Act CXVII (of Hungary) on the Commercial Representation Contracts of Self-employed Commercial Agents
(Закон Венгрии № CXVII о договорах коммерческого представительства, заключаемых независимыми коммерческими агентами)
(1) This Act shall apply to the commercial representation contracts of self-employed commercial agents (hereinafter referred to as 'commercial agency contract').
(2) For the purposes of this Act 'commercial agent' shall mean an intermediary acting on the basis of remuneration, who has continuing authority to negotiate the sale or the purchase of goods on behalf of another person, or to negotiate and conclude such transactions whether in the name of the principal or in his own name on behalf of that principal.
(3) 'Self-employed commercial agent' shall mean when the intermediary pursues commercial agency activities without being bound under an employment relationship. Self-employed commercial agents shall engage in such activities only on the basis of a commercial agency contract.
(4) Any person whose authorization to enter into commitments in the name of others is conferred by law shall not be deemed a self-employed commercial agent.
(5) Unless prescribed in specific other legislation to the contrary, this Act shall apply mutatis mutandis to the commercial agency contracts of self-employed agents when negotiating for services, intangible assets or securities in the commodity exchange or the commodity market.
(6) Within the meaning of this Act, any property that can be taken into possession shall be treated as goods.
(7) Matters not regulated in this Act shall be governed by the provisions of the Civil Code of the Republic of Hungary.
(8) Any agreements concluded on the basis of this Act, which contain unfair clauses in terms of free trade and competition, shall be subject to the provisions of Act LVII of 1996 on the Prohibition of Unfair Market Practices and Restraint of Trade.
(1) Parties may derogate from the provisions of this Act upon mutual consent, if the derogation in question is not permitted by this Act.
(2) Where derogation from certain provisions is expressly prohibited, any agreement of the parties in derogation of such provisions shall be substituted by the respective provision of this Act.
Terms and Conditions of Commercial Agency Contracts
(1) Where the contract contains a clause to authorize the self-employed commercial agent (hereinafter referred to as 'commercial agent') to conclude the transaction in the name of the principal, it shall also mean that
a) the commercial agent is entitled to accept the consideration due (receive the purchase price);
b) the statements made by the third party to the commercial agent concerning the conclusion of or in connection with the transaction shall become binding on the principal when they are conveyed to the commercial agent. Any restriction of representation with regard to the third party shall be deemed valid only if properly communicated.
(2) If the commercial agent is not authorized to conclude transactions in the name of the principal, the statements made by the third party to the commercial agent concerning the conclusion of or in connection with the transaction shall not be binding on the principal, unless otherwise stipulated by the parties.
Form of Contract
All commercial agency contracts must be made in writing. No derogation from this provision shall be permitted.
Obligations of the Commercial Agent
(1) The commercial agent must make all reasonable and proper efforts to negotiate the transactions specified in the commercial agency contract.
(2) In performing his activities the commercial agent must act dutifully and in good faith, and must look after his principal's interests and comply with his reasonable instructions.
(3) The commercial agent must inform the third party of his scope of authority.
(4) The commercial agent shall conclude the transaction with the third party if it so prescribed in the commercial agency contract.
(5) The commercial agent shall inform the principal of his activities as appropriate, and must notify the principal concerning any transaction negotiated and the statements made by the third party concerning the conclusion of or in connection with the transaction without delay. He shall also communicate to his principal all the necessary information available to him, such as on current market conditions and on any other circumstance that may be reasonably deemed important for the principal in connection with the commercial agency contract.
(6) No derogation from the provisions of Subsections (1)-(3) and (5) shall be permitted.
(1) Prior to entering into a commercial agency contract, the commercial agent must inform the principal if he is engaged in commercial agency activities of a similar nature with a commercial agency contract with another principal. Failure to comply with this provision shall be treated as breach of contract and subject to the relevant legal provisions.
(2) Under the duration of a commercial agency contract the commercial agent may not enter into another commercial agency contract for transactions of a similar nature without the prior written consent of the principal.
Obligations of the Principal
(1) The principal shall pay remuneration for commercial agency activities.
(2) In his relationship with the commercial agent, the principal must provide all reasonable assistance to the agent for performing his activities, such as to provide the necessary documentation and other materials relating to the transaction concerned, and to obtain for his commercial agent the information necessary for the performance of the agency contract.
(3) The principal must notify the commercial agent within a reasonable period once he anticipates that the volume of commercial transactions will be significantly lower than that which the commercial agent could normally have expected. The principal must, in addition, inform the commercial agent within a reasonable period of his acceptance, refusal, and of any non-execution of a commercial transaction which the commercial agent has procured for the principal.
(4) Risk of damages in connection with the materials provided to the commercial agent shall be borne by the principal.
(5) The parties may not derogate from the provisions of Subsections (1)-(3).
