Consulting and Drafting Commercial Brokerage Contracts
Brokerage is defined as a great support activity for businesses in finding markets (partners, raw material supply, commodity demand…) especially for newly established or operating businesses trying to invest in new and wide markets.
According to Article 150 of the 2005 Commercial Law, brokerage is a commercial activity in which a trader acts as an intermediary (called the broker) for parties buying and selling goods and providing services (called the broker receiver) in negotiating and making contracts to buy and sell goods and services because of remuneration according to the brokerage contract.
Relevant legal documents
- Law on Commercial 2005
- Decision 69/2018/ND-CP guiding the Law on Foreign Trade Management
Responsibilities of the parties in the brokerage contract
- For commercial brokers, there will be the following obligations:
- Preserve samples of goods and documents assigned to perform the brokerage. They must return those things to the broker receiver party after completing the brokerage;
- Do not disclose or provide information that is harmful to the interests of the broker-receiver party;
- Responsible for the legal status of the broker receiver parties (except for responsibility for solvency);
- Do not participate in contracts between broker receiver parties unless authorized by the brokered party.
- The broker receiver party will have the following obligations:
- Provide necessary information, documents and files related to goods and services;
- Pay brokerage fees and other reasonable expenses to the broker party.
If the parties have an agreement, there may be additional obligations for each party. These obligations will be recorded in the brokerage contract of the parties to ensure transparency, accuracy, and avoid disputes.
Main Contents of a Brokerage Contract:
- Full names, addresses, and relevant information of the parties and the manufacturer. Besides, it is necessary to have information about ID numbers, tax codes, and the representative of organization who signs the brokerage contract. This may include the contact information of each party (address, phone number, email, website); Bank account information (for payment transfer).
- Brokerage objects and content: It could be defined as a goods broker or service broker (parties should clearly state information about goods and services in this section). The broker receiver party should outline their expectations for results (e.g., introducing at least 5 suppliers who are suitable specific requirements) and criteria for assessing the effectiveness of the brokerage activities. (e.g., having a success contract with a new client because of brokerage)
- Rights and Obligations of the Broker and the broker receiver party.
- Sanctions for contract violations: Compensate for damages, penalties for breach of contract… especially sanctions in case of unilateral illegal termination of the contract.
- Terms of contract termination: including cases of unilateral contract termination by each party.
- Information security requirements: both parties should clearly defind what confidential information is, and clarify each party’s information security obligations, as well as the responsibilities of the violating party.
- Other regulations such as: Dispute resolution, contract validity.
A brokerage contract in commercial trade should comprehensively address these above essential elements. It is crucial to present these details in written form to ensure clarity and to safeguard the rights and interests of each party. The primary purpose of brokerage activities is to seek and expand opportunities to sell goods or services, ultimately increasing revenue and profit. Therefore, when making a contract, parties should pay attention to and clarify expectations regarding the results of the brokerage (This is the main basis for paying brokerage fees).
If there are any questions or concerns related to brokerage contracts, feel free to contact An Luat Vietnam for assistance and consultation.