Introduction
Contracts for self-employed commercial agents are regulated by Act CXVII of 2000.
The self-employed sales agent
A self-employed commercial agent is a self-employed, paid intermediary who has continuing authority to negotiate the sale or the purchase of goods or to negotiate and mediate contracts (transactions) concerning goods, services, proprietory rights and securities or securities transactions.
The self-employed commercial agency contract
Self-employed agency activity requires a written commercial agency contract (hereinafter “the Contract”). The Contract may authorize the agent to conclude negotiated transactions either in the name of his principal or in his own name on behalf of the principal. The Contract may be made for a fixed or indefinite term. A fixed term Contract automatically converts into an indefinite term Contract if the parties continue to perform its terms after the fixed term has elapsed. The Contract specifies the goods for which the agent is obliged to perform his duties and the geographical area or the geographical categories and categories of persons in respect of which his obligations apply.
The obligations of the agent
The commercial agent is obliged to make all efforts that might reasonably be expected of him in the interests of negotiating transactions and must proceed with reasonable care in the circumstances, with due heed to the principal’s interests and according to the principal’s instructions. The agent must inform his principal as necessary regarding his activities and inform him forthwith about negotiated transactions and about statements made by third parties concerning the transactions. The agent must also inform the principal about the market situation and all significant circumstances concerning the principal’s contractual interest.
The obligations of the principal
The principal is obliged to pay remuneration, assist the agent’s performance to an extent reasonable in the circumstances and provide the agent with the necessary documents. The principal must provide the agent with the information necessary for performance and notify the agent in good time if the number of transactions he intends to make, or is capable of making, substantially falls below the number that the agent might reasonably presume.
Remuneration
If the parties do not make an agreement on the amount of remuneration payable, the Contract shall
not be established unless the circumstances imply that the Contract was established even without such an agreement. In the latter case, the agent is entitled to the customary remuneration in the place of activity for the activity subject to the Contract in the place where it was pursued, and failing customary remuneration he shall be entitled to fair remuneration determined with due heed to all circumstances relating to the transaction. The remuneration may also be stipulated in the form of commission. Commission shall mean any element of the remuneration which varies according to the number or value of the transactions negotiated. The agent may not claim reimbursement of out-of-pocket expenses or general business expenses over and above the remuneration unless an agreement is made to the contrary.
Commission
If the parties stipulate payment of commission, the agent is entitled to commission for a transaction negotiated during the term of the Contract if
a) the transactions is made as the result of his activity,
b) the transaction is concluded with a third party whom the agent has engaged as a customer for former transactions of the same kind.
A commercial agent shall be entitled to commission on commercial transactions concluded after the agency Contract has terminated, if
a) the order of a third party reached the principal or the agent before the agency Contract terminated,
b) the transaction is mainly attributable to the commercial agent’s efforts during the period covered by the agency Contract and the transaction was entered into within a reasonable period of time after the Contract terminated.
The parties may agree that the commercial agent shall be entitled to an extra commission for the amounts collected by him (inkasszó-commission). If the commercial agent undertakes liability for performance of the third parties’ obligations arising out of the Contract, the agent shall be entitled to demand extra commission for undertaking this liability (del credere- commission).
The commission shall fall due as soon as the third party has executed the transaction, or would have executed the transaction if the principal had performed his obligations.
The agent shall not be entitled to a commission if the transaction is not performed unless the principal is responsible for non-performance.
The principal shall supply his commercial agent with a statement setting out all the necessary data for calculating the amount of the commission due, not later than the last day of the month following the quarter in which the commission has become due.
Conclusion and Termination of the Agency Contract
An agency Contract for an indefinite period may be terminated by either party by giving notice. Grounds for termination shall be given sufficient to enable the assessment of rights to indemnity. The period of notice shall be one month during the first year of the Contract, two months during the second year and three months during the third and subsequent years. The parties may not stipulate a shorter notice period unless the agent does not carry on his agency activity as his main activity. If the parties agree on a longer notice period, the notice period applicable to the principal must not be shorter than that applicable to the commercial agent. The end of the notice period must coincide with the end of a calendar month. Both parties may terminate the agency Contract with immediate effect if one party seriously breaches its his obligations set forth in the agency Contract or stipulated by law.
Indemnity
If the Contract ceases, the commercial agent is entitled to an indemnity if and to the extent he has brought the principal new customers or has significantly increased the volume of business with existing customers and the principal continues to derive substantial benefits from the business with such customers. The payment of the indemnity shall be equitable regarding all the circumstances and in particular for the commission lost by the commercial agent on the business and for future businesses transacted with such customers. The amount of the indemnity must be proportional to lost commission but may not exceed the equivalent of one year’s remuneration calculated at the commercial agent’s average annual remuneration over the preceding five years and if the Contract was for less than five years the indemnity shall be calculated on the average for the term of the Contract.
The commercial agent shall notify the principal of his claim for indemnity within one year after termination of the agency Contract. This deadline is a term of preclusion.
The commercial agent shall not be entitled to indemnity if the principal terminated the agency Contract with immediate effect owing to commercial agent’s breach of contract or the commercial agent terminated the agency Contract or the commercial agent assigned his rights and duties under the agency Contract to another person with the approval of the principal.
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June 2005
Dr. Gyula Horváth
attorney at law
* This Newsletter is for information only. Owing to its size, it is not comprehensive and does not qualify as advice .
