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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
This “short form” is a simplified contract intended for parties who do not want a detailed commercial agency contract, but prefer a shorter simpler form covering only the most essential issues.
It should be stressed that a “short form” contract will contain only provisions which cover the most typical issues arising between the parties and will not provide the choice of more sophisticated alternative provisions which might actually be more appropriate for some users. Indeed, some issues may arise which are not covered at all and they will be left to be determined by the courts.
If parties need more sophisticated solutions, they should use the “full” ICC Model Commercial Agency Contract (Publication No. 766), which provides a more complete set of clauses and options (particularly through the annexes).
The model has been made bearing in mind mainly the situation of agents who promote the sale of goods. It can also be applied to agents who promote services, but in that case the parties should check if all clauses are appropriate for their situation.
Many clauses of the model include the words “unless otherwise agreed”. This wording has been used in order to draw the attention of the users to the possibility of choosing other solutions which may be more appropriate for their specific needs. However, this does not mean that in the absence of the indication “unless otherwise agreed” the parties cannot agree otherwise.
Only in some cases, where parties should be sure that they really want a different solution (or where it may be difficult to understand what their real intention was) it has been preferred to use the words “unless otherwise agreed in writing”, in order to make clear that parties can depart from the contractual provision only by a written agreement.
Products (Box A-3-A). If the parties do not fill in Box A-3, the contract will cover all the products of the principal (See Article 1.2). If the parties define the products in Box A-3, they may refer to categories of products or to specific models. If the space is not sufficient, reference may be made to an Annex: e.g. by writing in box A-3-A “see Annex 1”.
Commission (Box A-5). If a “flat” rate of commission is insufficient (e.g. because the parties prefer a range of different rates according to the value of the transaction and/or with respect to authorised discounts granted by the agent), they can refer to an Annex. In the right hand side of Box A-4 parties can choose the time when the commission is due. If they choose the first option, the agent’s right to commission will accrue when the principal delivers the goods; if they choose the second one, the agent will be entitled to commission only after the customer has paid. If the parties make no choice, the second option will apply in accordance with Article 6.4.
Goodwill indemnity (Box A-6). In many countries (e.g. in all Member States of the European Union) the law provides that, except in the circumstances identified in Article 9.3, the agent is entitled to an indemnity in the event of termination by the principal, in order to repay the agent for the goodwill developed by the agent from which the principal will benefit after the contract has ended. If the agent is domiciled in such a country, it is strongly recommended that the agent be granted such an indemnity, by choosing alternative A-6-A (or by not completing Box A-6, which will have the same effect: see Article 9). If, on the contrary, the agent is domiciled in a country where no such indemnity is required by law, the parties may choose alternative B.
Applicable law (Box A-7). The recommended solution is not to submit the contract to a specific national law, but to only refer to the general principles of law generally recognized in international trade together with the Unidroit Principles (see Article 10.1). The reason for proposing this solution is that there are substantial differences between the domestic rules of various countries, and it would consequently have been impossible to establish a set of rules compatible with each national law. This is why a reference to generally recognised principles of international trade, rather than to a specific national law, appeared a better solution, at least if the parties submit their disputes to arbitration. For more detailed information about the pros and cons of this a-national choice of law clause, you can consult the study drafted by a special task force of the CLP Commission: “Developing neutral legal standards for international contracts. A-national rules as the applicable law in international commercial contracts with particular reference to the ICC Model Contracts”. The publication in question is available for free download on the ICC store homepage: http://store.iccwbo.org/content/uploaded/pdf/Developing_Neutral_Legal_Standards_Int_Contracts.pdf
If the parties adopt this solution, they should either not complete Box A-6 or should choose alternative A.
However, since this solution (i.e. that the contract be governed by general principles of law instead of a domestic law) is more appropriate when disputes are submitted to arbitration rather than to litigation in national courts, the choice of a specific national law will be preferable if the parties decide to have recourse to litigation before the ordinary courts (see Box A-8). In this case, however, the parties should check if and to what extent the contract conforms to the provisions of the applicable domestic law.
Resolution of disputes (Box A-8). Box A offers the choice between arbitration and jurisdiction of ordinary courts. If no choice is made ICC arbitration will apply, by virtue of Article 10.3. Parties should be aware that in certain countries the above clauses may be ineffective due to public policy rules reserving jurisdiction to local courts.
