Act (of Finland) on Commercial Agents and Salesmen
(Passed in Helsinki on the 8th day of May 1992, No. 417)
In accordance with the decision of Parliament the following is enacted:
In this Act, a commercial agent means a tradesman who under an agency agreement made with another, the principal, has undertaken for the latters account continuously to promote sales or purchases of merchandise by acquiring offers to the principal or by concluding sales contracts or contracts of purchase in his name.
With the exceptions mentioned in the following, the provisions of this Act are applied, unless otherwise provided by a contract, the practice adopted by the contracting parties, commercial usage or any other usage to be regarded as binding on the contracting parties. The following provisions concerning the non-binding nature of a contractual stipulation apply analogously to any practice, commercial usage or other usage adopted by the contracting parties.
To a provision of the Act, from which this Act allows no deviation by any contract to the detriment of the commercial agent, no exception is either allowed by any contract ruling that the law of a foreign state must be applied to the legal relationship between the commercial agent and the principal, if this Act should otherwise be applied to the legal relationship.
The agency agreement and any change made in it must be made in writing, if so required by either contracting party.
Any contractual stipulation restricting the right belonging to a contracting party under subsection 1 is invalid.
The provisions of the Law (228/29) on Acts According to the Law of Property apply to the adjustment of any unreasonable condition of the agency agreement.
Relationship between the commercial agent and the principal
Rights and obligations under the agency agreement
In carrying out his assignment the commercial agent shall look after his principal?s interests, act responsibly and honestly towards him and follow any reasonable instructions given by the principal.
The commercial agent is obliged to notify his principal of any matters which may be of significance to the activity assigned to him. In particular, he shall without undue delay notify the principal of any offers which may be considered and of any agreements concluded by himself in the principal?s name.
Any contractual stipulation deviating from the provisions of this section is invalid.
The commercial agent may accept assignments as defined in § 1 also from others than the principal, unless this is in conflict with the obligation belonging to the commercial agent under subsection 1 of § 5.
The commercial agent may not, neither during the time of validity of the agency agreement nor after its termination, use to his advantage or disclose to others any such business or professional secrets of the principal which he has been told or which he has learnt otherwise, if by so doing he would act contrary to good commercial usage.
The principal shall act responsibly and honestly towards the commercial agent.
The principal shall acquire the information required by the commercial agent in carrying out his assignment and supply him with the necessary material, such as samples, models, brochures and price-lists.
The principal is obliged to notify the commercial agent of any circumstances that may be of importance to the activity assigned to the agent. He shall also without undue delay let the commercial agent know whether he accepts or rejects an offer sent to him by the commercial agent or an agreement, which the commercial agent has concluded in the principal?s name although lacking the right to do so. If an agreement arranged or concluded by the commercial agent has not been fulfilled, the principal shall without undue delay notify the commercial agent of this.
The principal shall notify the commercial agent without undue delay, if he foresees that the activity under the agency agreement will be essentially less than the commercial agent may reasonably have grounds to expect.
Any contractual stipulation deviating from the provisions in this section is invalid.
If the principal or the commercial agent has violated the agency agreement or has otherwise intentionally or through carelessness neglected any obligation of his under this Act or any obligation of his under the agreement, he shall be obliged to compensate the other contracting party for any damage caused.
A party who intends to claim damages on the grounds mentioned in subsection 1 shall on learning about the grounds without undue delay notify the other contracting party of his intention. A party who fails to do so shall lose his right to compensation.
The provisions in subsection 2 do not apply to cases where the other contracting party has acted dishonestly or has caused considerable damage to the other through gross carelessness.
The commercial agent is entitled to a commission for any contract made during the time of validity of the agency agreement, if the contract has come about through his assistance or it has been concluded with a third party secured earlier by the commercial agent as the principal?s customer under similar circumstances, or if the commercial agent has been allotted a certain area or circle of customers and the contract was concluded with a third party belonging to this area or circle of customers.
