Chapter 38 - Agency Contract
Art. 670. Definition of agency contract
(1) By an agency contract, one person (the agent) undertakes, in the interests of and for the benefit of another person (the mandator), to negotiate or enter into contracts in the name and on account of the mandator independently and on a permanent basis. The mandator undertakes to pay a fee to the agent therefor.
(2) An agent acts independently if the agent has the right to a large extent to organise the activities and determine the working hours of the agent freely.
(3) A person who performs the obligations specified in subsection (1) of this section on the basis of an employment contract entered into with a mandator is not deemed to be an agent. Members of the directing body, partners or trustees in bankruptcy of a mandator who is a legal person who have the right arising from law or from the statutes, articles of association or partnership agreement to assume obligations for the legal person are also not deemed to be agents.
4) The provisions for authorisation agreements apply to agency contracts unless the provisions of this Chapter provide otherwise.
Art. 671. Acting as agent as principal or ancillary activity
Acting as an agent may be the principal activity or an ancillary activity of an agent. Acting as an agent is deemed to be an ancillary activity if the person is not principally active as an agent or does not obtain the greater part of the person's income therefrom. In the event of a dispute, the mandator may rely on the fact that acting as an agent is an ancillary activity of the person only if this is clear from the agency contract.
Art. 672. Document setting out content of agency contract
Each party has the right to demand that the content of the agency contract, of any amendments thereto and of any additional agreements be set out in a document signed by the other party. Any agreements which restrict or limit this right are void.
Art. 673. Obligations of agent
(1) An agent shall perform the obligations thereof with the diligence normally expected from a person acting for the purposes of the person's economic or professional activities, including by making reasonable efforts in the interests of the mandator to enter into or negotiate contracts. An agent shall immediately inform the mandator of every contract negotiated or entered into by the agent and also of other circumstances which are relevant for compliance with the interests of the mandator.
(2) Agreements which derogate from the provisions of subsection (1) of this section and subsection 621 (1) of this Act are void.
Art. 674. Obligations of mandator
(1) A mandator shall do everything to enable the agent to act successfully, including:
- placing, at the mandator's expense, documents which are necessary for the agent's activities at the disposal of the agent, including examples, drawings, price lists, printed advertising matter and the terms and conditions of a contract;
- informing the agent of circumstances necessary for the performance of the agent's obligations and carefully checking any notices submitted by the agent;
- immediately informing the agent of the entry into a contract negotiated by the agent, of approval of a contract entered into by the agent without the right of representation or exceeding the limits of the right of representation, and of failure to perform a contract negotiated or entered into by the agent;
- informing the agent immediately if the mandator anticipates that the extent of contracts entered into by the mandator will be significantly lesser than that which the agent could normally have expected.
(2) Agreements which derogate from the provisions of subsection (1) of this section are void.
Art. 675. Several mandators or agents
(1) An agent may also act for the benefit of other mandators unless otherwise agreed in writing.
(2) A mandator may also authorise other persons to perform the same obligations as the agent. If a mandator has assigned a particular area to the agent or has determined a group of customers for the agent with whom the agent is to negotiate or enter into contracts, the agent has the exclusive right to negotiate and enter into contracts in the name and on account of the mandator in that area with that group of customers unless agreed otherwise in writing.
Art. 676. Specifications of authority of agent
1) An agent has the right to accept notices concerning defects of things and also other declarations through which the other party to a contract negotiated or entered into by the agent performs the rights arising from unsatisfactory performance of the contract. An agent also has this right in the case where the agent does not have the right to enter into contracts in the name of the mandator.
(2) The restriction of the right specified in subsection (1) of this section is valid with regard to the other party to a contract negotiated or entered into by the agent only in the case where the other party was aware or ought to have been aware of the restriction upon submission of the notice or other declaration.
(3) An agent may accept monetary payments or the performance of obligations arising from contracts negotiated or entered into by the agent and may make declarations of intent for the amendment of contracts, above all with respect to deadlines for payment, only if this is prescribed in the agency contract.
(4) If an agent has entered into a contract in the name of the mandator without having the authority to do so and the other party to the contract was not aware of the agent's lack of authority, the contract is deemed to have been approved by the mandator unless the mandator, immediately after the agent or other party informs the mandator of entry into the contract and of the contents thereof, informs the other party of the mandator's refusal to approve of the contract.
