Parties obligations under the Agency Agreement

Within the Romanian justice system, the first definition of an agent originates from the year 1946 as being “a person exclusively assigned by one or several merchants to trade or conclude commercial operation within a locality or a region, in exchange of a remuneration which bears the name of commission.”

The Agency agreement is an expression of the unitary concept of intermediation, which includes in its subject contracts’ negotiations for another person called the principal, and concluding of contracts on behalf of that person, regardless of whether or not the agent has been conferred the power to represent the Principal. An Agency contract is an agreement between professionals, within the provisions of art. 3 from the New Civil Code (NCC). The NCC states, According to Article 2027 paragraph`s (2) provisions, that the agent is an independent person acting on a professional basis, proving the fact that the agent is a person who regularly concludes contracts with third parties (i.e. in professional quality), thus explaining the fact that the agent receives a mandate to steadfastly and not a mandate determined on a juridical operation.

The relations between the agent and the principal are characterized by the independence of the intermediary. This is not an agent of the principal, but a professional whose activity consists in facilitating the conclusion of certain categories of contracts between principal and third parties.

Which are the obligations of the parties under the agency agreement?

The agent is bound to the following obligations:

a. to obtain and to communicate to the principal the information which could interest him, regarding the regions established by contract, but also to notify to the other the necessary information that he possesses. This is a duty information with a broad content (the demand and supply for the assets and services offered by the principal, the prices applied, the level of competition in the region where the agent is empowered to act, the information on the geographical zone established by the contract, legislative norms and so on);

b. to make all the necessary efforts for negotiating and, if the case may be, to conclude the contracts for which he is empowered, in conditions as advantageous as possible for the principal. Taking into account the provisions of the first alignment, we consider that the agent is bound to act as he himself were the master of the affair and not to put his interests above those of the person from which he has been given the empowerment.

c. to comply with the reasonable instructions received from the principal. From this perspective, the New Civil Code does no longer make any distinction between the types of instructions given by the principal to the agent. By reasonable instructions there must be understood the normal instructions, which are typical for the agency activity on the basis of an agency contract.

d. to keep separate entries in his registers for the contracts regarding the principal;

e. to store the assets or the samples in a way to permit their identification. The assets and samples received by the agent from the principal, to be used as test samples for negotiations or, according to the case, for concluding contracts with third parties, must be stored in conditions to preserve their qualities, so as not to damage the “image” of the principal. If the agent is empowered by more principals, the assets or samples must be stored so as to permit the identification of those belonging to each and every principal.

The principal is particularly bound to:

a. render availability for agent`s trials, registers, fees and any other document, within the due time and in an appropriate quantity, in order for the agent to carry out his mandate. Since the latter acts on behalf and account of the principal, he uses those trials, registers, fees and any other document rendered available by the principal. This can explain the principal’s duty to render available for agent`s trials, registers, fees and any other document, within the due time and in an appropriate quantity, so as for the agent to be able to carry out his mandate.

b. provide the information necessary for enforcing the agency contract to the agent. Apart from the instructions given to the agent for carrying out his mandate, the principal must also provide him with the information required for applying those instructions. In this context, we refer as well to the provisions of article 2081 of the new Civil Code, including the situation in which the agent negotiates the conclusion of a contract, but does not receive the principal’s accept in due time, for the conclusion of the negotiated contract. In this case, the law institutes the presumption according to which the principal has given up to the conclusion of the contract involved, if he does not communicate its acceptance within a reasonable term. Since law does not define the expression “reasonable term”, several litigations can emerge from here, case in which it must be underlined the role of usages as law sources.

c. notify the agent, within a reasonable term, his anticipation that the volume of contracts will be significantly smaller than that to which the agent would have normally expected;

d. pay the remuneration to the agent, according to the conditions and terms established by contract or provided for by law. Remuneration can be expressed as a fixed or variable amount by reference to the number of contracts or acts of trade, or their value, it is called commission. In the absence of an express stipulation or legal provisions, the agent is entitled to a fixed remuneration according to the established applicable either in the place where they operate or in connection with the goods covered by the agency contract. If there are no such rules, the agent is entitled to receive reasonable remuneration depending on all matters relating to contracts. Unless the parties agree otherwise, the right to commission shall arise on the date on which one of the following conditions is met:

  • principal had executed contractual obligations towards third parties;
  • principal should execute its contractual obligations under the Convention concluded with third party;
  • third party has performed its contractual obligations.

Contact an Advisor

If you have any questions regarding this topic and how it might have an impact on your business, please contact the Mirus Consultant with whom you regularly work, or:

Ionut Zeche

  • Tax & Legal
  • Bucharest
  • + 40 (31) 228 20 77