TURKEY: The provisions of the Draft Commercial Code concerning Commercial Agents

Halil Ercüment ERDEM | TURKEY | 2006-05-19

Halil Ercüment ERDEM

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Clarity concerning the competence of the agent to represent the principal in the law suits. Pursuant to Art. 119/I of the Turkish Commercial Code (TCC), the commercial agent is competent to send notifications and protests and take delivery of such correspondences concerning his field of activity. However, this competence is limited with the contracts that he has intermediated or concluded on behalf of the principal, personally. Moreover, the agent has both the active and passive competence of being an actor in the law suits filed against the principal. The agent can be sued on behalf of the principal because of a conflict arising out of a contract where he had acted as an intermediary. Provisions inserted in the agency contracts stipulating the contrary shall be null and void. In the Draft Code, it is inserted that the agency contracts stipulating the contrary shall be null and void only in the case that the agent is acting on behalf of a foreign merchant. However, in these law suits, agency is just considered as a representative of the principal and the relevant judgments can not be directly enforced against the agency. This is well established application of the Court of Cassation; and it is expressly added to the Draft Code for the sake of clarity.

The principal’s more advantageous position when the agent exceeds its limits of authorization. Pursuant to Art. 122 of TCC, in cases where the agent concludes a contract on behalf of the principal, even though he was not authorized to do so or by exceeding its limits of authorization, and if the principal does not want to be bound with this contract, he must immediately inform the third party of the situation. If he does not serve such a notification immediately, then he will be considered as he has given consent to the transaction and be personally liable from the contract. In the Draft Code, the obligation of the principal to inform the third party is omitted. According to the Draft Code the agency will be liable of the contract in the case that the principal does not give its consent upon learning of the contract.

More detailed provisions concerning the right to commission. The provision concerning the agent’s right to commission is regulated in more detail in the Draft Code. It is prescribed in the Draft Code that the agent will also be entitled to commission for the contracts signed by the principal and the third parties that were gained as customers as a result of the efforts of the agent. Additionally, in some cases specially prescribed by the Draft Code, the agent will be able to claim commission for the contract to whose realization it had contributed even after the termination of the agency contract. The concept of “collection commission” is introduced by the Draft Code. If the collection of the fees arising out of contracts intermediated by the agent is not a part of the agency contract, then the agent shall be entitled to collection commission if it is instructed to collect the fee by the principal. The legal basis of the right to commission of the agent is the performance of the contract between the principal and the third party. The new Art. 114 of the Draft Code prescribes in detail the different situations where the contract is performed by one of the parties; where the contract is not performed or that it is obvious that it will not be performed. The Draft Code brings an express provision for the due date of the commission that the agent is entitled to. The commission will be due within three months after it arose. It is added that the principal is obliged to give all information necessary for the calculation of the commission to the agent.

Clear list of obligations of the principal. The obligations of the principal are listed with the Draft Code which aims to further protect the interests of the agents.

Agency contracts that are deemed to be enacted for an indeterminate period. It is added to the provision which regulates the termination of the agency agreements that an agency agreement, which was entered into for a determinate period and which continued to be implemented by the parties, shall be deemed to be enacted for an indeterminate period.

Goodwill compensation. The Draft Code regulates the goodwill compensation which is not stipulated in the current TCC but is established in practice by the courts in Turkey. According to Art. 122 of the Draft Code;

(1) The commercial agent shall be entitled to a reasonable indemnity upon termination of the agency contract if:

  • he has brought the principal new customers and the principal continues to derive substantial benefits from the business with such customers, and
  • he is deprived of the commission that he would be entitled to if the agency agreement was not terminated and that arises out of contracts entered into or will be entered into within a short time between the principal and third parties introduced by the commercial agent’s activities,
  • the payment of this indemnity is equitable having regard to all the circumstances.

(2) The amount of the indemnity may not exceed a figure equivalent to an indemnity for one year calculated from the commercial agent’s average annual remuneration over the preceding five years and if the contract goes back less than five years the indemnity shall be calculated on the average for the period in question.

(3) The indemnity shall not be payable where the commercial agent has terminated the agency contract unless such termination is justified by circumstances attributable to the principal or the principal has terminated the agency contract because of default attributable to the agent.

(4) The parties may not derogate from right to compensation to the detriment of the agent before the agency contract expires. The compensation shall be claimed by the agent within one year after the termination of the agency contract.

Restraint of trade clause. The Draft Code also regulates the restraint of trade clauses in agency contracts. According to Art. 123 of the Draft Code;

  1. An agreement restricting the business activities of a commercial agent following termination of the agency contract is valid if it is concluded in writing and a written document bearing the provisions of the agreement and signed by the principal is given to the agent. Such agreement shall be valid for not more than two years after termination of the agency contract and shall relate to the geographical area or the group of customers entrusted to the commercial agent and to the kind of goods covered by the agency contract. The principal shall pay an appropriate compensation to the agent due to the restraint of trade.
  2. The principal may withdraw from the application of restraint of trade clause in writing until the termination of the agency contract. In that case, the principal is relieved from the obligation to pay compensation after six months from the withdrawal.
  3. In the event that one of the parties terminate the agency contract for reasons attributable to the faulty acts of the other party, he may notify the other party within one month after the termination that he is not bound by the restraint of trade clause.
  4. The conditions contrary to this provision are null and void to the extent that they are to the detriment of the agent.

Ercument Erdem, IDI country expert for Turkey.

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