Are the parties free to agree on the scope of the Commercial Agency?
The Principal and the Commercial Agent are free to agree on the scope of the Commercial Agency. In particular, the parties may decide on instructing the Commercial Agent (1) worldwide or for a certain geographic region, (2) for all or only for certain products of Principal, (3) for all or only certain customers of the Principal.
Austrian statutory law provides for a non-compete obligation of the Commercial Agent during the contractual term (for a post-contractual non-compete obligation, see below).
Austrian law generally allows a restriction on the Commercial Agent's freedom to pick up Commercial Agencies for third parties. The Commercial Agent may even be obliged to solely represent the Principal.
The EU regulation on vertical restraints (Commission Regulation No 330/2010) only plays a limited role in the field of Agency Agreements (in the field of Distribution Agreements it plays a significant role, see below). However, whether it could apply to the Commercial Agent in the individual case should be assessed at the beginning of a cooperation and this could have significant legal implications.
Can the Commercial Agent bind the Principal?
The Agency Agreement can grant the Commercial Agent the power to negotiate and conclude agreements in the name and for the account of the Principal.
What are the primary obligations of the Commercial Agent?
The Commercial Agent has the following primary obligations based on statutory law:
- to seek to acquire business for the Principal, and to provide the Principal with the opportunity to enter into contracts with customers or even conclude such contracts herself in the name of the Principal;
- to inform the Principal immediately of any business transaction that he has closed for him;
- to provide the Principal with relevant information regarding the market, creditworthiness of customers and requirements concerning the products;
- to diligently safeguard the interests of the Principal in all business respects;
- to follow the Principal’s instructions;
- maintain confidentiality;
- to adhere to non-compete obligations during the contractual term based on case law;
- to hand over everything he received from the Principal or received due to a transaction; and
- to not accept rewards from third parties.
What are the primary obligations of the Principal?
The Principal has the following primary obligations based on statutory law:
- to give to the Commercial Agent the necessary documents and all necessary information relating to the goods concerned and information necessary for the performance of the agency contract;
- to inform the Commercial Agent immediately when he anticipates the volume of transactions will be considerably lower than the Commercial Agent could have expected, especially regarding the previous business scale or according to the details given by the Principal; and
- to notify the Commercial Agent without delay about the acceptance or rejection of a transaction intermediated or closed without authorization by the Commercial Agent, or the non-execution of a business intermediated or closed by him.
We strongly recommend detailing in the Agency Agreement the obligations of the Commercial Agent and the Principal. Although statutory rules in this regard exist, it is important to avoid a legal situation, which the parties did not desire. When setting out the obligations in the Agency Agreement, the vast amount of case law should be taken into account in order to avoid the risk of setting out invalid contractual provisions.
How is the Commercial Agent paid?
There are no mandatory rules governing the remuneration of the Agent. Generally, the Commercial Agent is entitled to commission for business transactions between the Principal and customers within the scope of the Commercial Agent's instruction.
During the contractual term, unless otherwise agreed, the Commercial Agent can claim a commission if:
- the transaction has been concluded as a result of its action. The mere naming of a third party who would like to conclude a transaction does not lead to a claim for commission unless such a trade practice for the relevant business sector exists;
- the transaction has been concluded with customers that were exclusively assigned to the Commercial Agent;
- the transaction has been concluded within a territory that was exclusively assigned to the Commercial Agent;
- the transaction has been concluded with a third party whom the Commercial Agent has previously acquired as a customer for transactions of the same kind.
For business transactions, which are concluded after the contractual term has ended, unless otherwise agreed, the Commercial Agent is entitled to a commission if:
- the business transaction is mainly attributable to the Commercial Agent's efforts during the contractual term and if the business transaction was entered into within a reasonable period after the end of the contractual term; or
- the customer’s offer to enter into a contract with the Principal was received by the Principal or the Commercial Agent prior to the Agency Agreement’s end.
A subsequent Commercial Agent has no right to claim commission if the predecessor deserves it, unless the circumstances justify a division of the commission between the Commercial Agent and its predecessor.
The statutory rules on the Commercial Agent's remuneration are not mandatory. We recommend stipulating in the Agency Agreement the exact way the Commercial Agent's commission will be calculated in order to avoid statutory law leading to a result which the Principal and/or the Commercial Agent did not desire.
Can a del credere clause be inserted into the agreement?
A del credere clause is valid.