The commercial agent has the right to obtain a commission for a contract made after the expiry of the agency agreement, if the contract came about as defined in § 10 and the offer of the third party reached the principal or the commercial agent before the agency agreement expired or if securing of the contract can be considered mainly due to the commercial agent?s assistance during the time of validity of the agency agreement and the contract came about within a reasonable time after the expiry of the agency agreement.
A commercial agent replacing an earlier commercial agent is not entitled under § 10 to any commission when the commission belongs to the earlier commercial agent according to subsection 1 of this section, unless in view of the circumstances it is reasonable to divide the commission between the commercial agents.
The commercial agent has the right to a commission as soon and to the extent any one of the following preconditions is fulfilled:
1) the principal has met his obligation of performance under a contract made between himself and a third party;
2) 3) the principal should have met his obligation of performance as defined in item 1;
4) 5) the third party has met his obligation of performance under the contract as defined in item 1.
6) The commercial agent is not bound by a contractual stipulation ruling that the right to a commission comes about later than at the time when the third party meets his obligation of performance or when he should have met it, if the principal would have met his obligation of performance under the contract.
If the principal has agreed with a third party without the commercial agent?s consent on cancellation of a contract or on changing its terms and conditions, and the third party?s obligation of performance is not met for this reason, not at all or partly, such lacking fulfilment of the obligation of performance shall not affect the commercial agent?s right to obtain a commission.
The commercial agent loses his right to a commission as defined in § 12 only if the contract between the principal and the third party is unfulfilled and this was not due to any circumstance on the principal?s part or on his side or to any reason mentioned in subsection 1 and if it is obvious that the obligation of performance will not be fulfilled later.
If the third party meets his obligation of performance only in part, the commercial agent shall have the right to a commission only in so far as the obligation of performance was fulfilled, unless otherwise provided in subsection 1 or 2.
The commercial agent may not with effects binding in advance waive any right belonging to him under this section.
The commission shall be paid to the commercial agent within one month of the end of that calendar month in which the commercial agent obtained the right to a commission according to § 12. In case the commercial agent has lost his right to a commission entirely or partly under subsection 2 or 3 of § 13, any amount paid in excess shall be reimbursed to the principal at his request.
A contractual stipulation ruling that the commission shall be paid to the commercial agent later than within a month of the end of that calendar month in which the commercial agent obtained the right to a commission, shall not bind the commercial agent.
If the parties have not agreed on the amount of commission due to the commercial agent, the commission will be determined by the amount generally paid at the commercial agent?s place of business for performances of similar or corresponding assignments. Should it not be possible to determine the amount of commission in this manner, the commercial agent has the right to a reasonable commission in view of prevailing circumstances.
The commission calculation is based on the purchase price to be paid by the buyer. However, no granted cash discount shall be regarded as a deduction of the purchase price nor any freight, package, customs duty, insurance premium, tax or any other such additional cost, unless this cost is specified separately in the invoice to the buyer on the strength of an agreement made with the buyer.
When the commercial agent is assigned the task of collecting payments he must keep received funds separately from other funds. The commercial agent has the right to obtain a special reasonable commission for such collection of payments, unless the commercial agent?s commission is intended to include compensation for this task as well.
The commission due to the commercial agent in accordance with subsection 1 shall be paid on collection of the payment.
If the commercial agent undertakes in relation to the principal to make sure that a third party meets his obligations under a contract (del credere), such a liability must be made in writing in order to be binding. The liability may concern only a definite contract or contracts to be made with a definite third party. The commercial agent is responsible for such a liability as for his own debt.
The commercial agent has the right to obtain a special reasonable commission for any contingent liability as specified in subsection 1.
The commission due to the commercial agent according to subsection 2 shall be paid on conclusion of the contract with the third party.
The commercial agent has the right to obtain a special commission for costs caused by such actions which are required by proper fulfilment of the agency agreement. However, no such compensation must be paid if the costs were caused by ordinary tasks of the commercial agent.
The commercial agent has the right to obtain monthly from the principal a commission account of those contracts for which he is entitled to a commission under § 10 or § 11.
