Topic 10. MANAGEMENT, COMMISSION AND AGENCY AGREEMENTS

10.1. Contract of agency

In accordance with paragraph 1 of Art. 971 of the Civil Code, under an agency agreement, one party (attorney) undertakes to perform certain legal actions on behalf and at the expense of the other party (principal). The rights and obligations under the transaction made by the attorney arise directly from the principal.

The contract of agency by its legal nature is consensual and bilateral. As a general rule, this contract is recognized as gratuitous, if the payment of remuneration to the attorney is not directly provided for by law or the contract. However, if this agreement is connected with the implementation of entrepreneurial activity by at least one of its participants, it, on the contrary, is assumed to be paid, unless its gratuitous nature is fixed in the agreement (clause 1 of article 972 of the Civil Code). In addition, the contract of agency is one of the personally trusted (fiduciary) transactions, which are relatively rare in modern civil circulation.

The subject of an agency agreement is the performance by one person on behalf of another of certain legal actions, most often transactions. The law emphasizes that the rights and obligations under a transaction made by an attorney arise directly from the principal (paragraph 1 of article 971 of the Civil Code). Consequently, the attorney does not become a participant in the transaction concluded by him with a third party, and the principal acts as such a party.

Since the agent, in accordance with the agency agreement, acts on behalf of another person, in this case there is representation, in connection with which the specified agreement is also called a representation agreement, and the agent is called a representative.

Representation, and hence the contract of agency, is possible in most civil legal relations (with the exception of those provided for in paragraph 4 of article 182 of the Civil Code). In this regard, any able-bodied citizens and legal entities, as well as public legal entities, can be parties to an agency agreement. There are restrictions only for commercial representatives, since only commercial organizations or individual entrepreneurs can act in their role.

The law does not contain special rules on the form of an agency contract, based on the fact that, as a general rule, the relations of its participants are formalized by issuing a power of attorney. The power of attorney, which determines the scope of the powers of the attorney, must be drawn up in accordance with the requirements of Art. 185 - 187 of the Civil Code. Being a written document, in most cases it does not imply (although it does not exclude) the additional formalization of the commission relationship by a special document (agreement) signed by both parties. Commercial representation is carried out on the basis of a written agreement, which may contain indications of the representative's powers (paragraph 1, clause 3, article 184 of the Civil Code). In this case, a power of attorney to perform legal actions on behalf of the principal is not required.

The contract of agency can be concluded both for a fixed period and without specifying a period (clause 2 of article 971 of the Civil Code). However, the powers of the attorney are usually fixed in a power of attorney, the validity of which is limited by law (clause 1, article 186 of the Civil Code). In this regard, an agency agreement concluded without specifying a period or for a period exceeding the validity period of the power of attorney issued for its execution (if the power of attorney is issued for three years) must be executed in the form of a written document.

The duty of the attorney is the personal execution of the instructions given to him. Reassignment is permissible only in cases and under the conditions provided for in Art. 187 of the Civil Code (clause 1 of article 976 of the Civil Code), i.e. or if there is a special authority to do so, directly fixed in the power of attorney, or if the principal is forced to resort to substitution by force of circumstances to protect the interests of the principal.

The attorney is obliged to execute the assignment given to him in accordance with the instructions of the principal. He has the right to deviate from the instructions of the principal, if this is necessary in the interests of the principal himself and the attorney could not request the principal in advance or did not receive a response to his request within a reasonable time. But even in this case, the principal, at the first opportunity, must be notified by the attorney about the deviation from the instructions given by him.

The commercial representative may be entitled to deviate from the principal's instructions in the interests of the principal without prior request to do so. However, he, unless otherwise provided by the contract of agency, is also obliged to inform his principal about the deviations made (Article 973 of the Civil Code).

In addition, in accordance with Art. 974 of the Civil Code, the attorney is obliged:

▪ at the request of the principal, provide him with all information about the progress of the execution of the order;

▪ immediately transfer to the principal everything received under transactions completed in pursuance of the order;

▪ upon execution of an order or upon termination of an agency agreement before its execution, immediately return to the principal the power of attorney, which has not expired, and submit a report with supporting documents attached, if required by the terms of the agreement or the nature of the order.

