The Higher Court of Ljubljana ruled that an agency agreement involves an obligation of result and therefore the agent isn’t entitled to any commission, if the contract has not been concluded, regardless of his efforts.
The Higher Court of Ljubljana as an appellate court has issued a judgement (29 August 2017, VSL Sklep I Cpg 313/2016) regarding the agent’s right to receive a commission. The Higher Court ruled that an agency agreement involves an obligation of result, which means that an agent’s right to receive a commission arises only when he in the name of and for the account of the principal concludes a contract with a third party, or through agent’s mediation a contract with a third person is concluded by the principal. The agent is therefore in no way entitled to a commission if the contract has not been concluded at all, regardless of the possible effort he has invested towards achieving this goal.
The relevant facts of the case are the following. The agent as the plaintiff and the principal as the defendant concluded an agency agreement, whereby the plaintiff undertook to, inter alia, realise in the territory of Poland a minimum monthly volume of product sales in the amount of PLN 28,000.00 (later PLN 80,000.00) and the defendant undertook to pay EUR 2,500.00 for the provided marketing and sales services.
From the reasoning of the first instance judgement, which was in favour of the plaintiff, it is clear that the plaintiff went to great efforts to achieve optimal business for the defendant. The plaintiff also correctly predicted that if the defendant did not appropriately adjust his prices, business transactions would not be achieved. In its reasoning, the Court of first instance pointed out several times that the plaintiff acted with diligence, conscientiously and fairly and was therefore justified to issue invoices for the work done in accordance with the agency agreement.
The Higher Court rejected this reasoning, stating that an agency agreement involves an obligation of result and not an obligation of conduct. Regardless of the possible effort on the part of the agent, the right to receive a commission is only acquired when a contract is concluded. The Higher Court further emphasized that even if the plaintiff acted with the diligence and fairness and worked as hard as possible to advance the defendant’s interests, this alone could not justify a right to a commission, as this would directly contravene the clear provisions of the first paragraph of Article 823 of the Slovenian Obligations code. Moreover, under the agency agreement in question, only commission for an obligation of result was agreed upon, whereby the plaintiff would be entitled to a fixed amount of commission only if he realised the contractually set minimum sales volume, payment for conduct however was not agreed upon.
The judgement issued by the Higher Court thus takes a strict position on the interpretation of the provisions of the Slovenian Obligations code. However, even if this is not of surprise since the relevant provisions are indeed quite clear and do not leave much room for doubt, it is to be questioned however, if such a literal interpretation of the law would lead to fair result in situations where the facts would lean even more in the agent’s favour, for example in cases when the absence of final conclusions of contracts could be attributed solely to the principal’s non-diligent behaviour such as ignoring the agent’s recommendations regarding price reductions appropriate for the relevant market. On the other hand, the decision of the Higher Court does affirm the principle of free regulation of obligational relationships and contractual autonomy of contracting parties, who are free to regulate their contractual relationship under an agency agreement in the way they so please, meaning that they can also include in their agreements agent’s right to commission which arises already based on his efforts.
Nevertheless, the plaintiff may have decided to file a petition for revision with the Supreme Court of Slovenia. If the plaintiff did so and should the Supreme Court decide that this issue presents a legal question, that needs to be answered in order to ensure legal certainty, uniform application or development of the law, it will be interesting to see the position that will be taken by the Supreme Court in resolving this conflict.