Art. 677. Specifications of authority of insurance agent
(1) An agent who is authorised on a permanent basis to negotiate or enter into insurance contracts (an insurance agent) is deemed to have been authorised to do the following in the insurance sector and area assigned to the agent:
- accept offers to enter into, extend or/ and amend insurance contracts, and applications for the withdrawal of such offers;
- accept notices forwarded by policyholders during the term of insurance contracts, applications for cancellation or declarations of withdrawal and other applications concerning insurance contracts;
- accept insurance premiums, interest and compensation for expenses.
(2) An insurance agent has the right to perform all legal acts relating to the contracts negotiated or entered into by the agent.
(3) If the authority of an insurance agent specified in subsections (1) and (2) of this section has been restricted, the restriction is valid with respect to a third party only where the third party was aware or ought to have been aware of the restriction with respect to the insurance agent upon performance of a legal act. Any agreement which derogates from this requirement is void.
Art. 678. Contracts on which agency fee shall be paid
(1) An agent has the right to an agency fee on all the contracts entered into by the mandator as a result of the activities of the agent during the term of the agency contract. An agent also has the right to an agency fee on contracts entered into with a person who, as a result of the activities of the agent, entered into a permanent business relationship with the mandator for entry into such contracts which were usually negotiated or entered into by the agent. An insurance agent has the right to an agency fee only on contracts negotiated or entered into by the agent in the name of the mandator.
(2) If a specific area has been assigned to an agent or if the group of customers of the agent has been determined, the agent has, in addition to the provisions of subsection (1) of this section, the right to an agency fee on contracts entered into during the term of the agency contract without the agent's participation with persons in the area or belonging to the group of customers assigned to the agent. An insurance agent does not have the right to receive an agency fee for such contracts.
(3) An agent also has the right to an agency fee on contracts entered into after the expiry of the agency contract if the agent has negotiated the contract or prepared the entry into the contract such that entry into the contract could be deemed, for the most part, to be the result of the activities of the agent and if the contract was entered into within a reasonable time after expiry of the agency contract, and also on contracts for which the agent has the right to receive an agency fee pursuant to the provisions of subsection (1) and (2) of this section if an offer by a third party for entry into such contract reaches the agent or mandator before expiry of the agency contract.
(4) An agent does not have the right to receive an agency fee for contracts on which an agency fee is paid to the previous agent pursuant to subsection (3) of this section. The agency fee shall be divided between the agents if this is justified under the circumstances.
Art. 679. Prerequisites for payment of agency fee
(1) The right of an agent to an agency fee arises when the mandator has performed the obligations of the mandator arising from a contract negotiated or entered into by the agent.
(2) If the parties have agreed that the agency fee is to be paid later than provided in subsection (1) of this section, the agent has the right to receive a reasonable advance payment. The right of the agent to an agency fee still arises as soon as the other party to the contract negotiated or entered into by the agent has performed the obligations of the party arising from the contract.
(3) The right of an insurance agent to an agency fee arises when the policyholder has paid the insurance premium from which the agency fee is to be calculated according to the agency contract.
(4) An agent does not have the right to an agency fee if it is evident that the contract is not performed due to a circumstance beyond the control of the mandator. In such case the agent shall refund the fee received pursuant to the provisions concerning unjustified enrichment.
(5) An agent also has the right to an agency fee if the mandator does not perform the contract and if the non-performance is caused by circumstances dependent on the mandator.
(6) The claim of an agent for an agency fee falls due on the last day of the month during which, pursuant to the provisions of subsection 682 (1) of this Act, the size of the agency fee is to be calculated.
(7) Any agreements which derogate from the provisions of subsections (4)-(6) of this section to the detriment of an agent are void.
Art. 680. Size of agency fee
(1) If the size of the agency fee has not been agreed, the standard local agency fee or, in the absence thereof, a reasonable amount of remuneration shall be deemed to be the agreed amount.
(2) The agency fee shall be calculated according to the contract entered into as a result of the activities of an agent from the amount payable by the other party to the contract or by the mandator. Accessory expenses, including transportation and packaging costs and other payments, shall be deducted from the amount only if they are indicated separately.
(3) In the case of contracts for use, the agency fee shall be calculated from the user fee for the entire term of the contract.
