Term of the Agency Agreement
There are no statutory rules on the term of Agency Agreements. The parties are free to decide on the duration of the agreement.
If the parties have not agreed a term, the Agency Agreement is considered concluded for an indefinite period.
If the parties agree on a fixed term and, after the expiry of the fixed term, continue to perform the Agency Agreement, the Agency Agreement is considered as concluded for an indefinite term.
Termination of the agency contract
If the Agency Agreement has been entered into for a fixed term, as a general principle, the Agency Agreement may only be terminated extraordinarily for good cause. During a fixed contractual term, no termination for convenience is admissible.
If the Agency Agreement has been entered into for an indefinite term, it may be terminated extraordinarily for good cause and for convenience by complying with certain minimum notice periods. Portuguese statutory law sets out the following minimum notice periods (depending on the actual duration of the Agency Agreement in question):
- during the first contractual year, a minimum notice period of one month with effect to the end of the month must be complied with;
- during the second contractual year, a minimum notice period of two months with effect to the end of the month must be complied with;
- during the third and/or any subsequent contractual year, a minimum notice period of three months with effect to the end of the month must be complied with.
The notice periods may not be shortened. The notice periods may be extended by contractual agreement, provided, however, the notice period for the Commercial Agent is at least of the same length as the notice period of the Principal.
Portuguese statutory law establishes a written form requirement with respect to the termination notice (both for good cause and for convenience).
The indemnification claim as main consequence of the Agency Agreement's termination
Upon termination of the contract, the Commercial Agent will be entitled to claim a compensation against the Principal (“compensation claim”) if the following circumstances occur:
- he Commercial Agent has acquired business with new customers or has substantially increased business with the existing customers;
- the Principal continues to derive substantial benefits from such business;
- the Commercial Agent has ceased to receive any commission or retribution (after termination) for contracts entered with the customers referred to in (i) above;
- the Agency Agreement has not been terminated due to any cause attributable to the Agent or the Commercial Agent has assigned to a third party its contractual position under the Agency Agreement.
In case the parties do not reach an agreement with regard to the amount of the compensation claim, such amount shall be equitable fixed by a judicial court having regard to all the circumstances of the individual case and, in particular, the commission lost by the Commercial Agent.
In any case, however, the amount of the compensation claim is capped: it may not exceed the Commercial Agent's average annual remuneration over the preceding five years (or the actual term, if it was less than five years). The cap may be used as an estimate figure for Principals to assess the financial risk of a termination of the Agency Agreement.
The Commercial Agent has one year after termination to request the compensation claim. The relevant lawsuit must be filed within the year following such communication.
The rules on the Commercial Agent's compensation claim are mandatory and may not be contractually excluded.
Other consequences of the Agency Agreement's termination
In the absence of a contractual agreement to the contrary, Portuguese law does not stipulate a post-contractual non-compete obligation of the Commercial Agent. Portuguese law, however, allows an agreement on such post-contractual non-compete obligation of the Commercial Agent for a period of maximum two years calculated from the end of the Agency Agreement. It is important to bear in mind that the Commercial Agent is entitled to a reasonable financial compensation if such post-contractual non-compete obligation has been agreed (unless the Principal in writing waives this obligation prior to the contractual end).
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