What Is The Agreement On Representation For Traders? Features Of The Agreement On Representation For Traders

In order to know What is the agreement on representation for traders? Features of the agreement on representation for traders, first of all, people need to know that representation for traders is a form of commercial intermediaries performed by traders in accordance with commercial law.

The agreement on representation for traders is an arrangement between two traders (the representative and the principal), in which the representative is granted authorization by the principal to perform trades under the name or direction of the principal and earn remunerations for the representation service rendered[1].

Features of the agreement on representation for traders

Firstly, the subject of such an agreement must be traders in accordance with the laws of Vietnam. Thus, it is feasible for a trader and its branch or representative office to enter into such an agreement. Furthermore, dependent units of a trader such as a branch, representative office, or a store, center, or department of an enterprise cannot be considered as a part of such agreement on behalf of the trader because this is not the case. They are affiliated units to enterprises, not traders. In the agreement on representation for traders, the representative is an independent trader, conducts business and commerce independently of the principal. The representation is considered as a business field of the engaged trader, in which it receives remuneration from acting as a representative. In principle, a trader acting as a representative can sign multiple representation contracts with different traders as long as the scope of representation does not conflict with each other.

In essence, representation for traders is a form of authorisation relationship with remuneration according to the provisions of the Civil Code. The authorisation agreement clearly states that the authorised party is obliged to perform the work on behalf of the principal, and the principal only has to pay remuneration if so agreed or otherwise provided for by the law[2]. However, it should be noted that in case a trader appoints his/her person to act as his/her representative, this is not the representation for traders in accordance with the commercial law, the institution of an authorised representative under the Civil Code shall apply instead[3]. In essence, the agreement on representation for traders is a form of authorisation agreement according to the provisions of the Civil Code, whereby the representative party on behalf of the principal performs transactions with a third party[4]. This is a noteworthy point to distinguish the activities of the representation for traders and goods sale or purchase entrustment in accordance with the commercial law.

Acting as a representative under an agreement on representation for traders is not ad hoc as a brokerage, but is performed regularly and continuously throughout the representing period as agreed in the agreement. This frequent proxying is an important distinction that distinguishes a contractual relation under the agreement on representation for traders from a commercial brokerage relation, in which the trader acts as a brokerage intermediary is entitled to remuneration under the brokerage contract[5].

Secondly, in terms of the form of agreement, the agreement on representation for traders must be made in writing or another form with equivalent legal validity[6], such as an electronic contract[7]. To such a type of commercial service in the form of authorisation with remuneration attached to the rights and obligations of the parties that lasts for such a long time, it is reasonable to stipulate that the form of contract on behalf of the trader must be made in writing a provision to ensure the rights and interests of the parties.

Third, in terms of the content of the agreement, the current commercial law does not stipulate the basic contents of an agreement on representation for traders. Accordingly, the content of the agreement will be agreed upon by the parties based on freedom of contract, the most important principle of the Civil Code. Hence, the parties have the full right to arrange on the term[8] and scope of representation[9] not to exceed the scope of commercial activities of the principal[10], representation remuneration, rights and obligations of the representative and the principal[11], restraint of trade agreements, sanctions for breach of agreement, etc.

Fourth, on the termination of the agreement, In the absence of any agreement, the validity duration of representation ends in either case where the principal or the representative notifies the other of termination of the agreement on representation for traders[12]. The representative shall be entitled to remunerations for any contract which is concluded within the contractual scope of representation. Entitlement to such remunerations arises from the date agreed upon in an agreement on representation by contracting parties[13]. If the principal unilaterally gives notification of termination of a representation agreement, the representative shall be entitled to claim remunerations paid by the principal for the conclusion of contracts with his/her clients and other payments that (s)he would have received[14]. If the representative unilaterally gives notification of termination of a representation agreement, the representative shall be deprived of the right to claim any remuneration for trades that (s)he would have received, unless otherwise agreed upon by aggrieved parties[15].

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