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LITHUANIA: New interesting case-laws on commercial agency.

Three decisions of the Lithuanian Supreme Court on termination of commercial agency contracts.

Inga KARULAITYTË-KVAINAUSKIENË - 16.09.08
Country expert

Decision of 2008-01-28 in civil case No. 3K-3-18/2008 (S)

Facts: On 15th February, 2006 the Parties have concluded the contract of agency, which has obliged the plaintiff to find a buyer for the defendant's property. It was stated that the plaintiff has fulfilled his contractual obligations: within the term given the agent found a buyer and informed the plaintiff by phone and registered letter, however defendant refused to perform his contractual obligations without the important reasons.

Arguments of Lithuanian Supreme Court:
In justice to evidence the Court held that in accordance with a duty of the agent to inform the principal about the fulfilment of agency without any delay ( art. 6.740 part 4 of the Civil Code of the Republic of Lithuania), the plaintiff has performed this duty properly as he has taken all the possible measures in order to inform defendant about the buyer, whereas the defendant, as principal, has not performed his duty to cooperate with the agent in order to facilitate the fulfilment of the agency (art. 6.761 part 1 of the CC). The duty to cooperate with the other party is also certified in art. 6.200 of the CC (In performing a contract, each party shall be bound to contribute and to cooperate with the other party). Cooperation signifies that the Parties have to support each other in exercising their rights and in performing their duties; according to the laws, the duty to cooperate has both the debtor and creditor; only in cooperation of the Parties the proper performance of the obligation could be assured.
In this case, the Court arrives to the conclusion that the defendant, in performance of his duty to cooperate, had a possibility and, also as a party of good-faith, had a must before the ending of the contract to inquire if the plaintiff (agent) performed his duties.

 

Decision of 2008-01-28 in civil case No. 3K-3-26/2008

Facts: The third person (principal) and the defendant (agent) have concluded the contract of agency, which has authorized the agent to find a buyer for his property. The defendant has concluded the advance-payment agreement with the plaintiff (buyer), where the plaintiff was obliged to buy a property for 105000 LTL. The defendant has terminated the advance- payment agreement due to the plaintiff's fault as he did not arrive on time to the notary office. The plaintiff applied to the Court in order to adjudge the termination of the agreement illegal and to award the 5000 LTL of the advance-payment from the defendant, since the agreement was not performed due to the fault of the agent.

Arguments of Lithuanian Supreme Court:
The Court referred firstly that the relations between the defendant (agent) and the third person (principal) are regulated by the contract of agency, concluded on 19th July, 2005. Therefore, the agent's legal activities with the third persons are qualified as performance of the contract of agency and they create rights and duties for the principal. In case if an agent performs not legal, but factual activities (for e.g. an agent organises the conclusion of the contract or informs the parties about the place and time of the contract signing etc.), he should be treated as an assistant of the principal. The defendant (principal) as the organizer of the signing of the future agreement in the notary office (acting as an assistant), acted as a third person, chosen by the principal in order to assist in the performance of the obligation. As a result, the responsibility of the principal arises due to the negligent work of the agent - an inability to find and inform the buyer about the time and the place of the conclusion of the contract. It is important to note, that due to the article 6.257 of the Civil Code of the Republic of Lithuania (A debtor who engages the services of third persons in performance of his obligation shall be liable towards the creditor where non-performance of the obligation or defective performance thereof results from the fault of the third persons concerned unless the law or the contract provides for the liability of the direct executor) the debtor is liable for the fault of the third person. The fault of the third person is the fault of the debtor (in this case- the fault of the principal). Therefore in this case, the article of the advance-payment agreement, which establishes a duty to return to a buyer (plaintiff) the advance - payment, if the agreement is not concluded due to the fault of the principal, should be applied.

 

Decision of 2005-11-02 in civil case No. 3K-3-533/2005

Facts: On 7th April, 2004 the Parties have concluded the contract of agency, which has enabled the defendant to sell the property of the plaintiff. The property price was 80 000 LTL. However, the agent sold it for 93000 LTL. It should be noted that the contract of agency provides that when the property is sold for a bigger price, the difference in price (80000 LTL and the real sale price) becomes a profit of the agent (in this case - defendant).

Arguments of Lithuanian Supreme Court:
The Court held that the contract of agency concluded between the Parties does not prohibit selling property for a bigger price; it means that selling property for a bigger price was allowed as the contract of agency had identified just a minimum of the price requested. It is stated that an agent, as a businessman, who performs selling actions, is obliged to transfer to the principal without delay everything received in the performance of the agency as this type of requirement is provided in article 6.760 part 5 of the Civil Code of the Republic of Lithuania. In this case, if an agent not only accomplishes the assignment of the principal to sell property, but also by using his skills in management sells the property in better conditions than it is provided in a contract, i.e. the bigger price for the sold property is obtained, in this way the difference in price should be transferred to the agent, unless the agreement of the Parties provides for otherwise. The laws do not oblige the agent to refund to the principal more than the agent undertook by the contract. Under the contract of agency it is important for the agent, whose professional activity or business is commercial agency on contract conclusion, to conclude an agreement on more favourable circumstances as both the incomes of the principal and the fulfilment of property interests depend directly on this matter (art. 6.760 part 1 of the CC). The Court concludes that the plaintiff (principal) does not have a right to claim the difference in property price from the defendant (agent).

  

Inga Karulaityte-Kvainauskiene, IDI Country Expert for Lithuania.

 

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