The difference between an agency agreement and a service agreement

The main difference between agency transactions is that they involve a third participant—the agent. He becomes an intermediary between the seller and the buyer and helps them complete the transaction. Although the appearance of an intermediary complicates accounting, you should not abandon agency agreements - they are beneficial for both parties.

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Subject of the agreement

1.1. The Principal instructs , and the Agent assumes the obligation for a fee to carry out on his own behalf, but at the expense of the Principal, a set of legal and actual actions aimed at (select the one you need)

• sale of real estate owned by the Principal (hereinafter referred to as the object). Characteristics of the object (name, purpose, address, cadastral number, area, etc.), documents confirming the Principal’s rights to it, the minimum selling price of the object and additional conditions are specified in the Specification for the sale of real estate, which is an integral part of the Agreement (Appendix N 1) (if the Agent sells the Principal’s object).
• acquisition of real estate for the Principal (hereinafter referred to as the object). Requirements for the object, the maximum purchase price and additional conditions are specified in the Specification for the acquisition of real estate, which is an integral part of the Agreement (Appendix No. 1) (if the Agent is purchasing the object for the Principal).

1.2. The rights and obligations under a transaction made by the Agent in pursuance of the Agreement arise with the Agent.

In what cases can an agency agreement be concluded?

An individual or legal entity acting as a Principal does not keep a time sheet for the Individual Agent and should not require him to comply with the working hours, because under an agency agreement, no labor relations arise between the parties. The individual must be fully capable.

The main difference between an agency agreement and similar agreements is that the Agent has the right to perform a wider range of actions than other intermediaries. It is advantageous to formalize it if there is a need to transfer to an intermediary the authority to perform legally significant as well as other actions (transfer of goods, search for suppliers, attracting clients, performing work, representing interests, etc.).

An agency agreement with an individual, a sample of which you can find below, is advisable to conclude if:

• the work is not permanent;
• there is a need to hire a person who lives in another region;
• The agent is not required to be present at the workplace every day and adhere to the work schedule.

The execution of this document is an alternative to including an employee in the organization’s staff. It should be noted that such an agreement usually involves long-term cooperation. If an organization or individual entrepreneur needs to perform a one-time transaction by an intermediary, it is better to sign a commission or commission agreement.

Procedure for executing an agent's order

(if the Agent sells the Principal’s property, you should select this version of clauses 2.1, 2.2)

2.1. No later than _____ (__________) business days from the date of conclusion of the Agreement, the Principal undertakes to transfer to the Agent under the acceptance certificate , along with the following documentation necessary for the execution of the order stipulated by clause 1.1 of the Agreement: ____________________ (documents to be transferred are indicated: an extract from Unified State Register of Real Estate in relation to the object, title documents for the land plot under the object, etc.).

2.2. The Agent undertakes to transfer to the Principal the funds received from the buyer of the property within _____ (__________) business days after receiving them.

(if the Agent purchases an object for the Principal, this version of clauses 2.1, 2.2 should be selected)

2.1. No later than _____ (__________) business days from the date of conclusion of the Agreement, the Principal undertakes to transfer to the Agent funds in the amount of _____ (__________) rubles necessary for the acquisition of the object.

2.2. The transfer of the object purchased for him to the Principal is carried out according to the acceptance certificate no later than _____ (__________) business days after the signing of the transfer and acceptance certificate by the Agent and the seller of the object.

2.3. The Principal undertakes to personally participate in the procedure for state registration of the transfer of ownership of the object or to issue the Agent a notarized power of attorney certifying the relevant authority.

2.4. The Agent's expenses incurred in connection with the execution of the order and subject to reimbursement at the expense of the Principal include:

• expenses directly provided for in the contract with (select the one you need) the buyer/seller of the object;
• _________________________.

All other expenses of the Agent are included in the amount of the agency fee.

2.5. The Agent executes the Principal’s instructions under the Agreement in the territory of ______________________.

Differences and features of an agency agreement: parties, form and subject of the agreement

Agency legal relations have common features with some others. It happens that the closeness of these relationships leads to the substitution of other relationships that de jure qualify as agency, and vice versa. If a dispute related to such legal relations comes to court consideration, there is a high probability that the court will point out a discrepancy, and therefore the parties may face consequences that they did not know about or for which they did not count.

In order to prevent such situations, we recommend that you familiarize yourself with the features of agency compared to related relationships:

Of the above delimitation criteria, the subject of the transaction is of primary importance. Let’s take a closer look at it and the essential terms of the deal as a whole.

Rights and obligations of the parties

3.1. The Agent undertakes:

3.1.1. Execute the Principal’s instructions on the most favorable terms for him within the following terms.

• the start date for the execution of the order is “__” ______ 20__;
• The deadline for completing the order is “__” _______ 20__.

The additional benefit from executing an order on terms more favorable than those specified in the Specification is shared between the Parties (select the one you need)

• equally.
• in the following proportion: _____ (___________)% of the amount of additional benefit is due to the Principal, _____ (___________)% is due to the Agent.

3.1.2. Transfer to the Principal everything received during the execution of the order under the conditions provided for in the Agreement.

