ITC - Commercial agency agreement – Community Weagree

ITC – Commercial agency agreement

An international commercial agency agreement organises the relationship between a seller (the principal) and an intermediary (the agent) who will enter into sales contracts on its (the seller's) behalf. The ITC has developed a contract template addressing numerous contexts of a commercial agency.

This ITC model contract “international commercial agency agreement” encompasses the most commonly accepted provisions governing the relationship between a Principal and a commercial Agent.

1. The contract is intended for use in connection with the introduction, promotion, negotiation and conclusion of sales of products or services by an independent Agent on behalf of a Principal, within a defined territory.
2. A main reason to appoint an Agent is that the Principal is unable to carry out the introduction, promotion, negotiation and conclusion of sales of products or services in a particular territory by itself, or is unwilling to make the necessary investments that are required.
3. The Agent may be a physical person or a company. When the Agent is a physical person, under no circumstances can it be considered as an employee of the Principal.
4. The Agent’s strength lies in its contacts with customers and its weakness derives from the fact that such customers belong to the Principal. This explains why, in many countries, such as EU countries, public policy laws aim to protect the Agent’s rights, especially upon the termination of the contract.
5. The Parties are subject to mandatory legal provisions of public policy that may apply regardless of the law of the contract chosen by the Parties. Such provisions are binding, which means that the Parties cannot ignore or decide not to apply them. These provisions may restrict the validity of certain provisions of the contract, and may allow a court to reduce or extend the obligations of the Parties.

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6. Before any discussion takes place between the Parties, it is therefore strongly recommended to check whether the agency contract contemplated may be impacted by such laws.
7. When the agency contract applies to products, the Principal may or may not be the manufacturer of these products. The Principal may be, for instance, a distributor.
8. The main purpose of the contract is to establish the level of each party’s obligations towards the other, such as the authority of the Agent to commit the Principal (Article 2.2), to receive payments on his behalf (Article 2.3), the obligation for the Principal to accept the orders transmitted by the Agent (Articles 3.4 and 3.5), the information which the Principal should pass on to the Agent, such as the minimum overall orders, any change in the range of products or services, price, etc. (Articles 3.3, 3.7), minimum orders (Article 4), advertising, fairs and exhibitions (Article 5), Internet sales (Article 6), non-competition (Article 7), trademarks and property rights (Article 9), exclusivity (Article 10) commissions (Articles 11 and 12), consequences on termination (Article 14 and 15) and assignment and appointment of sub-Agents (Article 19).
9. Parties should review alternatives and options proposed in order to strike those that are irrelevant to the Parties’ common intentions.
10. Standard provisions have been incorporated, including financial responsibility of the Agent (optional clause 13), force majeure – excuse for non-performance (Article 16) and change of circumstances (hardship) (Article 17).

The ITC model International commercial agency contract can also be downloaded in PDF format from the ITC website.

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