The principal is obliged, first of all, to properly formalize the powers of the attorney, i.e. issue a power of attorney to the latter to perform legal actions stipulated by the contract of agency. It is necessary that the instructions of the principal be lawful, feasible and specific (clause 1 of article 973 of the Civil Code), otherwise they will not bind the attorney.

Unless otherwise provided by the agreement, the principal is also obliged:

▪ reimburse the attorney for expenses incurred;

▪ provide him with the funds necessary to execute the order;

▪ immediately accept from the attorney all orders executed by him in accordance with the contract;

▪ pay the attorney a fee if the agency agreement is for a fee.

The commercial representative is granted the right to retain the things to be transferred to the principal until the latter fulfills his obligations to compensate the costs incurred by the attorney and pay him the stipulated remuneration (clause 3 of article 972, article 359 of the Civil Code).

The relations of the parties to the commission agreement are of a personal-confidential (fiduciary) nature. This is due to the presence of the norm of paragraph 2 of Art. 977 of the Civil Code, according to which the principal has the right to cancel the order, and the attorney to refuse it at any time, without explaining the motives of his actions. An agreement to waive this right is void.

If the contract of commission is terminated before the commission has been fully executed by the attorney, the principal is obliged to reimburse the attorney for the costs incurred in the execution of the order, and when the attorney was due remuneration, also pay him a remuneration in proportion to the work performed by him. This rule does not apply to the execution of an order by an attorney after he has learned or should have known about the termination of the order (paragraph 1 of article 978 of the Civil Code).

The peculiarity of the contract of agency as a contract based on a trusting relationship is that in the event of a unilateral refusal to execute it, the principal and the attorney do not bear the obligation to compensate for the losses caused by this to the other party (clauses 2, 3 of article 978 of the Civil Code). As an exception, compensation for losses is provided only to the principal in case of refusal to execute the attorney's order in conditions where the principal is deprived of the opportunity to otherwise secure his interests.

Since fiduciary is not a defining feature for business relations, the current legislation establishes more stringent rules governing the unilateral cancellation of a commercial representation agreement. In particular, in case of withdrawal from such an agreement, as a general rule, prior notice to the other party is required at least 30 days in advance.

The personal-confidential nature of the relationship between the parties to the contract of agency excludes the possibility of succession in respect of their obligations.

10.2. Commission agreement

In accordance with paragraph 1 of Art. 990 of the Civil Code, under a commission agreement, one party (commission agent) undertakes, on behalf of the other party (committent), for a fee, to make a transaction (several transactions) on its own behalf, but at the expense of the committent.

A party to transactions concluded in the interests of the principal is initially the commission agent (intermediary), who acts on his own behalf and therefore acquires rights and obligations on them, which he then transfers to the principal.

The committent (the alienator or purchaser of the goods) does not become a participant in transactions concluded by the commission agent on his behalf and at his expense, even if he is directly named in the transaction or enters into direct relations with a third party counterparty for its execution. In this respect, a commission contract differs from a commission contract.

The peculiarity of the commission agreement, which distinguishes it from the commission agreement, is also that its subject is only the conclusion of transactions, usually for the sale of the committent's property.

Finally, a commission agreement is always paid, and an agency agreement can be such only if there is a special indication of the law, other legal act or agreement. The reimbursable nature of the commission, due to the relations of trade (commercial) mediation underlying it, excludes the personal-confidential nature of this agreement. Therefore, the commission agent, unlike the attorney, cannot unilaterally, unmotivatedly and without compensation for losses, refuse to fulfill the contract, and the death of a citizen or the liquidation of a legal entity acting as a committent does not entail automatic termination of the contract, since succession is possible here.

The commission agreement, by its legal nature, is consensual, reimbursable and bilateral. When concluding it, the general provisions on the form of transactions should be applied.

The main obligation of the commission agent, which is a legal entity or an individual entrepreneur, is to make a transaction or transactions for the committent in accordance with the instruction given to him. The commission agent is responsible for the validity, but not for the enforceability of transactions concluded by him with third parties in the interests of the committent (paragraph 1 of article 993 of the Civil Code).

The commission agent is liable to the committent for non-execution by a third party of a valid transaction concluded by him only in two cases:

▪ if the commission agent fails to exercise the necessary diligence in choosing a third party - the counterparty to the transaction, for example, when he enters into a transaction with a legal entity that is in the process of liquidation;

▪ if there is a condition in the contract that the commission agent assumes guarantee for the execution of the transaction concluded for the principal by a third party (del credere) (clause 1 of Article 991 of the Civil Code). In this case, the commission agent simultaneously becomes a guarantor (Article 361 of the Civil Code) and, along with a third party, is responsible to the principal for the proper execution of the concluded transaction.