3.1.3. Provide the Principal with a report on the execution of the order (hereinafter referred to as the Agent’s report) in writing (Appendix No. 2), as well as documents confirming the fact of expenses and their amount (select the one required)

• no later than _____ (__________) business days after the transfer to the Principal of funds received from the buyer of the object (if the Agent sells the Principal’s object).
• simultaneously with the signing of the acceptance certificate of the object purchased for the Principal (if the Agent purchases the object for the Principal).

3.1.4. Agent (select the one you need)

• is not liable to the Principal for the failure of a third party to fulfill a transaction concluded with him at the expense of the Principal.
• vouches to the Principal for the execution by a third party of a transaction concluded with him at the expense of the Principal (del credere).

3.1.5. Agent (select the one you need)

• has the right , in order to fulfill the Agreement, to enter into subagency agreements with third parties.
• is obliged to carry out the Principal's instructions personally.

3.1.6. In case of failure to fulfill the Principal’s instructions, the Agent is obliged to return to the Principal everything received from him within _____ (__________) business days after delivery of the corresponding request of the Principal.

3.1.7. The agent is responsible for damage to the object in his possession (select the one you need),

• subject to sale in the interests of the Principal, within the limits of its value specified in the Specification for Sale (if the Agent sells the Principal’s object).
• purchased for the Principal, within the limits of its value under an agreement concluded with the seller in pursuance of an agency order (if the Agent purchases an object for the Principal).

Other essential terms of the agency agreement that distinguish it from the service agreement

• The agency agreement may contain restrictions that exclude the right of the agent to engage in activities similar to the instructions of the principal in a certain territory or during a specified period of time. However, the agent's right to sell goods or provide services to certain persons cannot be limited. Such a restriction is included in the agreement in accordance with Art. 1007 of the Civil Code of the Russian Federation. However, a restriction of this nature in a service agreement would be illegal.
• In the course of fulfilling the assignments assumed under the contract, the agent is obliged to keep reports and provide them to the principal within the time period specified in the contract. The report must be accompanied by documents on expenses incurred, which are subject to compensation by the principal. The deadlines for providing reporting to the principal may or may not be strictly established by the contract. If there are no specific deadlines, the agent reports to the principal as the contract is executed or after its expiration and all instructions have been completed.

In general, paid services and agency agreements are intended for various areas of civil law relations. It is impossible to give a definite answer about which of the agreements is optimal, since they are intended for completely different actions.

In general, an agency agreement is most often used to perform one-time or regular actions of a legal, marketing or other nature. At the same time, the agency agreement places emphasis on the professional knowledge and experience of the agent - lawyer, realtor, marketer, etc., who act in the interests of the principal and perform actions on his behalf and at his expense.

If you need advice on drawing up an agreement, choosing its form and further legal support, our specialists are always ready to provide you with all the necessary legal assistance.

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3.2. The principal undertakes:

3.2.1. Accept from the Agent everything received under a transaction concluded with a third party in pursuance of the Agreement.

3.2.2. Review the Agent's report and approve it or notify the Agent of your objections to the report within _______ (____________) business days from the date of its receipt. If there are no objections from the Principal within the specified period, the Agent's report is considered accepted.

3.2.3. Pay the agent's remuneration, the amount of additional benefits due to the Agent in accordance with the Agreement, additional remuneration for del credere (if the Agent has guaranteed to the Principal for the execution of a transaction by a third party concluded with him at the expense of the Principal (if the appropriate condition is selected within the framework of clause 3.1.4 of the Agreement )), as well as reimburse the Agent for expenses incurred by him, supported by documents.

3.2.4. Principal (select the one you need)

• undertakes not to enter into similar agency agreements with other agents operating in the territory specified in clause 2.5 of the Agreement, and/or to refrain from carrying out independent activities in this territory similar to those that are the subject of the Agreement.
• has the right to enter into similar agency agreements with other agents operating in the territory specified in clause 2.5 of the Agreement, and/or conduct independent activities in this territory, similar to those that are the subject of the Agreement.

Is a contract considered gratuitous if it does not indicate a price?

Regardless of whether the parties indicated the condition in the price agreement or not, the agreement in any case is considered compensated.
If the parties have not determined the amount of remuneration for the agent, the agreement will not be considered not concluded, since the price condition is not essential. In such situations, the amount of remuneration is determined in the manner provided for in paragraph 3 of Art. 424 of the Civil Code of the Russian Federation, taking into account the practice of executing similar agreements.

Article 424 of the Civil Code of the Russian Federation “Price”

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Agent fees and expenses

4.1. The agency fee is _____ (__________) rubles, including VAT _____ (__________) rubles.

(if the Agent sells the Principal's property)

4.2. The Agent withholds remuneration , part of the additional benefit (clause 3.1.1 of the Agreement), as well as expenses incurred in connection with the execution of orders under the Agreement (clause 2.4 of the Agreement), from the funds received from the buyer of the object and subject to transfer to the Principal (clause 2.2 Agreements). Deduction is made from each payment received from the buyer of the property in the appropriate proportion.

