Conclusion and Termination of a Commission Agreement

Conclusion of a commission agreement is subject to the general rules of contract law. For further information, see The Main Principles of Contract Law [The Main Principles of Contract Law]. Conclusion of a commission agreement is not subject to formal requirements, and can be done, for instance, by accepting an offer. A commission agreement can also be concluded orally, whether by way of a telephone conversation or otherwise, but it is advisable to do it in written form.

In general, a commission agreement terminates upon completion of the commissioned work. If the agreement has been concluded for a fixed term, it terminates upon expiry of the agreed term. Commission agreements can also be concluded as being valid until further notice. In this case, a notice can be issued to terminate the agreement upon expiry of the notice period. If no notice period has been specified, the agreement will terminate following lapse of a reasonable time period from the notice.

Due to the nature of a commission agreement, trust between the parties is particularly important. Therefore, either party must be able to terminate a commission agreement due to the fiduciary relationship (relationship based on trust) becoming disrupted. An exception to this applies, among others, with respect to attorneys-at-law. They are unable to withdraw from their duties except if required to do so due to a conflict of interests, or some other particularly weighty reason. Even then, such withdrawal must be made in a way which does not cause damage to the principal.

Termination of the commission agreement without legally justified grounds may result in liability for damages, if the commission agreement contains no provisions permitting termination.

An agent can be released from his/her task on the grounds of military service, illness or other lawful reason, such as parental leave. The agent must notify the principal of his/her withdrawal from the commissioned tasks sufficiently early to enable the principal to commission a replacing agent.

A commission agreement can be rescinded, if the other party is in material breach of the agreement. Grounds for rescission include, for example, committing a felony committed against the agent or material breach of the agreement, such as repeated non-payment of invoices.