The Agent’s Commission

An agent is normally entitled to a commission, even in the absence of a contractual provision to such effect. This is based on both custom and statute. The agreement should specify the acts that entitle to commission and when such entitlement arises.

According to the Act on Commercial Representatives and Salesmen, an agent shall be entitled to commission for transactions concluded during the term of the agency agreement, provided that the conclusion of such transactions was due to the agent’s contributions. If the agent has exclusive rights within a territory, the agent shall be entitled to commission for all transactions concluded within such territory during the term of the agreement, regardless of the agent’s contribution. An exception to the foregoing applies with respect to transactions involving products, which the principal has reserved the right to trade directly.

Unless otherwise agreed, the agent’s entitlement to commission arises either when the principal fulfills or should have fulfilled the obligation to deliver in accordance with the agreement between the principal and the client, for example by delivering the product to the client, or when the client has made the payment in accordance with such agreement. It is not, however, possible to agree that the agent’s entitlement to commission would arise later than when the client has or should have made the payment.

It is advisable to agree on when the commission will become due. Pursuant to the Act, in the absence of an agreement, the commission shall be paid within one month from the expiry of the calendar month during which the agent’s entitlement to commission arose. The parties may, however, agree that the commission shall be paid within one month from expiry of the quarter during which the agent’s entitlement to commission arose. A term of an agreement which sets forth a later due date for the commission is not valid.

The amount of commission should be agreed upon in the agency agreement. In the absence of an agreement, the commission amount is determined based on custom. Normally, the commission amount is determined as a percentage of the value of the products sold.

Calculation of the commission should also be agreed upon. According to the Act, commission is calculated based on the purchase price payable by the buyer. Possible cash discount shall, however, not be deducted from the purchase price, nor freight, packaging, customs duty, insurance premium, tax or other such additional cost, unless such costs have been separately itemized in the invoice sent to the client. It is possible to agree otherwise.