What are rights and obligations of parties to commercial agency contract in Viet Nam?

Commercial agency is a highly collaborative commercial activity that promotes the distribution of goods and services from producers, service providers to consumers quickly and widely. Let’s join Lawyer X to find out legal regulations on commercial agency through the following situation: “Hello, lawyer! In the near future, my family is going to plan to act as a fertilizer distributor for a fertilizer company in the South Viet Nam. I would like to ask if I sign an agency contract with this manufacturer, what are the rights and obligations of parties to agency contract? Thank you for your answer!”

Legal grounds

Commercial law

What is commercial agency?

Purchase and sale of goods transactions can be concluded by 2 methods: direct purchase and sale of goods between sellers and buyers; and transaction through commercial intermediaries.

Commercial intermediary activities mean activities carried out by a trader to effect commercial transactions for one or several identified traders, including representation for traders, commercial brokerage, goods sale or purchase entrustment, and commercial agency.

Of which, commercial agency means a commercial activity whereby the principal and the agent agree that the agent, in its own name, sells or purchases goods for the principal or provides services of the principal to customers for remuneration.

Forms of agency

– Off-take agency is a form of agency whereby the agent definitely sells or purchases a specific quantity of goods or provides a full service for the principal.

– Exclusive agency is a form of agency whereby a sole agent is authorized by the principal to sell or purchase one or more goods items or to provide one or more types of services within a given geographical area.

– General goods sale or purchase or service provision agency is a form of agency whereby an agent organizes a network of sub-agents to sell or purchase goods, or provide services for the principal. The general agent represents the network of sub-agents. Sub-agents operate under the management and in the name of the general agent.

– Other forms of agency agreed upon by the parties.

Parties to agency contracts

– Principals are traders that deliver goods to agents for sale or provide money to agents for purchase of goods, or traders that authorize the provision of services to service-providing agents. The principal is the owner of goods or money delivered to the agent(s).

– Agents are traders that receive goods to act as sale agents or receive money to act as purchase agents or accepts the authorization to provide services.

Rights and obligations of parties to commercial agency contracts

*Rights of principals

Unless otherwise agreed, principals shall have the following rights:

– To fix prices of goods purchased or sold or charge rates of services provided to customers under agency;

– To fix agency prices;

 – To request agents to take security measures as provided for by law;

 – To request agents to make payments or deliver goods under agency contracts;

– To inspect and supervise the performance of contracts by agents;

*Obligations of principals

Unless otherwise agreed, principals shall have the following obligations:

 – To guide, supply information to, and facilitate, agents to perform agency contracts;

– To bear responsibility for quality of goods of goods sale or purchase agents, and quality of services of service-providing agents;

– To pay remuneration and other reasonable expenses to agents;

 – To return to agents their assets used as security (if any) upon the termination of agency contracts;

– To bear joint responsibility for law violation acts of agents if such law violation acts are partly attributable to their faults.

*Rights of agents

Unless otherwise agreed by the parties, agents shall have the following rights:

– To enter into agency contracts with one or more principals, except for cases specified in Clause 7, Article 175 of Commercial law;

– To request principals to deliver goods or money under agency contracts; to take back assets used as security (if any) upon the termination of agency contracts;

– To request principals to guide, supply information and create other related conditions for the performance of agency contracts;

 – To decide on goods sale prices or service charge rates for customers, for off-take agents;

 – To enjoy remunerations and other lawful rights and interests brought about by agency activities.

*Obligations of agents

 Unless otherwise agreed, agents shall have the following obligations:

– To purchase or sell goods or provide services to customers at prices or charge rates fixed by principals; – To comply strictly with agreements on handover and receipt of money and goods with principals;

– To take security measures for performance of civil obligations as provided for by law;

– To pay to principals any proceeds of the sale of goods, for sale agents; to deliver purchased goods to principals, for purchase agents; or to pay service charges to principals, for service-providing agents;

– To preserve goods after the receipt thereof, for sale agents, or prior to the delivery thereof, for purchase agents; to bear joint responsibility for quality of goods of purchase or sale agents or quality of services of service-providing agents in cases where they are at fault;

– To submit to inspection and supervision by principals, and to report to principals on their agency activities;

– Where it is specified by law that an agent shall be allowed to enter into an agency contract with a principal for a certain type of goods or service, such provision of law must be complied with.

Some notes in content of agency contracts

Agency remuneration

– Unless otherwise agreed, agency remuneration shall be paid to agents in the form of commission or price margin.

– Where principals fix goods purchase or sale prices or service charge rates, agents shall enjoy commissions calculated in percentage of such goods purchase or sale prices or service charge rates.

– Where principals do not fix goods purchase or sale prices or service charge rates but fix only agency prices, agents shall enjoy price margins. Price margin is determined to be the difference between goods purchase or sale price or service charge rate and the price fixed by the principals for the agent.

Payment in agency activities

Unless otherwise agreed, payments for goods, payment of service charges and payment of agency remunerations shall be made in installments after agents complete the purchase or sale of a specific quantity of goods or the provision of a specific volume of services.

Duration of agency

– Unless otherwise agreed, the duration of agency shall expire only after a reasonable period of time which must be at least 60 days after either party to the agency contract notifies the other party of the termination of such agency contract.

– Unless otherwise agreed, if the principal notifies the termination of the agency contract, the agent shall have the right to request the principal to pay a compensation for the period of time during which it has acted as an agent for such principal. The value of such compensation shall be an average one-month’s agency remuneration for each year the agent has acted as an agent for the principal. Where the duration of agency is less than one year, such compensation shall be equal to an average one-month’s agency remuneration during the agency term.

– Where an agency contract is terminated at the request of the agent, the agent shall not have the right to request the principal to pay compensation for the period of time during which it has acted as an agent for the principal.

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