One of the important obligations of the committent is the payment to the commission agent of the remuneration determined by the contract, which directly follows from the norm of paragraph 1 of Art. 990 GK. The remuneration may be established in the form of the difference or part of the difference between the price of the goods set by the committent and the more favorable price at which the commission agent will be able to sell the goods. If there is no condition in the contract on the amount of remuneration and it is impossible to determine it based on the terms of the contract, it must be paid in the amount of the remuneration usually charged under comparable circumstances for intermediary commission services (clause 3 of article 424 of the Civil Code). Thus, the condition of remuneration is not one of the essential conditions of this agreement. If there is a condition on the delcreder in the contract, the committent, in addition, is obliged to pay additional remuneration (paragraph 1 of article 991 of the Civil Code).

The committent is also obliged to reimburse the commission agent for all expenses related to the execution of the order, since, in accordance with paragraph 1 of Art. 990 of the Civil Code, it must be carried out at his expense. However, as a general rule, the commission agent does not have the right to reimbursement of storage costs, unless otherwise provided by law or commission agreement (Article 1001 of the Civil Code).

Since the commission agent makes transactions in the interests and at the expense of the committent, he is obliged to execute the commission he has accepted on the most favorable terms for the committent and in accordance with his instructions. In the absence of such indications in the contract, the commission agent is obliged to act in accordance with the customs of business turnover or other usually imposed requirements (part 1 of article 992 of the Civil Code).

Deviations from the instructions of the principal in the performance of the contract, including those relating to the price of concluded transactions, are permissible only in cases where this is necessary in the interests of the principal and the commission agent could not request the principal in advance or did not receive a response to his request within a reasonable time. However, here, too, the commission agent is obliged to notify the committent of the allowed deviations as soon as it became possible. Only a professional commission agent under the terms of the contract may be granted the right to deviate from the instructions of the committent without prior request and even without subsequent notification (paragraph 1 of article 995 of the Civil Code).

If the commission agent sold the property of the committent at a price lower than the agreed price, he is obliged to reimburse the difference, unless he proves that, taking into account the prevailing situation on the market, he had no other choice and such a sale prevented even greater losses for the committent. In the case when the commission agent was obliged to request the committent in advance, he must also prove that he was unable to obtain the prior consent of the committent to deviate from his instructions (paragraph 2 of article 995 of the Civil Code).

If the commission agent bought the property at a price higher than agreed with the committent, the latter has the right to refuse to accept such a purchase. However, the committent must declare this to the commission agent within a reasonable time after receiving the notice of the conclusion of the transaction. Otherwise, the purchase is recognized as accepted by the committent. In this situation, the commission agent may also take the difference in price into his account. In this case, the committent is not entitled to refuse the transaction concluded for him, since he does not suffer losses from non-fulfillment of his instructions by the commission agent (clause 3 of article 995 of the Civil Code).

The additional benefit received as a result of the transaction by the commission agent on terms more favorable than those indicated by the committent is divided equally between the committent and the commission agent, unless otherwise provided by agreement of the parties (part 2 of article 992 of the Civil Code).

Upon execution of the order, the commission agent is obliged to submit a report to the committent and transfer to him everything received under the commission agreement. The principal's objections to the report must be communicated to the commission agent within 30 days from the date of its receipt, unless otherwise specified by the agreement. Otherwise, unless otherwise agreed, the report is considered accepted in the form in which it is presented (Article 999 of the Civil Code).

The fulfillment of the commission contract also consists in the payment of remuneration to the commission agent by the committent and reimbursement of expenses incurred in connection with the execution of the committent's order. At the same time, the law establishes special guarantees for the commission agent, which is especially important for professional commercial intermediaries. First, he is granted the provisions of Art. 359 of the Civil Code, the right to retain the things of the committent held by him until all his monetary claims under the contract are satisfied (Article 996 of the Civil Code). Secondly, he has the right to withhold the amounts due to him under the contract from the amounts received by him for the committent, having offset his claims against the committent (Article 997 of the Civil Code).

