Agency Agreement

An agent is a person who continuously and independently acts as an intermediary in, or concludes, commercial transactions for a merchant (the principal). Under TCC Article 102, an agent is someone who, without a dependent status such as commercial representative, commercial proxy, sales clerk or employee, makes it their profession, on the basis of a contract, to perform this activity continuously within a specific area.

Key Features

• Independence: The agent runs its own business and is not an employee.
• Continuity: One-off intermediation is not agency.
• Territorial exclusivity: Unless otherwise agreed in writing, the principal may not appoint more than one agent for the same line of business in the same territory, and the agent may not act for competing businesses there (TCC Article 104).
• Authority: An agent generally only intermediates; it needs separate authorisation to conclude contracts on the principal’s behalf.

Termination

• An indefinite-term agreement may be terminated with three months’ notice; any agreement may be terminated at any time for just cause (TCC Article 121(1)).
• A fixed-term agreement that continues to be performed after expiry becomes indefinite.
• A party terminating without just cause or without observing the notice period must compensate the other for losses caused by the non-completion of pending business.

Goodwill Indemnity and Non-Compete

On termination, the agent may claim a goodwill indemnity for the benefits the principal continues to derive from customers the agent brought in. A post-termination non-compete must be in writing, may last at most two years, must be limited to the agent’s territory and customer group, and the principal must pay the agent appropriate compensation (TCC Article 123).

Distinguishing Similar Contracts

An agent acts for the principal’s account and earns commission. A distributor buys goods in its own name and for its own account and resells them. A franchisee also acts in its own name and for its own account but uses the franchisor’s system and brand. The actual structure of the relationship, not the label, is decisive.