Commercial Agency Contracts in Romania

Practical Guide

Change country

How are agency agreements regulated in Romania?

The Romanian Civil code foresees in art. 1167 that there are rules of law applicable to all contracts and specific rules of law applicable in case of particular contracts which benefit from certain conditions laid down by either the code or special rules (The “Named contracts”).

In such a category of the Named contract falls the agency contract that is expressly regulated by articles 2072 – 2095 of the Civil code, that lay down a set of imperative or dispositive rules that shall be applicable in the case of such a contract, even if the parties do not make any reference to them.

Additionally, the Civil code provides that the rules laid down for the agency contracts are supplemented by the provisions regarding the contract of commission to the extent that the latter are compatible. If the agent has the power to represent the principal at the conclusion of the contracts, the provisions regarding the mandate contract with representation shall be applicable too.

However, there are certain categories of contracts that shall not be regulated by the provisions of the Civil code regarding agencies, such as for the person that:

  • acts as an intermediary on stock exchanges and regulated markets for commodities and derivatives;
  • has the status of insurance or reinsurance agent or broker;
  • performs an unpaid service as an agent;
  • has the status of legal or statutory body of a legal person, having the right to represent thereof;
  • is an associate or shareholder and is legally empowered to represent the other associates or shareholders;
  • has the capacity of judicial administrator, liquidator, guardian, trustee, custodian or seizure administrator in report with the client;

Also, there is the case of specific agency contracts (eg. Freight broker sales contract) in which there are additional rules of law applicable, that are specific for the type of contract that the Agent shall conclude for and on behalf of the Principal, consequently we suggest a full verification of the legal framework to be done before concluding an agency contract under Romanian law.

What are the differences from other intermediaries?

According to the 1st paragraph of Article 2072 from the Civil Code: "Through the agency contract, the principal empowers the agent to either negotiate or negotiate and conclude contracts, in the name and on behalf of the principal, in return for remuneration, in one or more determined regions”. According to the 2nd paragraph of the same article, the agent is an independent intermediary acting professionally.

The main particularities of the agency contract that separate it from the other types of contracts are the following:

  • First of all, the power of attorney that the agent has to represent the Principal is ongoing and is not subject to repetitive confirmations from the Principal as in the case of the intermediation or the commission contracts.
  • Secondly, unless otherwise provided in the contract, the agent is empowered to conclude contracts in the name and on behalf of the principal, whereas in the case of the intermediation contract and of the commission one, the beneficiary itself generally concludes the contracts with the third parties.

According to the Romanian Civil Code, the intermediation contract is the one whereby the intermediary commits himself to the client to liaise him with a third party, in order to conclude a contract. The intermediary is independent in performing its obligations.

The parties to the contract are the intermediary and the client. The main obligation of the intermediary is to facilitate the conclusion of a contract. The client provides all the instructions regarding the contract to be concluded. In the event that the intermediary does not comply with the instructions received, he will be held liable for any damages caused. The intermediary is not responsible for the execution of the contract concluded by the client and the third party or for his improper execution. The intermediary is entitled to remuneration from the client only if the contract is concluded as a result of its services.

Unlike the case of the agency contract, for the intermediation one, the Civil code does not provide special conditions for: the indemnity in case of termination, the cases of unilateral termination or entitlement to a commission in case of non-executed contracts, but the parties are free to regulate such aspects through the signed contract.

According to the Civil Code, the commission contract is the mandate that deals with the purchase or sale of goods or the provision of services on behalf of the client and in the name of the commissioner that is acting professionally, in exchange for a fee called commission.

The main difference between the commission and the agency contracts resides in the fact that the contract with the third party is concluded by the commissioner and the client is not a signatory, meaning that in the case of the commission contract, the client cannot directly act against the third party.

However, the Civil Code provides that in the event of non-performance of the obligations by the third party, the client may exercise the actions arising from the contract with the third party, after being subrogated upon request in the rights of the commissioner.

Lastly, another major difference between agency and commission is that while the first contract is concluded for a determined period and it implies a continuous authorization of the agent to render services in the name of the principal, in the case of the commission contract the empowerment given by the client to the commissioner is occasional, and according to art. 2051 (1) from the Civil Code the client may revoke the power given to the commissioner until such time as it concluded the act with the third party.

The main difference between the distribution and the agency contract resides in the types of services/goods sold, in the sense that the distribution contract must regard goods whereas the agency can also cover the situation in which the client is rendering services. In the vast majority of distribution contracts, the distributor buys the goods belonging to the client and resells them on its own name, and consequently has more independence in terms of business decisions.

How to appoint an agent in Romania

In terms of formal requirement, the Civil code provides that the agency contract must be concluded in written form: authentic or under private signature. The written form is only necessary to prove that the act exists.
All parties of the contract are entitled to obtain from each other, upon request, a written document, signed, containing the content of the agency contract, and the parties cannot waive such right.

In accordance with Order no. 2994/2016, the contract concluded with an agent that is not a Romanian resident and which does not have a permanent establishment in Romania must be registered before the Romanian tax authorities by the Principal within 30 days after such a contract is concluded.