The principal as a service recipient has the right to unilaterally and unmotivatedly refuse to perform the contract at any time. However, he is obliged to compensate the commission agent for all losses caused by the cancellation of the order, including lost income in the form of remuneration due for services, as well as within the period established by the commission agreement, and if such a period is not established, immediately dispose of his property held by the commission agent (Article 1003 of the Civil Code) . The commission agent is not entitled to unilaterally refuse to execute the committent's order, unless such a right is expressly provided for him in the contract.

Unless otherwise specified by the commission agreement, the commission agent has the right, in order to fulfill this agreement, to conclude a subcommission agreement with another person, while remaining responsible for the actions of the subcommission agent to the committent (Article 994 of the Civil Code).

10.3. Agency contract

In accordance with paragraph 1 of Art. 1005 of the Civil Code, under an agency agreement, one party (agent) undertakes, for a fee, to perform, on behalf of and at the expense of the other party (principal), legal and other (actual) actions either on its own behalf or on behalf of the principal.

The agency agreement is new for Russian law. The design of this agreement pursues the goal of civil legal registration of relations in which an intermediary or representative performs both legal and actual actions in the interests of others.

If the agent acts at the expense of the principal, but on his own behalf, he becomes a party to transactions concluded by him with third parties, and even in the case when the principal was named in the transaction or entered into direct relations with the third party to execute the transaction (para. 2 paragraph 1 of article 1005 of the Civil Code). At the same time, the rules on the commission agreement are applied to the relations between the principal and the agent, if they do not contradict the special rules of Ch. 52 of the Civil Code on agency or the essence of this agreement (Article 1011 of the Civil Code).

If the agent, under the terms of the contract concluded with the principal, acts not only at the expense of, but also on behalf of the principal, the rules on the contract of agency with the same restrictions apply to the relations arising between him and the principal with the same restrictions with which the rules on the contract of commission are applied in other cases (Art. 1011 GK).

An agency agreement is always paid and does not have a personal trust character even when the agent makes transactions on behalf of the principal (which causes the inadmissibility of a unilateral unmotivated refusal to execute it before the expiration of the agreement).

The contract in question is of a continuing nature, since, by virtue of its effect, the agent is obliged to perform, and not to perform, any actions for the principal, and, therefore, cannot be concluded for the agent to perform any one specific transaction or other action. The agency agreement by its legal nature is also consensual and bilateral. It can be concluded both for a period and without specifying a period (clause 3 of article 1005 of the Civil Code).

The law does not establish special requirements for the form of this agreement, however, taking into account the nature of the emerging relationship, similar to the relationship of a commercial representation, the right for an agent to perform legal actions on behalf of the principal must be formalized either by a power of attorney or a written agreement (by analogy with paragraph 3 of Article 184 GK). The difference here is that in the agency agreement it is allowed to indicate only the general powers of the agent to make transactions and other legal actions on behalf of the principal without specifying them (which is often impossible at the time of concluding such an agreement due to the complex nature of the agent’s activities and insufficiently clear prospects in future). In such cases, the principal in relations with third parties is not entitled to refer to the agent’s lack of proper powers, unless he proves that the third party knew or should have known about the restriction of the agent’s powers (paragraph 2 of article 1005 of the Civil Code).

The main duty of the agent is to perform transactions and other legal and actual actions in the interests and at the expense of the principal. At the same time, the agency agreement may establish territorial restrictions on the actions of both the agent and the principal.

The principal is obliged to properly formalize the powers of the agent and provide him with the funds necessary for the execution of the assignment given to him, since it must be executed at the expense of the principal. The principal is also obliged to pay the agent remuneration for the actions performed in his interests (Article 1006 of the Civil Code).

During the execution of the contract, the agent is obliged to submit reports to the principal, which must be accompanied by the necessary evidence of expenses incurred at the expense of the principal, unless otherwise provided by the contract (Article 1008 of the Civil Code).

Unless otherwise provided by the agency agreement, the agent has the right, in order to fulfill the agreement, to conclude a subagency agreement with another person, while remaining responsible for the actions of the subagent to the principal. In such cases, the agent actually takes the position of principal in relations with the subagent.

The agency agreement may provide for the obligation of the agent to conclude a subagency agreement with or without specifying the specific terms of such an agreement (paragraph 1 of article 1009 of the Civil Code).

Author: Ivakin V.N.

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