Romanian Agency Agreements

Despite the current slowing down of international trade we as a law firm in Romania dealing with international trade have seen a rise in interest by foreign SME’s in entering into agency and distributorship agreements with Romanian companies. Whilst the foreign SME’s might seek to invoke the laws of their own country many Romanian companies will want the contract to be written under Romanian law.

Romania has adopted the provisions of EEC Directive No. 86/653/1986. This was done firstly in Romanian Law no. 509/2002 and subsequently in the new Commercial Code which was adopted in 2011.

Law no 509/2002 was abrogated by Articles 2072 – 2095 of the new Commercial Code especially in the chapter designated “Agency Contract”.
The agency agreement is now defined by the Code which was an aspect which was not covered in the old law. Under the Commercial Code a person (principal) empowers the other person (agent) either to negotiate or to negotiate or conclude contracts on his behalf or account. An agent can be a natural person or a legal entity.

As a rule the contents of an agency contract are established by the parties although the Code does impose certain obligatory provisions. These obligatory provisions relate to the parties to the contract, the exclusivity or the non-competition clause as well as termination provisions.

The non-competition clause can relate to either provisions during the term of the agency contract as well as the after its termination. The law is very strict in relation to the non-competition clause. It cannot be longer than two years. If the parties provide for a longer period it is automatically by law reduced to two years. The law also restricts the geographical area and groups of persons to whom it applies as well as to the assets of the principal with which the agent was involved. Thus its effect on the agent is limited. Care has to be taken in drafting such clauses for if they are drafted incorrectly then they will be treated by the courts as a nullity and have no effect.

The agency contract has to be in either written authenticated form or under private signature. An agency contract can be created verbally but has to be evidenced in writing.

Under the terms of the Code the agent is required communicate to the principal information which would be of interest to the principal; to make all necessary efforts in relation to negotiating contracts; to comply with the reasonable instructions of the principal; to keep and store samples so that they can be identified and to keep proper records of account.

On the other hand the principal has to give the agent sufficient means to carry out the mandate and this can include giving samples etc. He is required to give all necessary information to the agent; to advise the agent if the contract amounts cannot be delivered; pay money due to the agent on time; to pay the commission to the agent as provided in the agency contract.

It should be noted that in relation to the commission the agent is entitled not only to his commission for contracts signed during the term of the agency contract but also for commission on contract signed after termination of the agency contract if it was signed by the agents efforts. The Code also provides provisions regarding the time and manner of payment of the commission by the principal even if the contract is silent.
The history of the termination of agency contracts has been chequered in the past. Directive EEC Directive No. 86/653/1986 was an attempt to protect agents from principals who had abused their position. Now the agent’s position is protected by the Code as indeed it was under Law no. 509/2002.

An agency contract will come to an end either at the expiration of the term as set out in the written agreement or if no period is specified then on the service of a notice from the party requiring the agency contract to be brought to an end.

It should be note that the Code specifically provides that if a fixed term appointment is continued after its due date by the action of the parties then it is automatically converted into a contract for an indeterminate period. The law specifies the period of notice which must be given to terminate an indeterminate contract. If the agency contract is for less than one year then the notice period is one year. If the contract is longer than one year then the notice period must be at least one month increasing by one month for each subsequent year of the agency contract up to a limit of six months. The parties can and often do agree a longer period.

There are also provisions covering issues where a party is in default and the above provisions may apply.

In the light of the above we would advise clients who have already entered into agency contracts under Romanian law in the past to check and see what provisions apply, alternately have them reviewed by a Romanian lawyer who is conversant with the new Romanian Civil Code to see if the changes brought about by the new Civil Code have effectively been incorporated and what other alterations maybe necessary.

About Nicholas S Hammond

Nicholas is an English solicitor who has been practising in Romania since 1990. He has been a partner in a number of law firms in Romania as the principal partner. Hammond and Associates trading as Hammond Partnership is the culmination of many years experiance.

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