EU competition rules. As regards contracts within the European Union (or capable of producing significant effects within the EU) the EU competition rules and particularly Article 101 of the Treaty on the Functioning of the European Union (TFEU) are to be respected. However, in principle agency agreements do not fall under the prohibition of Article 101 and therefore need not to comply with the EU antitrust rules. Only in exceptional cases, where the agent takes financial and commercial risks which are similar to those of a distributor (reseller), the contract may fall under Article 101 and will therefore need to comply with Regulation 330/2010 in order to be exempted from the prohibition. In this case parties should ask for expert advice.
Internet sales. If the Principal wishes to sell its products on the Internet through its own website or otherwise, parties should decide whether they should exclude such sales from the exclusivity granted to the agent under Article 5 or look for other possible solutions. It has been considered that it was not appropriate to deal with this issue in this “short form”. A clause offering two alternative solutions to this issue can be found in Article 13.5 of the “full” ICC Model Commercial Agency Contract” (Publication No. 766).
1 Territory and Products
1.1 The Principal appoints the Agent, who accepts, to promote the sale of the products listed in box A-3A as well as any other products the parties may agree in writing to include in box A-3-A at any time during the term of this Contract (hereinafter called the “Products”) in the territory (if any) indicated in box A-3B (hereinafter called the “Territory”).
1.2 If the parties have not completed box A-3A, all products manufactured and/or marketed by the Principal at present and in the future will be considered as “Products” for the purpose of this Contract.
2. Good faith and fair dealing
2.1 In carrying out their obligations under this Contract the parties will act in accordance with good faith and fair dealing.
2.2 The provisions of this Contract, as well as any statements made by the parties in connection with this agency relationship, shall be interpreted in good faith.
3. Agent’s functions
3.1 The Agent agrees to use its best endeavours to promote the sale of the Products in the Territory in accordance with the Principal’s reasonable instructions and shall protect the Principal’s interests with the diligence of a responsible person.
3.2 Unless otherwise specifically agreed, the Agent has no authority to make contracts on behalf of, or in any way to bind the Principal towards third parties. The Agent only solicits orders from customers for the Principal, who is free to accept or to reject them.
3.3 The Agent shall satisfy itself, with due diligence, of the solvency of customers whose orders it transmits to the Principal. The Agent shall not transmit orders from customers of which it knows or ought to know that they are in a critical or difficult financial position, without informing the Principal in advance of such fact. The Agent shall, furthermore, give reasonable assistance to the Principal in recovering debts due.
3.4 The Agent is not entitled to receive payments on the Principal’s behalf without prior written authorization from the Principal to that effect. When the Agent has been so authorized, it must transmit them as soon as possible to the Principal and until then hold them separately on deposit on the Principal’s behalf.
4. Undertaking not to compete
4.1 Without the prior written authorization of the Principal, the Agent shall not, directly or indirectly, represent, manufacture or distribute any products which are in competition with the Products, for the entire term of this Contract.
4.2 The Agent is entitled to represent, manufacture, market or sell any products which are not competitive with the Products, provided it informs the Principal in advance of such activity .
5. Exclusivity
5.1 The Principal shall not, during the term of this Contract, grant any other person or undertaking (including a subsidiary of the Principal) within the Territory the right to represent or distribute the Products.
5.2 The Principal shall be entitled to deal directly, without the Agent’s intervention, with customers situated in the Territory provided the Principal informs the Agent in advance. In respect of such sales the Agent shall be entitled to the commission provided for in Article 6.1.
5.3 If box A-4 has been filled in, the customers listed in the box will be managed directly by the Principal. Unless otherwise agreed, the Agent is not entitled to commission on such business.
6. Commission
6.1 Except as otherwise agreed, the Agent is entitled to the commission indicated in box A-5 on all sales of the Products which are made by the Principal during the term of this Contract to customers established in the Territory.
6.2 If the Agent, when dealing with customers established in the Territory, secures orders resulting in contracts of sale with customers established outside the Territory, and if the Principal accepts such orders, the Agent shall be entitled to receive a reduced commission, the amount of which shall be decided on a case by case basis. Similarly, the Agent’s commission shall be reduced when another agent solicits orders with customers established outside the Territory resulting in contracts of sale with customers established within the Territory.
6.3 Commission shall be calculated on the EXW Incoterms® rule reference value, irrespective of the Incoterms rule chosen in the contract of sale.
