Many business owners begin working with international agents without signing anything in writing. They rely on goodwill, a rush to sell, or recommendations.
Until problems arise: unpaid commissions, client disputes, misunderstood exclusivity, or legal conflicts in countries they don't even know.
All of this can be avoided with a well-drafted contract.
But for that, you first need to know when and how to sign it.
Definition, characteristics and legal keys
What types of commercial agents exist?
It is essential to distinguish between the various types of commercial agents that we can find in order to understand the international agency contract , which will be tailored to the needs of the relationship between the parties.
We find the following commercial agents:
- Import commercial agent: Its main function is to locate producers abroad to satisfy the needs of its clientele in the country of origin.
- Export agents: Their approach focuses on adjusting to supply, unlike import agents who adapt to demand. Their clients generally turn to them for potential buyers abroad.
- Commercial brokers: They are dedicated to the export and import field, and tend to specialize in a specific country or geographic area.
- General Agents: They are more demanding agents, they request exclusivity to operate in a defined region and manage the company's products exclusively. These contracts usually have a duration of around 5 years, and the clients of commercial agents tend to be mainly medium and large companies well established in national markets.
- Purchasing agents: They focus their attention on meeting the needs of large distribution companies, generally in the food or textile sectors. For example, it is common for food distribution chains to use commercial purchasing agents to obtain certain products at more competitive prices.
What is an international agency contract?
An international agency agreement is a key legal tool for companies that want to sell their products or services in other countries without opening a branch or subsidiary . Through this agreement, a foreign company appoints an independent sales agent to represent it and promote its offerings in a specific territory.
This international agent , who typically operates as a self-employed professional, acts on behalf of the company, managing contacts, negotiations, and commercial transactions within the local market. In return, they receive financial compensation , usually in the form of a commission on generated sales.
Thanks to this type of contract, many companies can access new international markets quickly, flexibly and with less financial risk, delegating the commercial aspect to someone who already knows the country and its particularities.
Characteristics of the international agency contract
The commercial representation contract has a series of characteristics such as:
- The establishment of the commercial relationship between the commercial agent and the company requesting its services will be carried out through the formalization of a commercial agency contract.
- The commercial agent presents himself as an independent professional who is not part of the client companies.
- Although the commercial agent represents the commercial interests of his clients, he will not be exposed to the policy, objectives and results of the company that hires him.
How to draft an international agency contract?
In the agency contract, it is essential to clearly establish the responsibilities of the commercial agent, the compensation he or she will receive, and other elements such as non-compete agreements or other payments.
It is important to note that the commercial agent, being an independent professional, may logically have multiple clients.
However, it is ethical and advisable for the agent to inform new clients about this situation , as there may be clients in the same sector, which could generate conflicts.
Given this possibility, the commercial agent could be subject to a non-compete clause, preventing him from working with two companies in the same sector in the same country or geographical area.
Although the fundamental premise is that clients belong to the commercial agent and not to the company that hires him, the latter has the option of retaining certain information about buyers abroad.
Ultimately, sales agents' value generation is based on the creation of a portfolio of contacts built by themselves.
Legal framework of the agency contract
In the case of Spain, we find that most commercial agents are grouped under the Commercial Council of Commercial Agents (CGAC) and the legal framework under which the international agency contract is based is as follows:
- It is regulated by the Regulation 593/2008 of the European Parliament and of the European Council.
- It is where everything related to the contractual relations between agent and client.
- From a more material perspective, the agency contract is regulated by Directive 86/653/EC, which defines the rights of the Member States of the European Union (the EEC at the time) in relation to international commercial agents.
Conclusion on when to sign an agency contract
In conclusion, we can assume that the commercial agency contract is a great resource to establish oneself in a new market in which one has no references or contacts.
This is perhaps the most suitable way to achieve short-term success when selling abroad.
Even so, in the medium term or when the exporting company establishes itself in that new foreign market, it will be advisable to use its own sales channels, since in the end, with the commercial agency contract, the exclusivity of the distribution of the products is ceded and high percentages of sales are lost in favor of the commercial agent.
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Frequently Asked Questions (FAQs)
Yes. It's best to sign a contract that clearly regulates the relationship, such as an international agency or commercial representation contract, to avoid legal or commercial misunderstandings.
It will depend on the type of relationship: if they act on your behalf, it could be an agency contract; if they buy and resell, it could be a distribution contract. The important thing is to have it in writing and tailored to the destination country.
Risks such as commission disputes, lack of clear exclusivity, jurisdictional conflicts, or unexpected compensation. Without a contract, it's difficult to legally protect your business.
This can create a conflict of interest. That's why it's common to include a non-compete clause in the contract to protect your market position.
In an agency agreement, the agent acts on your behalf. In a distribution agreement, the distributor purchases and resells the products on its own behalf. The obligations and risks are different.
Before they begin working on your behalf or representing your company. If you do so afterward, you could lose negotiating power or face undesirable terms.
