefinite period.

Read more:
Franchising »
Duty to keep business secret according to provisions of the Companies act »
Professional liability insurance in Serbia »

Leave a Reply

Your email address will not be published.