(1) In the absence of any agreement on the matter of remuneration between the parties, the commercial agent shall be entitled to the remuneration that commercial agents appointed for the goods forming the subject of his agency contract are customarily allowed in the place where he carries on his activities, taking into account all circumstances of the transaction, provided they lead to the conclusion that the contract has been concluded between the parties without having established the level of remuneration.
(2) The remuneration of the commercial agent can be stipulated in the form of commission. For the purposes of this Act, any part of the remuneration, which varies with the number, or value of business transactions shall be deemed to be commission. Sections 9-13 shall not apply if the commercial agent is not remunerated by commission.
(3) Unless there is an agreement to the contrary, the commercial agent shall not demand - in addition to the remuneration -any reimbursement of the costs and expenses that he had incurred for the performance of the agency contract.
(4) The commercial agent cannot accept or demand any remuneration from the third party of the transaction without the consent of his principal.
(1) Where it is so stipulated in the contract, the commercial agent shall be entitled to commission on commercial transactions concluded during the period covered by the agency contract
a) where the transaction has been concluded as a result of his action, or
b) where the transaction is concluded with a third party whom he has previously acquired as a customer for transactions of the same kind.
(2) If the commercial agent has an exclusive right of agency, he shall also be entitled to commission on transactions executed by the principal without the agent's direct involvement during the period covered by the agency contract in a specific geographical area or with a group of customers covered by such exclusive agency.
(3) The following shall be treated as belonging to a geographical area:
a) a natural person whose place of domicile or place of residence is located in the area in question;
b) a legal person or unincorporated business association whose economic activities are carried out in the area in question.
(4) A transaction that has been executed or that is to be performed in a specific area shall also be deemed as belonging to the geographical area entrusted to the commercial agent.
(1) The principal shall be entitled to refuse payment of the commission referred to in Section 9, if that commission is payable, pursuant to Subsection (2), to the previous commercial agent entrusted with transactions of the same kind, if the principal has informed the commercial agent at the time of contracting of the existence of a previous commercial agency contract.
(2) Where the contract stipulates commission, the commercial agent shall be entitled to commission on commercial transactions concluded after the agency contract has terminated if
a) the proposal of the third party for the conclusion of the transaction, that is subject to commission in accordance with Section 9, has reached the principal or the commercial agent before the agency contract terminated, or
b) the transaction is mainly attributable to the commercial agent's efforts during the period covered by the agency contract and if the transaction was entered into within a reasonable period after that contract terminated.
(3) When a transaction is attributable to the efforts of several commercial agents acting in sequence in the same field, the commission due for transaction shall be shared equitably between such commercial agents.
(1) Parties may stipulate a special commission payable to the commercial agent for collecting payments (commission for collecting).
(2) Where the commercial agent guarantees his principal against the default of the third party with whom he contracts he shall be entitled to separate remuneration for this service (del credere commission).
(1) The commission shall become due, as agreed by the parties, at the time and to the extent
a) the transaction with the third party is concluded, and the principal has executed or should have executed the transaction, or
b) the transaction with the third party is concluded and the third party has executed the transaction.
(2) The commission shall become due at the latest when the third party has executed his part of the transaction or should have done so if the principal had executed his part of the transaction, as he should have.
(3) If the parties stipulate that commission for a transaction becomes due when it is entered into, whether or not it is executed, the commission shall become due at the time the transaction is concluded.
(4) A del credere commission shall become due upon conclusion of the contract.
(5) The commercial agent shall be entitled to commission for a transaction that was not executed with the third party for reasons beyond the principal's control.
(6) Where the commercial agent is not entitled to commission or his right to commission is extinguished, he shall refund any commission already received to the principal without delay. No interest shall be charged on refunded commission if it was received in good faith.
(7) Any agreement of the parties to derogate from Subsection (2) to the detriment of the commercial agent shall not be permitted. Furthermore, any agreement to deprive the commercial agent's right to commission where the transaction is not executed for reasons attributable to the principal is also not permitted.
(1) The principal shall supply his commercial agent with a statement of the commission due, not later than the last day of the month following the quarter in which the commission becomes due. This statement shall contain the main components used in calculating the amount of commission.
(2) The commercial agent shall be entitled to demand that he be provided with all the information, and in particular an extract from the books of the principal which he needs in order to check the amount of the commission due to him.
(3) Any agreement of the parties to derogate from Subsections (1) and (2) to the detriment of the commercial agent shall not be permitted.
Scope of Activity
(1) Commercial agency contracts must define the kind of goods and the geographical area, or the group of customers and the geographical area, which are entrusted to the commercial agent as covered by his agency under the contract (hereinafter referred to as 'scope of activity').
(2) The commercial agent may be granted exclusive right of agency for a specific scope of activity.
Duration of Contract
(1) A commercial agency contract may be concluded for a fixed or an indefinite period.
