Brokerage contract

What it means

A brokerage contract is a contract type under the Slovak Commercial Code in which the broker undertakes to work towards giving the client the opportunity to conclude a certain contract with a third party. The client undertakes to pay the broker a commission for this.

The right to commission generally arises only when the brokered contract is concluded, not from the broker’s efforts alone. If the agreement provides that commission is due only once the brokered contract is performed, for example when the price is paid, the right arises only then. The broker is entitled to expenses on top of commission only if agreed.

It must be distinguished from a commercial agency contract, where the agent continuously seeks business for the principal in a territory, and a commission agent contract, where the agent concludes deals in its own name for the principal’s account. A broker does not conclude the contract itself.

How it works in practice

In contracts with brokers, for example for selling property or finding investors or new customers, we recommend specifying exactly which contract the broker is to secure, what commission they receive and when it becomes due. Whether the brokerage is exclusive and for how long should also be agreed.

For tax purposes, brokerage commissions are an expense deductible only when paid for the payer. If the invoice is unpaid at year-end, the deduction is claimed only in the year of payment. With commissions to individuals, reporting obligations or withholding tax for non-residents must also be watched.

The broker must inform the client of circumstances relevant to their decision and may not act against their interests. If the broker also represents the other side, the client should be told. The contract should address this expressly.

What to watch out for

Disputes most often concern whether the broker really brought about the concluded contract or whether the parties concluded it without them. The contract should therefore define clearly when a deal counts as brokered, for instance when the client was introduced to the counterparty through the broker.

With consumers, for example estate agency services for individuals, consumer protection also applies. Disproportionate contractual penalties or automatic extension of exclusivity may be invalid, and the trade inspection assesses them strictly.