When is a Broker Considered to Have Completed Their Obligations?

When is a broker considered to have completed their obligations is the core issue determining when the right to request remuneration payment arises in commercial transactions. This intermediary activity requires specific confirmation of work results between the broker and the brokered party based on contract terms and current regulations. The following article by Long Phan Consulting Company will analyze in detail the conditions under legal regulations to accurately determine the completion of brokerage obligations.

What is the difference between a broker and a broker?

Brokerage is the act of acting as an intermediary for parties to contact, negotiate, and establish relationships to enjoy remuneration. The content of brokerage activities usually includes finding customers and conducting initial negotiations with them, organizing for the brokered party to contact customers, and assisting parties in negotiating and signing contracts. Unlike representatives, brokers do not directly conclude contracts with customers. Brokerage helps transactions between parties happen quickly, easily, and ensures the interests of the parties.

The scope of brokerage is very wide, such as commercial brokerage, securities brokerage, real estate brokerage, insurance brokerage, maritime brokerage, etc. Brokerage relationships are usually established based on contracts.

According to Article 150 of the Commercial Law 2005, commercial brokerage is a commercial activity whereby a trader acts as an intermediary (called the broker) for parties buying and selling goods or providing services (called the brokered party) in negotiating and concluding contracts for the sale and purchase of goods or services and enjoys remuneration under the brokerage contract.

From the above regulation, it can be understood that the broker is usually a trader with legal business registration to perform commercial brokerage services. Their legal status is completely independent of the buyer and seller; they are not responsible for the solvency of the parties but only responsible for the legal status of the partner they introduce.

>>> See more: Payment Methods for Real Estate Brokerage Remuneration for Practicing Individuals

Obligations of the parties in commercial brokerage

According to Article 151 of the Commercial Law 2005, unless otherwise agreed, the commercial broker has the following obligations:

1. Preserve goods samples and documents entrusted for brokerage and return them to the brokered party after completing the brokerage.
2. Not to disclose or provide information detrimental to the interests of the brokered party.
3. Be responsible for the legal status of the brokered parties, but not responsible for their solvency.
4. Not to participate in the performance of contracts between the brokered parties, unless authorized by the brokered party.

The obligations of the brokered party are also detailed by law, including:

1. Provide necessary information, documents, and means related to goods and services.
2. Pay brokerage remuneration and other reasonable costs to the broker.

When is a broker considered to have completed their obligations

According to the legal nature of commercial brokerage activities prescribed in Article 150 and Article 151 of the Commercial Law 2005, the core obligation of the broker is to act as an intermediary for parties to contact, negotiate, and reach the conclusion of a contract. Therefore, in the absence of other agreements, the time the parties sign the contract is the time the broker completes their obligation.

• Note: The law does not require the main contract to be fully performed or generate profit to consider the brokerage obligation completed. The subsequent performance or breach of the contract is the responsibility of the concluding parties and does not generate or terminate the broker’s obligation, unless otherwise agreed.
• However, the broker must prove that the parties knowing each other and signing the contract is a direct result of their intermediary activities.
• The broker must also fulfill accompanying obligations (honest information, confidentiality, legal status verification). Serious violations of these obligations may lead to the broker not being considered as having completed the obligation, even if the contract is signed.
• Freedom of Agreement: Parties can stipulate in the brokerage contract that the obligation is only completed upon another event (e.g., full payment, successful delivery). In these cases, determination is based directly on the contract content.

>>> See more: Sample a commercial brokerage contract: Instructions for drafting properly

Brokerage consulting services at Long Phan Consulting Company

Long Phan Consulting Company provides comprehensive consulting service solutions for commercial intermediary activities, ensuring the maximization of benefits and limiting risks for both brokers and brokered parties. We approach the problem based on a thorough analysis of the transaction context and specialized regulations. Our support is structured into the following key areas:

1. Drafting and Reviewing Commercial Brokerage Contracts

• Support 1: Establish clear quantitative criteria to determine the time the right to remuneration arises (contract signing, 1st payment, or asset handover).
• Support 2: Draft clauses on commission rates, payment methods, and interest on late payments.
• Support 3: Consult on clauses preventing the brokered party from arbitrarily transacting with customers introduced by the broker to avoid paying fees (circumvention clauses).

2. Specialized Law Compliance Consulting for Brokerage Enterprises

• Support 1: Assist in drafting documents and preparing dossiers for administrative procedures for real estate trading floors, securities brokerage companies, and maritime brokers to comply with specific business conditions.
• Support 2: Consult on building operational regulations, customer appraisal processes, and record-keeping processes to ensure compliance with the Commercial Law and specialized laws.
• Support 3: Provide short-term training courses on contract drafting skills and risk identification for sales staff and brokerage specialists.

Frequently Asked Questions Relating to “When is a broker considered to have completed their obligations?”

Below are some frequently asked questions about the obligations of brokers; please refer to them:

If a sales contract is canceled after signing due to the fault of one party, is the broker obligated to refund the commission?

In principle, the broker’s right to receive remuneration arises at the time the brokered parties sign the contract (unless otherwise agreed). Therefore, the subsequent cancellation, invalidation, or termination of the contract due to the fault of the parties or force majeure does not negate the broker’s right to receive remuneration, and the broker is not obligated to refund this amount.

(Legal basis: Article 153 of the 2005 Commercial Law.)

Are brokers reimbursed for travel and client entertainment expenses if the deal is unsuccessful?

Yes. The law stipulates that the party being brokered must bear reasonable costs incurred in connection with the brokerage, even if the brokerage does not yield results for the brokered party. However, to ensure your rights are protected, you should specifically list the types of refundable costs in the initial brokerage contract.

(Legal basis: Clause 2, Article 152 of the 2005 Commercial Law.)

Does the law stipulate a ceiling (maximum limit) for commercial brokerage fees?

Currently, the Commercial Law does not stipulate a maximum limit or restriction on brokerage fees. The fee level is entirely based on free agreement between the parties. However, some specialized fields may have their own regulations regarding service price ranges.

(Legal basis: Article 153 of the 2005 Commercial Law.)

If the contract doesn’t specify the fee, how much will the broker be paid?

In the absence of an agreement on the fee, the fee will be determined based on the price of that type of service under similar conditions regarding the method of delivery, time of delivery, geographical market, method of payment, and other conditions affecting the price of the service.

(Legal basis: Articles 86 and 153 of the 2005 Commercial Law.)

Does the broker have the right to represent the seller in signing the contract with the buyer?

No. The broker is not permitted to participate in the execution of the contract (including signing) between the brokered parties, except in cases where there is separate, legally valid authorization from the brokered party. If they sign without authorization, the transaction may be declared void.

(Legal basis: Clause 4, Article 151 of the 2005 Commercial Law.)

Conclusion

Determining the time of completion of brokerage obligations plays a prerequisite role in protecting financial interests and maintaining sustainable cooperative relationships. Clients need to proactively build a solid legal basis right from the contract drafting stage.

If you need in-depth support on contract drafting or legal advice on brokerage, please contact Long Phan Consulting Company via Hotline 1900636389 for optimal technical solutions.