With respect to who can act as an agent, since an agency contract entails a continuous commercial activity that can be unrolled only by companies or authorized individuals (PFA) we consider that a natural person cannot act as an agent in a professional manner and that it is necessary that a company is created as a commercial vehicle for the activity or that an authorization in this sense is obtained from the trade registry.

Applicable law to an agency contract in Romania

Under Romanian law, the parties to an agency contract may freely determine the material law applicable to the contract. Generally the agency contract is usually regulated by the law applicable in the agent’s country of residence.

Similar provisions are laid down by the Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I Regulation), see Guide on EU law, that stipulate in art. 4 (1(b)) that in the case of a contract for rendering services, the applicable law is the one from the provider’s place of residence.

However, from our point of view, if the agent is rendering the services outside its jurisdiction, we consider that the contract should be regulated as per the provisions of art.4 (3) from Rome I Regulation by the law applicable on the territory where the services are rendered since the contract will have the closest ties with this latter jurisdiction.

The provisions through which the party drafting the contract is deviating from the common rules laid down by the Civil code are named “unusual clauses” and in order for them to be effective, they must be expressly accepted in writing by the other party. Hence, if the parties are drafting an agency contract and deviating from the Romanian law applicable, we recommend inserting a provision stating that the articles regarding the applicable law and the arbitral clause/competent court provisions are expressly acknowledged and accepted by the parties.

Dispute resolution clauses in agency agreements in Romania

The Romanian civil procedure code provides that the competence in case of a service contract (agency included) may belong either to the courts where the defendant is seated (court of first instance if the value of the claim is under 200.000 RON - approx. 42.000 EUR - or to the tribunal for those over this threshold) or alternatively to the competent court from the place the contract was meant to be executed, should the court claim regard the performance, annulment or termination of the contract.

In case of litigations in which one of the parties is a foreign entity, Romanian courts are competent if the defendant has his headquarters/residence or permanent establishment in Romania. In case of multiple defendants, Romanian courts are competent if at least one defendant meets the above-mentioned condition.

The parties benefit from full liberty in terms of choice of forum clauses in case of agency contracts, but any derogation from the general rule of court competence, indicated above must be in writing and be expressly accepted by the parties, irrespective if we are talking about a deviation in favour of a foreign court or of an arbitral tribunal or institution. Also, the parties must make sure that they do not deviate from imperative norms of law, as indicated in Regulation No. 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, known as the Recast Brussels Regulation (see the EU Guide for details).

The choice of forum clause should be correlated with the choice of the material law, in order to ensure smooth handling of the dispute, since although in theory, it is possible for the arbitrator/judge to decide based on foreign law, it is in no way advisable.

The parties may decide to defer their dispute to arbitration by either inserting an arbitral clause in the contract or sign a compromise after the dispute has arisen and derogate from the provisions of the contract in terms of jurisdiction.
The arbitral clause may refer to an institutionalized court of arbitration or to an ad hoc proceeding. All institutionalized courts of arbitration put forward a model clause that is to be included in the contract and generally agency contracts contain an arbitral clause that is a copy – paste of the standard arbitral clause given by the court. However, in rare occasions, the parties choose to deviate from the model clause and in such case, it is to be underlined that special attention should be given to the tendency to modify the place of arbitration because the former shall also have an impact on the law applicable to the dispute. For example, in a recent case, Austrian law became incident in arbitration between a Romanian and an Italian company simply because the parties chose Vienna as the place of arbitration and when the insolvency procedure was opened against the claimant, Austrian insolvency code was applied as lex loci arbitri.

Also, another aspect that should be considered when choosing a certain institutionalized court of arbitration is whether the rules of procedure foresee an expedite procedure in the case of a certain, liquid and outstanding debt and whether the answer is positive if there is a threshold up to which such expedite procedures are available. The reason for this is to avoid lengthy arbitral proceedings if one of the parties already has outstanding invoices.

How to terminate an Agency contract in Romania

The agency contract may be terminated by:

  • at the expiration of the term, if it is concluded for a fixed period;
  • through the agreement of the parties at any time during its execution;
  • by unilateral, without default, termination by either of the parties through a notification;
  • through a notification sent by the aggrieved party in case of breach of the contract by the other party by either of the parties;
  • in other particular cases such as: the winding up of either of the parties.

Just like in the case of most type of contracts, the parties to an agency contract may determine its duration or just leave it for an undefined one. It is to be noted though, that in the case of the contract concluded for a determined period of time, if the parties continue to work on its basis after its expiry, then the contract shall be automatically extended for an undefined period of time, which shall have an impact on the notice that either party must send in order to terminate the contract; which means that time of prior notice initially foreseen in the contract (if any) is amended as detailed below.
With respect to the notice period, in the first year of the contract, the notice period shall be at least one month. If the duration of the contract is longer than one year, the minimum notice period shall be increased by one month for each additional year started, all up to 6 months maximum.

The parties may derogate from the provisions of the Civil Code and stipulate a longer notice period (than 6 months) but in such case, it is mandatory that both parties are to be bound by the same obligation.