(2) An agency contract for a fixed period, which continues to be performed by both parties after that period has expired, shall be deemed to have been converted into an agency contract for an indefinite period.
Termination of Contract
(1) Where an agency contract is concluded for an indefinite period either party may terminate it by notice. The notice shall contain an explanation to the extent to determine the agent's entitlement to indemnity (Sections 18-19).
(2) The period of notice shall be one month for the first year of the contract, two months for the second year commenced, and three months for the third year commenced and subsequent years. The parties may not agree on shorter periods of notice, unless the agency activities of the commercial agent are considered secondary.
(3) If the parties agree on longer periods, the period of notice to be observed by the principal must not be shorter than that to be observed by the commercial agent.
(4) The period of notice must coincide with the end of a calendar month.
(5) Where an agency contract for a fixed period is converted into an agency contract for an indefinite period, the entire duration of the contract must be taken into account in the calculation of the period of notice.
Breach of Contract
Either party may terminate the commercial agency contract with immediate effect in the event of the other party's failure to carry out his obligations stipulated in the contract or to which he is subject under this Act. The provisions of the Civil Code shall be observed with regard to any other aspects of breach of contract.
(1) The commercial agent shall be entitled to an indemnity upon termination of the commercial agency contract if and to the extent that
a) he has brought the principal new customers and the principal continues to derive substantial benefits from the business with customers solicited by the commercial agent following termination of the contract, and
b) the payment of this indemnity is equitable having regard to all the circumstances and, in particular, the commission lost by the commercial agent because of the termination of the contract that would otherwise be due to him on future transactions with customers solicited by him if the contract was to remain in force.
(2) It shall be treated as bringing new customers where the commercial agent has significantly increased the volume of business with existing customers to an extent equivalent to soliciting a new customer.
(3) The amount of the indemnity must be consistent with the loss of commission referred to in Paragraph b) of Subsection (1), and it may not exceed a figure equivalent to an indemnity for one year calculated from the commercial agent's average annual remuneration over the preceding five years. If the contract goes back less than five years, the indemnity shall be calculated on the average for the period in question.
(4) The grant of such an indemnity shall not prevent the commercial agent from seeking damages.
(5) Entitlement to the indemnity shall also arise where the agency contract is terminated as a result of the commercial agent's death (ceasing activities without successor).
(6) Any claim for indemnity shall be notified to the principal within one year following termination of the contract, or else the commercial agent shall lose his entitlement to the indemnity.
The commercial agent shall not be entitled to indemnity if
a) the principal has terminated the agency contract with immediate effect on the grounds of the agent's breach of contract, or
b) the commercial agent has terminated the agency contract, unless such termination is justified by circumstances attributable to the principal or on grounds of age, infirmity or illness of the commercial agent in consequence of which he cannot reasonably be required to continue his activities, or
c) with the agreement of the principal, the commercial agent assigns his rights and duties under the agency contract to another person.
The parties may not derogate from Sections 18 and 19 to the detriment of the commercial agent before the agency contract expires.
An agreement between the parties following termination of the contract on the amount of indemnity cannot be contested on the grounds of alleged error of the parties in their calculation of the benefits to be derived by the principal from the business with customers solicited by the commercial agent following termination of the contract.
Restraint of Trade Clause
(1) For the purposes of this Act a 'restraint of trade clause' shall mean an agreement restricting the business activities of the commercial agent following termination of the agency contract.
(2) A restraint of trade clause shall be valid only if concluded in writing for not more than two years after termination of the agency contract, if it specifies compensation, and if it relates to the scope of activity covered by his agency under the contract.
(3) If the commercial agent has terminated the contract with immediate effect on the grounds of the principal's breach of contract, he may also terminate the restraint of trade clause in writing within one month from the termination of the contract.
Entry into Force
(1) This Act shall enter into force on the first day of third month following promulgation; it shall apply to contracts concluded thereafter.
(2) Effective as of 1 January 2003, the provisions of this Act shall also apply to contracts concluded before its entry into force, unless the events that give rise to the rights and obligations under the contract occur prior to 1 January 2003. With regard to the contracts to which this Subsection applies, the obligations in connection with the conclusion of the commercial agency contract under this Act shall commence on 1 January 2003; if the contract is not evidenced in writing it shall be considered invalid from this date forward.
(3) Simultaneously with the entry into force of this Act, Sections 19-31 of Law-Decree No. 8 of 1978 on the Application of the Civil Code of the Republic of Hungary Regarding External Economic Relations shall be repealed.
Approximation to the Laws of the European Communities
Within the framework of Section 3 of Act I of 1994 promulgating the Europe Agreement establishing an association between the Republic of Hungary and the European Communities and their Member States, signed in Brussels on 16 December 1991, this Act contains regulations designed to approximate with Council Directive 86/653/EEC on the coordination of the laws of the Member States relating to self-employed commercial agents.