Rights and obligations when representing traders

Representing traders is a commercial activity, performing the work of the represented person and receiving remuneration. For representation to be effective, the parties must understand their rights and obligations. In the article below, we will inform you about the rights and obligations of the parties in the business representative relationship and other related issues.

What is a merchant representative? Characteristics of representatives of traders

According to Clause 1, Article 141 of the Law on Commercial 2005, representing a trader is the act of a trader receiving authorization (called the representative) from another trader (called the principal) to carry out commercial activities. on behalf of, according to the instructions of that trader and receive remuneration for representation.

Representatives of traders have the following characteristics:

1. Both parties involved are traders: Both the representative and the principal must be traders, meaning they must carry out commercial activities within the scope of their activities.
2. Representation relationship arising from representation contract: This relationship is established on the basis of representation contract. The contract is established in writing or other forms with equivalent legal validity.
3. Carrying out transactions on behalf of the principal: The representative carries out commercial activities (buying and selling, providing services, negotiating, signing contracts) in the name of the principal, not in my own name.
4. The representative party receives remuneration: Representation activities are always remunerated, different from civil authorization contracts, where the parties can agree without remuneration.
5. Legal responsibility belongs to the principal: The acts performed by the representative within the scope of authorization will create legal consequences for the principal, and the principal must be responsible for the commitments made by the representative.
6. Do not transact with yourself or another representative party: The representative must not make transactions with itself or with a third party that is also a representative of that party, unless otherwise prescribed by law.
7. Activities may be performed for multiple principals: The agent may act on behalf of multiple principals, but must still comply with the rule of not dealing with himself or with a third party that he is also representing.
8. Clear scope of authorization: The representative relationship for traders is determined by the scope of authorization between the representative and the principal, and only actions within the scope of authorization have legal effect on the principal.
9. Relationships with third parties: When dealing with a third party, the representative acts on behalf of the principal and the contracts or commitments will legally bind the principal.

The above characteristics help distinguish the representative relationship for traders from other forms of commercial representation or intermediary, while ensuring legality and responsibility in commercial transactions.

How long is the trader’s representation period?

According to Article 144 of the Law on Commercial 2005, regulations on the duration of representation for traders are determined as follows:

• The duration of representation is agreed upon by the parties.
• In case there is no agreement, the representation term ends when the principal notifies the representative of the termination of the representation contract or the representative notifies the principal of the termination of the contract.

Benefits when representing traders

When representing traders, the representative has the following basic rights:

• Right to receive remuneration: The representative has the right to receive remuneration for representative activities, according to the agreement with the principal. This remuneration can be calculated as a percentage of the transaction or a fixed level depending on the agreement between the two parties.
• Right to request remuneration when the contract terminates: If the principal unilaterally terminates the representation contract, the representative has the right to request remuneration for transactions performed during the representation period, including contracts signed with customers in which the representative has participated.
• Right to protect interests when the contract is terminated: If the representation contract is terminated by the principal, the representative has the right to request remuneration for the transactions in which he or she participated, even if the contract does not continue.
• Right to represent multiple merchants: The representative can perform work on behalf of many different merchants, as long as there is no conflict of interest and does not violate the agreement between the parties.

These rights help protect the fairness and interests of the representative in the process of carrying out commercial transactions on behalf of the principal.

Obligations of parties in representative activities

Obligations of the representative

Unless otherwise agreed, the representative has the obligations according to Article 145 of the Law on Commercial 2005 as follows:

• Carry out commercial activities in the name and for the benefit of the principal;
• Inform the principal about the opportunities and results of implementing authorized commercial activities;
• Comply with the principal’s instructions if those instructions do not violate the law;
• Do not carry out commercial activities on your own behalf or on behalf of a third person within the scope of representation;
• Must not disclose or provide to others secrets related to the principal’s commercial activities during the period of representation and within two years from the termination of the representation contract;
• Preserve assigned assets and documents to perform representative activities.

Obligations of the principal

Unless otherwise agreed, based on Article 146 of the Law on Commercial 2005, the principal has the following obligations:

• Immediately notify the representative of the conclusion of the contract that the representative has negotiated, the performance of the contract that the representative has concluded, and the acceptance or non-acceptance of activities outside the scope of representation that the representative performs;
• Provide assets, documents, and information necessary for the representative to perform representative activities;
• Pay remuneration and other reasonable expenses to the representative;
• Timely notify the representative of the possibility of not being able to conclude or perform the contract within the scope of representation.

Consulting services and support for representative issues for traders at Long Phan

At Long Phan, we provide in-depth support services on issues related to merchant representatives, helping you resolve all difficulties and questions during the representation process. Below are the services we provide:

• Consulting on representation contracts: drafting, checking and adjusting representative contracts for traders to comply with regulations and maximize your rights;
• Consulting and supporting participation in negotiating and signing representative contracts;
• Instructions on the rights and obligations of the representative: Clearly explain the right to receive remuneration, the right to claim compensation when the contract is unilaterally terminated, as well as the obligations related to the performance of the representative contract face;
• Consulting on termination of representation contracts;
• Consulting on risks in trader representative relationships and solutions.

When signing a contract to represent a trader, you need to ensure that your representative activities protect your rights and avoid unnecessary risks. With a team of experienced experts in the commercial field, Long Phan will accompany you throughout the representation process, from negotiating contracts to resolving arising problems. Please contact Long Phan immediately via the hotline: 0906735386 for advice and the most dedicated support.