Those contracts must be included in the commission account for which the commercial agent has obtained a right to commission during the last calendar month in accordance with § 12. For each contract, that commission amount must be mentioned which is due to the commercial agent or, in case no commission is credited, the reason for this.
In case it is established on grounds emerging after the presentation of the commission account that the commercial agent has lost his right to a commission entirely or partly as regards some contract included in the account, the principal may credit the commission amount to himself in a later account.
The commercial agent may not with binding effect waive any right belonging to himself under subsections 1 and 2. However, the contracting parties may agree that a commission account shall be given to the commercial agent within a month of the end of that calendar quarter in which the right to a commission came about.
The commercial agent has a right to obtain from the principal an extract from the principal?s books and all other such information in the principal?s possession which is necessary for checking the commission account.
Should the principal refuse to give the information defined in subsection 1 or, if there is reason to suspect that the account or the given information is insufficient or false, an auditor approved by the Central Chamber of Commerce or by a chamber of commerce and appointed by the commercial agent shall have the right to audit the principal?s books to the extent required to find out to what extent the commercial agent is entitled to a commission.
Any contractual stipulation restricting the commercial agent?s right under this section is invalid.
In case collection of money due to the commercial agent on the strength of the agency relationship would otherwise be endangered, the commercial agent may withhold such documents, samples, models and merchandise belonging to the principal, which have come into his possession due to his assignment, and also anything collected by himself from a third party with the principal?s authorisation, until the principal has paid the money due to the commercial agent or has lodged a security for it.
Termination of the agency agreement
An agency agreement made for a fixed period of time expires at the end of the agreed time. Should the agreement on the strength of a stipulation included in it expire only when notice of its termination is given before the end of the agreement period, the agreement shall be considered valid for the time being after the agreement period, if no notice of termination has been given.
If the contracting parties after the termination of a concluded agency agreement continue their agency relationship without any explicit agreement, the validity of the agreement shall be regarded as prolonged for the time being.
An agency agreement which is in force for the time being may be terminated to expire after a period of notice. When a agreement is terminated during the first contract year, the period of notice is one month. Thereafter the period of notice will be prolonged by one month for each commenced contract year. The longest period of notice, however, is six months.
The contracting parties may not with binding effect agree in advance on any shorter period of notice than the one determined in subsection 1. However, the period of notice agreed upon for the commercial agent to follow may be fixed at three months by mutual agreement, although the agency agreement has been in force for a longer time than three years.
If the contracting parties agree on a longer period of notice than the one determined in subsection 1, the period of notice to be applied when the principal gives notice can not be fixed to be shorter with binding effect on the commercial agent than the period of notice fixed for the commercial agent to follow.
The period of notice is calculated from the end of that calendar month in which the notice of termination is delivered to the contracting party.
If the principal?s or the commercial agent?s property is surrendered into bankruptcy, the agency agreement will be regarded as having expired on the day when the bankruptcy petition was submitted to the court.
Irrespective of the provisions in force concerning the period of validity and the period of notice of the agency agreement, either contracting party may cancel the agreement at once if an important reason so requires. Neglect or other such conduct of one party which makes it unreasonable to demand that the other party should continue the agreement relationship is regarded as such a reason.
If the circumstances do not call for another estimation, either contracting party may cancel the agency agreement especially in the following cases:
1) when a contracting party has misled the other party over essential issues when making the agency agreement;
2) 3) when a contracting party will not consent to a demand presented by the other contracting party and concerning compliance with the written form as ruled in § 3;
4) 5) when a contracting party has made himself guilty of an action severely damaging the interest of the other contracting party or otherwise making the latter justifiably lose confidence in the first-mentioned party; or
6) 7) when the other contracting party has in essential respects failed to meet his obligations under the agency agreement.
8) The right according to this section of a contracting party to cancel the agency agreement expires if not used by him without undue delay on receiving information about the grounds for cancellation or, when the grounds are continuous, after they have ceased.
If there are no grounds for cancellation as defined in § 25, a contracting party may nevertheless make the agreement expire prematurely, but he shall then be obliged to compensate the other for any resulting damage.
