Commercial agency contract
A contract whereby an independent commercial agent is mandated to negotiate or conclude sales on behalf of a principal.
A commercial agency contract is a contract whereby an independent commercial agent is permanently mandated to negotiate and, potentially, conclude sales contracts on behalf of a principal.
In the EU, the commercial agent's status is protected by Directive 86/653/EEC, transposed in all Member States. Key protections include:
- Commission: right to remuneration on all business in their area, even deals concluded directly by the principal
- End-of-contract indemnity: upon termination, the agent is entitled to compensation for the clientele brought (in France: up to 2 years' commission)
- Notice period: 1 month in the first year, 2 months in the second, 3 months from the third year onwards
The agent bears no commercial risk on sales: they do not stock, invoice, or bear non-payment risk (unless a del credere clause applies). This is the fundamental difference from a distributor.
For exporters, a commercial agent is a cost-effective way to penetrate a foreign market without heavy investment. The agent brings local market knowledge, contact networks and command of local language and business customs.