An agency contract is one of the most complicated contracts to define in corporate law doctrine because it includes many commercial contracts that aids in the profitability and efficiency of a company. According to French doctrine, agency contract workers are considered independent from their employers because they do not work in the office proper, but in new sites nationally and internationally based on one’s competence.
A commercial agent is an intermediary that has been granted the authority by the manufacturer to negotiate the sale or the purchase of goods on the company’s behalf, or to negotiate and conclude such transactions.
The agent is both an independent worker and company controlled. The agent is an independent employee because the company does not control the agent’s schedule, or provide direct instructions on a regular basis. However, the agent is accountable financially for one’s actions and business conducted on behalf of the company.
As previously discussed, the agency contract employee surrenders more control to the manufacturer, yet performs in the organization’s favor. In agency contracts, the manufacturer determines the customer’s price because, according to agency contracts, the agent legally cannot participate in price fixing.
An agent, a direct employee of the corporation, is hired to connect the manufacturer with potential customers in the new location, where the agent is specialized and earns commission.
The agent reduces the risk of customer´s non-payment to the manufacturer. The customer pays the manufacturer directly who in turn pays the agent commission.
It is important to note that while the agent represents the manufacturer in agency contracts, an agent is a company employee, taking direction from the company and working in its interests. The agent will not personally fulfill the contract because the agent works for the company, not the manufacturer, regardless if the deal yields profits or losses.
When hiring an agent for international business, the applicable legislation for the agency contract is based on the foreign country’s laws. This leaves the manufacturer disadvantaged under foreign courts. To protect the company, it is vital that one understands the applicable rules in the state or country for business expansion, ensuring control of possible risks.
For example, if a company terminates an agency contract in Europe, the corporation would adhere to the conditions of the Directive (86/653/EEC) formed on December 18, 1986 [1]. Coordinated by EU Member States, the law relates to self-employed commercial agents and requires that a company compensates the agent comparable to the projected commission that the agent would have earned. For instance, the agent may have generated new customers or increased the volume of business with existing customers. This blog further discusses the unique features of agency contracts abroad.
References
[1] See http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:1986:382:0017:0021:EN:PDF.
Also See: Automobiles > The Exceptional Act of Automobiles