In an agency agreement two parties, a seller of products, often called the principal, and a commercial agent agree that the commercial agent shall mediate, for an agreed compensation, in effecting sales agreements for the products of the principal. This means that the commercial agent does not sell his own products for his own account and risk, but he receives a commission on the part of the principal’s turnover that he generated.
The agency agreement is clearly defined by law. For example, the law states when a commercial agent is entitled to commission, and describes the rights and obligations of both parties. The law also sets out that the commercial agent is entitled to damage compensation if the agency agreement is terminated prematurely or for the wrong reasons. In principle, this damage compensation is equal to the remuneration for the time that the agency agreement would have lasted if it had been terminated regularly (normally), taking into account the commission earned in the previous years.
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