AGENCY CONTRACT

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The agency contract is an agreement whereby a natural or legal person (the agent) undertakes to promote or conclude commercial transactions on behalf of and in the name of others, as an independent intermediary, without assuming the risk and rewards of such transactions, in return for remuneration.

The agent acts on behalf of others and his function is to attract customers for the principal. In the event of termination of the agency contract, the agent who has brought new clients to the principal is entitled to a client indemnity.

It is important to formalise in writing any commercial relationship between principal and agent, and the agency contract should contain, at a minimum, the identification of the parties, determination of the territory of action, remuneration, exclusivity, post-contractual non-competition, duration of the contract, forms of termination of the contract and applicable law. In addition, the applicable regulations and corresponding indemnities in each country with which agency business relations are maintained must be verified.

How can the artificial intelligence (see+ TIP) to perform the agency contract?

As a language model, I can provide you with information and recommendations on the agency contract, as well as clarify any doubts you may have on the subject.

For example, I can provide you with a list of the essential elements to be included in an agency contract, such as the identification of the parties, the agent's territory of operation, the remuneration and the forms of termination of the contract, among others. I can also provide you with information on the applicable regulations and best commercial and legal practices in relation to agency contracts.

However, please note that I cannot give you specific legal advice or draw up an agency contract on your behalf, since as a language model I am not authorised to practise law nor can I act as your legal representative.

My role is to provide you with general information and recommendations on the subject, but it is always advisable that you consult with a lawyer specialising in commercial law to obtain specific legal advice tailored to your particular needs and circumstances.

Advantages and disadvantages of the agency contract for the exporter

THE AGENCY CONTRACT CAN OFFER A NUMBER OF ADVANTAGES TO THE EXPORTER, FOR EXAMPLE:

ADVANTAGES:

1. It allows the exporter to reach new markets without having to invest heavily in infrastructure, advertising or personnel, as the agent acts as an independent intermediary and is responsible for promoting and selling the exporter's products in the local market.
2. The exporter can benefit from the agent's experience and knowledge of the local market, enabling it to tailor its products and services to the needs and preferences of local consumers.
3. The exporter can have more control over the sales and distribution process of its products in the foreign market.
4. The exporter can minimise the risk of non-payment, as the agent is usually responsible for collecting payments from local customers.

HOWEVER, THERE ARE ALSO SOME DISADVANTAGES FOR THE EXPORTER TO CONSIDER, FOR EXAMPLE:

DISADVANTAGES:

1. The exporter may lose control over the brand and image of his product, as the agent may promote it in a different way than the exporter himself.
2. The exporter may face disputes with the agent if the agent does not meet expectations or fails to meet the sales targets set out in the contract.
3. The exporter may have to share part of its profits with the agent in the form of commissions or additional payments.
4. The exporter may have difficulties in finding a reliable and competent agent in the foreign market.

In summary, the agency contract can be a viable option for the exporter wishing to expand into new markets, but it is important to weigh the advantages and disadvantages before making a decision.

Under the agency contract, a natural or legal person (the agent) undertakes to another (the principal), on a continuous/stable basis, and in return for remuneration, to promote, or not only to promote but also to conclude, acts of commerce on behalf of and in the name of others, as an independent intermediary, without assuming (unless otherwise agreed) the risk and peril of such operations. 

In the definition of agency, therefore, the following aspects stand out

• The independent nature of the agent. 
• The possibility that the agent may be a mere negotiator (engaged only in promoting acts of commerce on behalf of the principal) or that, on the contrary, he may assume the function of concluding acts of commerce on behalf of the principal. 
• The employee's employment and the requirement of permanence or stability.
• The paid nature of the agent. 

The consequence of this is that in an agency relationship the agent's function is basically to attract clients for his principal, with the portfolio of clients generated by his activity being for the benefit of the principal and receiving remuneration in exchange for this activity.

WHICH MAY CONSIST OF:

• A fixed amount.
• And/or a commission, which will depend on the acts promoted and/or concluded on behalf of the principal. 

The attraction of new clients is one of the determining factors that lead an entrepreneur to sign an agency contract, and it is important to bear in mind that the clientele generated during the term of any agency contract is also a determining factor when it comes to terminating a contract of this type insofar as, in accordance with the provisions of the regulations in force in our country, it is important to bear in mind that, in accordance with the provisions of the regulations in force in our country:

"When the agency contract is terminated, whether for a fixed or indefinite period, the agent who has brought new clients to the employer or has significantly increased the operations with the pre-existing client shall be entitled to compensation if his previous activity can continue to produce substantial advantages for the employer and is equitably justified by the existence of agreements limiting competition, by the commissions lost or by the other circumstances. This is known as client compensation. 

The agency contract is configured as a commercial implementation mechanism that offers an entrepreneur the possibility of reaching (with a minimum investment) a greater number of potential clients thanks to the intermediation of the agent.

Regulations 

• Law 12/1992 of 27 May 1992 on Agency Contracts. 
• Council Directive 86/653/EEC of 18 December 1986. 

Practical recommendation 

From a commercial point of view, and despite the fact that the agent collects customers for his principal, it is desirable that the entrepreneur (principal) maintains a fluid and stable commercial relationship with his final client in order to avoid any risk of losing his clientele as a consequence of the termination of the agency contract. 

From a legal point of view, it is essential to formalise any commercial relationship between principal and agent in writing. Since in most negotiation processes with an agent there is not enough time to draft an agency contract, it is advisable to have a standard (framework) contract in advance, which has been reviewed by an experienced lawyer and can be modified by the company on a case-by-case basis.

Expert advice 

Verify for each of the countries with which agency business relations are maintained.

THE FOLLOWING ASPECTS:

• Applicable regulations. 
• Possibility or not of early termination of the contract. 
• Compensation for clientele or damages, if any, which may be due to the agent on termination of the contract

THE MINIMUM CONTENT OF THE AGENCY CONTRACT

THE AGENCY CONTRACT SHOULD, AS A MINIMUM, REGULATE THE FOLLOWING TERMS AND CONDITIONS:

• Identification of the parties: agent and principal. 
• Determination of the agent's territory of action. 
• Trial period.
• Reporting obligations of the agent. 
• Remuneration:

• • Fixed or variable (commission).
  • Accrual and method of payment. 
  • Regime applicable to acts concluded after the termination of the agency contract due to acts promoted by the agent during the term of this contract.

• Exclusivity: setting minimum standards before granting exclusivity over a given territory. 
• Post-contractual non-competition: 

• • Time limit: In general terms, Spanish legislation sets this limit at a maximum of two (2) years. 
  • Territorial boundary: geographical area attributed to the agent. 
  • Need to be in writing. 
  • It may only concern goods or services similar to the subject matter of the agency contract.

• Duration of the contract: particular attention to the impact of the duration on the compensation scheme for the staff member. 

• • Determined. 
  • Indefinite.

• Forms of termination of the contract and consequences of such termination: 

• • Pre-Notices. 
  • Compensation per client. 
  • Compensation for damages. 
  • Death of the agent.

• Importance of determining the applicable law: Particular attention should be paid to the fact that certain legal systems lay down rules of a mandatory nature, i.e. rules which are not available to the parties. 
• List of pre-existing clients (very important for determining possible client indemnities in favour of the agent).