The commercial agent may not with binding effect waive his right to compensation according to subsection 1 before the termination of the agency agreement.
If cancellation of the agency agreement as defined in § 25 was caused by the other contracting party?s intentional or careless action or if the agreement expired due to the other party?s bankruptcy, his contracting party shall be entitled to receive compensation for any damage caused by premature cessation of the contract relationship.
On termination of the agency agreement the commercial agent has the right to indemnity from the principal if and in so far as:
1) the commercial agent has secured new customers for the principal or he has significantly increased the trade with existing customers and this results in significant benefit for the principal in connection with the termination of the agency agreement or afterwards; and
2) 3) the indemnity may be regarded as reasonable in view of the commissions lost by the commercial agent for contracts to be concluded with customers as defined in item 1 and in view of all other factors influencing the matter.
4) The commercial agent has the right to receive indemnity to a maximum amount equal to the commercial agent?s commissions in one year calculated by the average commissions for the last five years. If the agency agreement has been in force for a shorter period than five years, the average of commissions is calculated on the basis of commissions paid during the whole time of validity of the agreement.
If the agency agreement has expired due to the commercial agent?s death or bankruptcy, the indemnity in accordance with subsections 1 and 2 shall belong to his death estate or bankruptcy estate.
No payment of indemnity shall prevent the commercial agent or his death estate or bankruptcy estate from claiming damages on grounds of violation of the agreement.
Any contractual stipulation restricting the right to indemnity under this section before the termination of the agency agreement is invalid.
The commercial agent has no right to indemnity if:
1) the principal has given notice of termination or has cancelled the agency agreement on grounds of neglect or conduct of the commercial agent as defined in § 25;
2) 3) the commercial agent has given notice of termination or has cancelled the agency agreement; or
4) 5) the commercial agent has assigned to another party with the principal?s consent his rights and obligations under the agency agreement.
6) The provision in item 2 of subsection 1 notwithstanding, the commercial agent on having given notice of termination or having cancelled the agency agreement will have the right to indemnity, if justified cause existed for giving notice or cancelling the agency agreement on account of a circumstance due to the principal or if the commercial agent can not reasonably be expected to carry on his business on account of age, deteriorated health or illness.
The commercial agent loses his right to indemnity, unless within one year of the expiry of the agency agreement he notifies the principal of his claim for indemnity.
Any contractual stipulation restricting the right of the commercial agent under this section before the termination of the agency agreement is invalid.
If the agency agreement has terminated due to notice of termination, bankruptcy, cancellation or any other reason, the commercial agent is obliged, until such a time when the principal, his guardian or assignee or his trustees in bankruptcy can secure the principal?s or his estate?s interests, to take such steps that are necessary to safeguard the principal or his estate from damage, unless this will cause him considerable costs or inconvenience.
Any agreement restricting the commercial agent?s activity after the termination of the agency agreement will bind the commercial agent only in so far as it:
1) is made in writing;
2) 3) concerns an area or circle of customers allotted to the commercial agent; and
4) 5) concerns merchandise of the same kind as those under the agency agreement.
6) A contractual stipulation ruling that the agreement defined in subsection 1 will be valid for a longer time than two years after the termination of the agency agreement will not be binding on the commercial agent for a longer time than two years.
Qualification of the commercial agent
and the principal?s relation to a third party
The commercial agent may conclude contracts for the principal only if authorised to do so.
If the principal has made over to the commercial agent such forms bearing his own name which when filled in by the agent can be regarded as proving that the contract was concluded for the principal, such a contract made on a form filled in by the agent shall be binding on the principal in the same way as if he had explicitly authorised the agent to conclude the contract.
If the commercial agent has made a contract on behalf of the principal without any authorisation or exceeding his authorisation, the principal must, if not willing to accept the contract, notify the third party of this without undue delay upon learning about the contract. If the principal fails to do so, he is considered to have accepted the contract.
If the principal does not wish to accept an offer received by the commercial agent, he must make this known to the party making the offer without undue delay upon receiving the offer or upon learning about its contents. If the principal fails to do so, he is considered to have accepted the offer.