Art. 681. Additional agency fee for liability
(1) If an agent, by agreement with the mandator, undertakes to be liable for the performance of an obligation of the other party arising from a contract negotiated or entered into by the agent, this obligation shall be expressed in written form.
(2) If an agent undertakes to be liable for the performance of an obligation specified in subsection (1) of this section, the agent has the right to receive an additional fee therefor (del credere commission). Any agreements which preclude the right of agents to receive del credere commission are void.
(3) The right of an agent to del credere commission arises as of entry into a contract from which obligations arise for the performance of which the agent is liable.
Art. 682. Calculation of agency fee
(1) A mandator shall calculate the fee payable to an agent on a monthly basis. The calculation period may be extended to three months by agreement.
(2) The calculation of the agency fee shall be forwarded to the agent not later than by the end of the month following the calculation period. The calculation of the agency fee shall set out the size of the agency fee and the circumstances which are relevant for the determination thereof.
(3) Upon receipt of a calculation, an agent may demand submission of an extract from the accounting documentation of the mandator concerning all contracts on which an agency fee is to be paid to the agent pursuant to § 678 of this Act. Submission of an extract may be demanded later only if the parties have not reached an agreement concerning the calculation.
(4) In addition to a calculation of the agency fee and an extract from the accounting records, an agent may demand that information be submitted on all circumstances relevant to the claim for an agency fee, to the date on which it falls due and to the method of its calculation.
(5) If a mandator refuses to provide a calculation or an extract or if an agent has reason to doubt the correctness or completeness of the calculation, the agent may demand that the mandator allow either the agent or an auditor appointed by the agent, whichever the agent chooses, to examine the mandator's accounting records to the extent necessary to certify the correctness or completeness of the calculation or the extract. If the mandator allows the agent to examine the records, the agent has the right to use the assistance of an auditor in such examination.
(6) Any agreements which preclude or restrict the rights of an agent provided for in subsections (1)-(5) of this section are void.
Art. 683. Collection charge
In addition to an agency fee payable on contracts entered into, an agent has the right to an additional fee payable on amounts collected according to the orders of the mandator and delivered to the mandator.
Art. 684. Reimbursement of expenses of agent
(1) An agent may demand that reasonable expenses incurred thereby upon the performance of an agency contract be reimbursed if they exceed the expenses usually incurred upon the performance of this type of agency contract. An agent may demand that expenses usually incurred upon the performance of an agency contract be reimbursed if so agreed upon or if this is usual under the circumstances.
(2) An agent may demand that expenses be reimbursed regardless of whether the agent has the right to receive an agency fee.
Art. 685. Right of security
(1) In order to secure claims arising from an agency contract which have fallen due, the agent has the right of security over the movables and securities of the mandator which, on the basis of the agency contract, are in the possession of the agent, and also to payments made by third parties and received by the agent in the case where the agent has the right to receive such payments. An agent may refuse to hand over documents only in the case where this is necessary to secure claims for an agency fee or for the reimbursement of expenses which have fallen due.
(2) Any agreements to waive or restrict the right of security are void.
Art. 686. Ordinary cancellation of agency contract
(1) Each party to an agency contract entered into for an unspecified term have the right to cancel the contract by giving at least one month's advance notice. If the contract has been in force for more than one year and acting as an agent has been the agent's principal activity, the mandator shall give the agent at least two months' advance notice of cancellation of the contract. If the contract has been in force for more than two years and acting as an agent has been the agent's principal activity, the mandator shall give the agent at least three months' advance notice of cancellation of the contract. The contract may be cancelled only at the end of a month.
(2) Any agreements by which the terms for cancellation specified in subsection (1) of this section are extended such that the term for cancellation prescribed for a mandator is shorter than the term for cancellation prescribed for the agent are void.
(3) If the parties continue to perform an agency contract after expiry of the term of the contract, the contract is deemed to become an agency contract for an unspecified term after expiry of the term.
Art. 687. Preclusion of extraordinary cancellation of agency contract
Any agreements which preclude or restrict the right to cancel an agency contract with good reason are void.