Regarding the unilateral termination, either party may unilaterally terminate an agency contract concluded for an indefinite period, but it must mandatorily respect the notice period. In the case of the agency contract concluded for a fixed period, it must expressly provide a clause regarding its unilateral denunciation, in order for the parties to benefit from such possibility.

For the agency contract with a duration of 1 year, the notice period is 1 month. The parties may, however, agree on longer notice terms that will apply, for the same duration, to both the agent and the client. Unless the parties agree otherwise, the notice period expires at the end of the calendar month.

The only cases in which the agency contract can be terminated unilaterally without any notice are the extraordinary ones, such as force majeure or fortuitous cases, which make it impossible to continue the collaboration between agent and client. The contract shall cease on the date of receipt of the written notification denouncing it.

Termination indemnity for agency agreements in Romania

According to the Civil Code, upon termination of the contract, the agent is entitled to receive compensation only if:

  • he acquired new clients for the principal or significantly increased the volume of operations with existing clients, and the principal still obtains substantial profits from the operations with these clients;
  • the payment of this allowance is fair, given the specific circumstances, in particular, the commissions that the agent should have received as a result of the operations concluded by the principal with the foreseen
clients, as well as the possible restriction of the professional activity of the agent due to a non-compete clause.

The parties cannot derogate from the above against the interest of the agent.
The amount of the allowance may not exceed an amount equivalent to the agent's annual remuneration, calculated on the basis of the annual average received by the agent during the last 5 years. If the duration of the contract is under 5 years, the annual remuneration is calculated based on the average remuneration received during that period.

The agent's right to indemnity does not restrict his right to seek damages. The entitlement to the indemnity shall expire if, within one year from the termination of the agency contract, the agent does not send a formal claim to the client with regard to the payment of the indemnity.

The agent is not entitled to any indemnity if one of the following cases apply:

  • the principal terminates the contract due to the fact that the agent breached the contract;
  • the agent unilaterally terminates the contract, unless this denunciation is motivated by circumstances such as the age, infirmity or illness, and in case it was not reasonable to require his continuation as an agent;
  • when the agent has assigned, with the knowledge of the Principal, his rights and duties in the agency contract to a third person.

Other peculiarities

The agency contract should contain a clause with respect to the exclusive (or non-exclusive) character of the relation between the parties in that particular territory. In the absence of such a provision, both the agent and the principal are entitled to conclude similar contracts for the same goods/services with third parties that shall activate on that territory.

The exclusivity may be unilateral, namely only for the Agent to be obliged not to act on behalf of other principals on the same territory and for the same goods or products and, should this be the case, the clause must be worded in a manner that restricts the possibility of the Agent to provide competing services to others not only through an agency contract but also through a labour contract or an intermediary contract. It is advisable for the exclusivity clause to also cover the interdiction of the agent to unroll the same activity through its family members/friends etc., and whose purpose would be to reverse the burden of proof.
This obligation should be read in conjunction with the obligation foreseen in art. 2079 (1) of the Civil Code that states that the agent should act in good faith and with loyalty.

According to the Civil Code the non–compete clause can regard only the territory included in the agency contract and only the goods and services that the agent was empowered to negotiate for and shall be valid for a maximum of two years after the end of the contract. If a longer period was foreseen then its effects shall be limited to two years and if the territory or the scope of the services affected by non-compete have been enlarged then such provisions shall not produce effects.

The principal cannot rely on the non-compete clause when the contract agency ceases in the following situations: a) the principal unilaterally denounces the agency contract with non-observance of the term of notice, legal or conventional; b) the agency contract is terminated as a result of the fault of the principal.

The non – compete clause must be in writing.

The agent receives for his services a commission and the parties may agree when the latter is due. In this respect, the Civil Code sets forth three possibilities, but the parties are free to deviate from the legal provisions: a) when the principal fulfilled its obligations towards the third party; b) when the principal should have fulfilled its obligation according to the contract executed with the third party; c) when the third party fulfilled its obligations (mainly the payment one) towards the principal. The principal, of course, would be interested to stipulate that the agent’s fee shall be due at the date the third party pays the price.

The commission is due also for the contracts concluded through the efforts of the agent, that have not been fully executed due to either of the parties, should the agent have fulfilled its obligations.

With respect to the computation modality, at the end of each quarter, the principal must send copies of the invoices to the agent that were sent to third parties, as well as a description of the commission value calculation. At the request of the agent, the principal shall immediately communicate to him the information necessary to calculate the commission, including the relevant statements from its accounting records. Also, article 2087 (3) stipulates that the clause through which the parties derogate against the interest of the agent from the principal’s obligation to make available all documents/information necessary for the computation of the commission to the Agent shall be void.

Apart from the general obligations required from the agent and the principal by the EU Agency directive, the Romanian Civil Code has also imposed additional ones to the parties, namely:

  • The agent is additionally obliged to keep in its registers separate records for the contracts concerning each client and to store the goods or samples in a way that ensures their identification:
  • The principal is obliged to make available to the agent not only the documentation but must supply, in a timely manner, and an appropriate quantity, samples, catalogues and rates.

Can we help you?

    Read privacy policy of Legalmondo.
    This site is protected by reCAPTCHA and is responsible for the Google Privacy Policy and Terms of Service.