The provision in subsection 1 shall not be applied if the commercial agent and the party making the offer have agreed otherwise.
If a third party has made an offer to the commercial agent, who has sent it to the principal, the party making the offer has the same right to notify the principal of cancellation of the offer as he would have had if he had sent the offer himself.
The provision in subsection 1 shall not be applied if the commercial agent and the party making the offer have agreed otherwise.
If a tradesman has negotiated with the commercial agent about a purchase or sale for the account of his firm and he receives a notification from the agent?s principal wherein the principal referring to these negotiations announces his approval of the offer made to the agent or his confirmation of the contract concluded with the agent, the tradesman must, if wishing to claim that he has not made any offer or not concluded any contract at all or that the contents of the offer or contract are presented falsely in the announcement, without undue delay make this known to the principal. If the tradesman fails to do so, he is considered to have accepted the contract of the contents indicated by the principal?s announcement received by the tradesman.
The provision in subsection 1 shall not be applied if the principal knew or he ought to have known that the offer or contract mentioned in the announcement had not been made or that the contents of the offer or contract were falsely declared, nor if the tradesman can prove that the announcement was false.
Although the commercial agent has the right to conclude contracts binding the principal, he has no right to collect payments for sold merchandise, grant postponement of payments or grant price reductions after the conclusion of the contract nor to make any changes in the contract.
If the principal has learnt that the commercial agent has taken the step defined in subsection 1 without authorisation, when the contract has been concluded with the agent?s assistance or within the area or circle of customers allotted to him in the way defined in § 10, and if the principal does not wish to accept the agent?s step, he must without undue delay make this known to the third party. If the principal fails to do so, he is considered to have accepted to step.
The commercial agent may receive on behalf of the principal a notification of a defect or shortage in the merchandise or of a delay in its delivery and any other notification concerning fulfilment of the contract, if the contract was concluded with his assistance or within the area or circle of customers allotted to him as defined in § 10. However, without authorisation from the principal the agent has no right to take decisions on the basis of such a notification, although he may conclude contracts which bind the principal.
A salesman in this Act means an employee who by an agency agreement between himself and the employer has undertaken for the employer?s account to promote in the way defined in § 1 sales of merchandise by travelling to various localities or by paying visits to customers at the locality where the employer?s firm is located. The salesman does not carry with him merchandise intended for sale.
Unless otherwise provided in this Act, the Contracts of Employment Act (320/70) is applied to the legal relationship between the salesman and the employer.
The provisions of §§ 2-4 and 7, subsections 1-4 of § 8 and §§ 32-38, 44 and 45 are applied to the salesman and to the employer respectively.
If the salesman?s commission is paid wholly or partly as a commission, the provisions of §§ 10 and 11, subsection 1 of § 12, subsection 1 of § 13, § 15, subsections 1 and 2 of § 19, and subsections 1 and 3 of § 20 shall be applied.
The salesman may not before the termination of the agency agreement waive with binding effect his right under subsection 1 of § 11 to a commission for a contract, for which the offer reached the principal after the termination of the agency agreement.
The salesman has the right to receive special compensation for travelling, postage, cable, telephone and other such expenses as well as a daily allowance for the time of travels. The employer is obliged to make an advance payment to the salesman at his request for his expenses and travel allowance.
If a notification to be given by the commercial agent under subsection 2 of § 9 or subsection 3 of § 29, by the principal under subsection 2 of § 9, § 33, subsection 1 of § 34 or subsection 2 of § 37 or by the tradesman under subsection 1 of § 36, has been sent in a proper manner, the sender may rely on the notification even if it is delayed, distorted or fails to arrive.
This Act will come into force on the 1st day of November 1992. It revokes the Act (389/75) on Commercial Agents passed on 30 May 1975 and later changes to that Act.
This Act is applied from the 1st day of January 1994 to agency agreements made before the coming into force of the Act. Until that date earlier provisions are applied, unless otherwise agreed.
Helsinki, on the 8th day of May 1992
President of the Republic
Minister of Justice Hannele Pokka