Art. 688. Right of agent to compensation for termination of contract and compensation for damage caused by termination of contract
(1) An agent has the right to receive separate compensation (termination-of-contract compensation) upon termination of an agency contract if:
- the agent has created business relationships with new clients for a mandator or significantly extended the existing business relationships of the mandator, and
- the mandator has significantly benefited from such business relationships even after termination of the agency contract, and
- due to the termination of the agency contract, the agent loses the right to an agency fee which, had the contract continued, the agent would have been entitled to on contracts which were already entered into or would have been entered into in the future with persons who, as a result of the activities of the agent, entered into a permanent business relationship with the mandator for entry into contracts which were usually negotiated or entered into by the agent, and
- payment of compensation is justified taking into consideration all the circumstances.
(2) An agent does not have the right to demand payment of a termination-of-contract compensation which exceeds the average annual fee of the five last years of the agent's activity or, if the agency contract was in force for a shorter period, a termination-of-contract compensation which exceeds the average annual fee of the entire period of the duration of the contract. If the agency contract was in force for less than one year, the agent does not have the right to demand payment of a compensation in an amount which exceeds the size of the agency fee earned during the entire term of the contract.
(3) Payment of a termination-of-contract compensation does not preclude or restrict the right of an agent to demand compensation for damage caused to the agent by the termination of the agency contract. Such damage is presumed to exist if an agent does not receive the agency fee which the agent would have earned had the agency contract continued, while at the same time the mandator gained substantial income due to the activities of the agent. Such damage is also presumed to exist if the agent was unable to amortise expenses which the agent incurred due to performance of the agency contract and following the instructions provided by the mandator.
(4) An agent does not have the right to a termination-of-contract compensation or compensation for damage specified in subsection (3) of this section if:
- the agency contract is cancelled by the agent, except in the case where the reason for cancellation is a circumstance dependent on the mandator or the age or state of health of the agent which does not enable the agent to continue the activities thereof;
- the agency contract is cancelled by the mandator due to the wrongful behaviour of the agent;
- after termination of a contract, the mandator and the agent enter into an agreement pursuant to which the agent is substituted by a third party who pays a fee to the departing agent in an amount equal to the termination-of-contract compensation and compensation for damage to which the agent would otherwise be entitled;
- acting as an agent was an ancillary activity of the agent.
(5) Any agreements entered into before the termination of an agency contract which preclude or restrict the right of an agent to a termination-of-contract compensation or compensation for damage are void.
Art. 689.Restraint of trade clause
(1) Any agreement which restricts the economic activity of an agent after the termination of an agency contract (a restraint of trade clause) shall be entered into in writing.
(2) An agreement on a restraint of trade clause shall be entered into for a term of up to two years after termination of the agency contract and shall only extend to the area determined by the agency contract or to the group of customers with whom the agent was to negotiate or enter into contracts pursuant to the agency contract and only to contracts which the agent was to negotiate or enter into.
(3) The mandator shall pay reasonable compensation to the agent for the period of the duration of the restraint of trade clause even if this has not been agreed.
(4) Until to the termination of the agency contract, the mandator has the right to cancel an agreement on a restraint of trade clause in writing. If the agency contract expires within six months as of the date on which the mandator cancels a restraint of trade clause, the mandator shall pay the compensation specified in subsection (3) of this section to the agent for the period of time between the date on which the agency contract expired and the date when six months have passed from the cancellation of the restraint of trade clause.
(5) If an agency contract is cancelled due to a violation of the contract by a party, the cancelling party may also cancel the restraint of trade clause within one month. In such case, the mandator is not required to pay the compensation specified in subsection (3) of this section.
(6) Any agreements which derogate from the provisions of subsections (1)-(5) of this section to the detriment of the agent are void.
Art. 690. Expiry of claims arising from agency contract
(1) The limitation period of a claim arising from an agency contract is four years as of the end of the year in which the claim falls due. Parties to a contract shall not agree on a limitation period shorter than one year.
(2) The limitation period of a claim for termination-of-contract compensation and compensation for damage is one year as of the date of termination of the agency contract.
Art. 691. Specifications regarding foreign agent and ship's agent
On the agreement of the parties to a contract, the parties may derogate from the provisions of this Chapter in the following cases even if this Act expressly provides or the nature of a provision indicates that derogation from this Act is not permitted:
- an agent who does not live in Estonia or in a member state of the European Union is acting for the benefit of a mandator who has a place of business or, in the absence thereof, residence or seat in Estonia;
- an agent negotiates or enters into contracts the object of which is the chartering of ships, preparation of ships for voyage, supply of ships or carriage of passengers by ship.
