Commercial agency contract

What it means

A commercial agency contract is a contract type governed by the Commercial Code. The commercial agent, acting as an independent entrepreneur, undertakes on a long-term basis to look for business opportunities for the principal and, where agreed, to conclude deals in the principal’s name and on its account, and the principal pays a commission for this.

It differs from a commission contract in that the agent does not act in its own name, and from a mandate contract in that it is not a one-off task but an ongoing activity in a defined territory or with a defined group of customers. The agency can be exclusive or non-exclusive.

The law protects the agent as the weaker party. When the contract ends, the agent may be entitled to compensation for the clientele it brought to the principal and from which the principal keeps benefiting. The law caps the amount at the average annual commission of recent years, and the claim must be raised within the statutory period.

How it works in practice

For clients who sell through commercial agents, we set up commission records so that each agent invoice clearly shows which deals it relates to. We book the commission as an expense in the period in which the entitlement arose, not when it is paid, and under an exclusive agency we also track deals concluded without the agent’s involvement.

When the agent is a Slovak sole trader, the commission is business income for the agent and the principal withholds nothing from it. When the agent is based abroad and has authority to conclude contracts in the principal’s name, we review the risk of a permanent establishment, and for a service from another EU state we apply the VAT reverse charge.

When the cooperation ends, we help the client quantify the agent’s possible compensation claim from historical commissions and create a provision for it until the dispute is settled. We also check whether the agreed non-compete meets the statutory conditions and whether separate consideration has been agreed for it.

What to watch out for

The contract should precisely define the territory, the customer group, how commission is calculated and when the entitlement arises. Vague wording leads to disputes about commission on repeat orders from customers the agent introduced, and in court the interpretation often favours the agent.

A non-compete clause after the agency ends is valid only in writing, only for the contractual territory and customers, and for no longer than the statutory maximum. A broader ban is void. In a long cooperation with a single agent, bear in mind the risk that an inspection will treat the relationship as dependent work.