6.4 Unless otherwise agreed (e.g., as indicated in box A-5), the Agent shall acquire the right to commission only after full payment by the customers of the invoiced price. In case of partial payment, made in compliance with the sale contract, the Agent shall be entitled to a proportional payment.
6.5 The Principal shall provide the Agent with a statement of the commissions due in respect of each quarter, or such shorter period as the parties may agree, and shall set out all the business in respect of which such commission is payable. The commission shall be paid not later than the last day of the month following the relevant quarter.
7 Term and termination of the Contract
7.1 This Contract is concluded for an indefinite period and enters into force on the date on which it is signed.
7.2 This Contract may be terminated by either party by notice given in writing by means of communication ensuring evidence and date of receipt (e.g. registered mail with return receipt, special courier), not less than 4 months in advance. If the Contract has lasted for more than four years, the period of notice will be of not less than 6 months. The end of the period of notice must coincide with the end of a calendar month.
8 Earlier contract termination
8.1 Each party may terminate this Contract with immediate effect by notice given in writing by means of communication ensuring evidence and date of receipt (e.g. registered mail with return receipt, special courier) , in case of a substantial breach by the other party of the obligations arising out of the Contract, or in case of exceptional circumstances justifying the earlier termination. Any failure by a party to carry out all or part of its obligations under the Contract resulting in such detriment to the other party as to substantially deprive it of what it is entitled to expect under the Contract, shall be considered as a substantial breach for the purpose of this Article 8.1. Circumstances in which it would be unreasonable to require the terminating party to continue to be bound by this Contract, shall be considered as exceptional circumstances for the purpose of this Article 8.1.
8.2 If a party terminates the Contract in accordance with this Article, and it appears thereafter that the reasons put forward by that party did not justify the earlier termination, the termination will be effective, but the other party will be entitled to damages for the unjustified earlier termination. Such damages will be equal to the average commission for the period the Contract would have lasted in case of normal termination, unless the damaged party proves that the actual damage is higher (or, respectively, the party having terminated the Contract proves that the actual damage is lower). The above damages are in addition to the indemnity which may be due under Article 9.
9 Goodwill indemnity
9.1 Unless otherwise agreed (e.g. in box A-6), upon termination of the Contract the Agent shall be entitled to an indemnity (“goodwill indemnity”) if and to the extent it has brought the Principal new customers or has significantly increased the volume of business with existing customers and the Principal continues to derive substantial benefits from the business with such customers, and the payment of this indemnity is equitable having regard to all the circumstances and, in particular, the commission lost by the Agent on the business transacted with such customers and provided that the Agent claims such indemnity in writing within one year from contract termination.
9.2 The amount of the indemnity shall not exceed a figure equivalent to an indemnity for one year calculated from the Agent’s average annual remuneration over the preceding five years and, if the Contract lasted for less than five years, the indemnity shall be calculated on the average for the period in question.
9.3 The Agent shall have no right to indemnity in the following cases:
a) where the Principal has terminated the Contract in accordance with Article 8;
b) where the Agent has terminated the Contract, unless the termination is justified under Article 8 or on grounds of age, infirmity or illness in consequence of which the Agent cannot reasonably be required to continue its activities;
c) where, with the agreement of the Principal, the Agent assigns its rights and duties under this Contract to another person.
9.4 The goodwill indemnity under this Article 9 (“Contractual Indemnity”) is in lieu of any goodwill indemnity or equivalent compensation the Agent may be entitled to by virtue of rules of law applicable to the present Contract (“Statutory Indemnity”) and will consequently replace such Statutory Indemnity (if any). However, in case the Agent’s right to the Statutory Indemnity cannot be validly replaced by the Contractual Indemnity under the applicable law, Article 9.1 will not apply and the Agent will be entitled to the Statutory Indemnity in lieu of the Contractual Indemnity set out in this Article 9.
10 Applicable law - Arbitration
10.1 Unless otherwise agreed in writing (whether in box A-7 or elsewhere), any questions relating to this agency Contract shall be governed, in the following order:
a) by the principles of law generally recognized in international trade as applicable to international agency contracts,
b) by the relevant trade usages, and
c) by the UnIDroIt Principles of International Commercial Contracts, with the exclusion of national laws.
10.2 The parties may at any time, without prejudice to Article 10.3., seek to settle any dispute arising out of or in connection with this agency Contract in accordance with the ICC Mediation Rules.1
10.3 Unless otherwise agreed in writing (whether by completing Box A-8 or otherwise), all disputes arising out of or in connection with this agency Contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.