(if the Agent purchases an object for the Principal)

4.2. Agency fee (select the one you need/it is possible to establish a different payment procedure)

• The Agent withholds funds received from the Principal until the order is executed.
• The Principal transfers to the Agent separately within _____ (__________) business days after approval of the Agent's report.

Expenses incurred by the Agent in connection with the execution of orders under the Agreement (clause 2.4 of the Agreement) are reimbursed by the Principal no later than _____ (__________) business days from the date of approval of the Agent’s report, to which documents are attached confirming the fact of expenses and their amount.

The Agent withholds part of the additional benefit (clause 3.1.1 of the Agreement) from the funds received from the Principal.

Interest on the deferment (installment plan) amount is not accrued and is not payable.

4.3. Expenses incurred by the Agent in connection with the execution of orders under the Agreement and subject to reimbursement by the Principal (clause 2.4 of the Agreement) must be confirmed by the Agent’s report and documents certifying the fact of expenses incurred and their amount.

(clause 4.4 is included in the Agreement if the Agent has guaranteed to the Principal for the execution of a transaction by a third party concluded with him at the expense of the Principal (if the appropriate condition is selected within the framework of clause 3.1.4 of the Agreement))

4.4. The Principal undertakes to pay the Agent an additional fee for del credere in the amount of _____ (_______) rubles, including VAT _______ (____________) rubles. The del credere fee is paid in the same manner as the agency fee.

The agent receives compensation from the principal

The agent's income is the remuneration he receives from the principal. There are a lot of options for calculating it, from simple to complicated. Therefore, we recommend that you pay attention to this clause in the contract. Here are some ways to determine your reward:

1. A specific amount per transaction. This is a reliable option since you know the amount of the reward in advance. But this is not always beneficial for the agent, since he will not be able to earn more than the agreed amount.
2. Percentage of the transaction. This is more profitable for the agent and motivates him to sell more. For example, according to the terms of the contract, the agent will receive 10% from each coffee maker sold. If an agent sells 5 coffee makers for 10,000 rubles, his revenue will be 5,000 rubles.
3. A markup on the price of a product or service. The principal sets the minimum price at which the agent can sell the goods, but does not limit it to the maximum. This method motivates the agent to sell at a higher price. For example, the principal instructs to sell a coffee maker for at least 10,000 rubles. The agent sets his price - 12,000 rubles. After selling the coffee maker, he will transfer 10,000 to the principal and keep 2,000 rubles for himself. This will be his reward.

In addition to the amount of remuneration, the agent and the principal agree on the timing of its payment. There are also several options here:

1. The principal pays the agent before the work is completed.
2. The agent transfers the proceeds from sales minus his remuneration to the principal.
3. The principal pays the agent after the contract is executed. If no deadline is specified in the contract, the principal pays the remuneration within a week after receiving the report from the agent.

Responsibility of the parties

5.1. For violation of the terms of execution of the order , the Principal has the right to demand that the Agent pay a penalty (penalty) in the amount of _____ (__________)% of the Agent’s remuneration for each day of delay.

5.2. For violation of the deadline for the transfer of everything received upon execution of the order, the Principal has the right to demand from the Agent to pay a penalty (penalty) for each day of delay in the amount of _____ (__________)% (select the one required)

• from the amount of funds not transferred to the Principal in a timely manner (clause 2.2 of the Agreement) (if the Agent sells the Principal’s property).
• from the cost of the object not transferred to the Principal in a timely manner (clause 2.2 of the Agreement) (if the Agent purchases the object for the Principal).

5.3. For violation of the deadlines for submitting the report, the Principal has the right to demand that the Agent pay a fine in the amount of _____ (__________) rubles.

(clause 5.4 is included in the Agreement if the Agent acquires an object for the Principal and, within the framework of clause 4.2 of the Agreement, the Parties agreed on the condition for the payment of agency fees after the execution of the order)

5.4. For violation of the terms of payment of remuneration provided for in clauses 4.2, 4.4 of the Agreement (clause 4.4 is indicated if the Parties have agreed on the condition for the payment of additional remuneration for the del credere), the Agent has the right to demand that the Principal pay a penalty (penalty) in the amount of ____ (________________)% from the unpaid amount for each day of delay.

(clause 5.5 is included in the Agreement if the Agent purchases an object for the Principal)

5.5. For violation of the deadlines for reimbursement of expenses (clause 4.2 of the Agreement), the Agent has the right to demand that the Principal pay a penalty (penalty) in the amount of _____ (____________)% of the unpaid amount for each day of delay.

5.6. The Party that fails to fulfill or improperly fulfills its obligations under the Agreement is obliged to compensate the other Party for losses caused by such violations.

5.7. In all other cases of failure to fulfill obligations under the Agreement, the Parties are liable in accordance with the law.

The principal reimburses the agent for expenses

One of the main advantages of a contract for an agent is the minimal cost of its execution.

Firstly, the agent does not spend money on purchasing the goods, because they belong to the principal. And if a product sells poorly, it does not cause losses.

Secondly, the principal reimburses the agent for expenses under the contract. It is possible to set a fixed amount of compensation without taking into account actual costs. Another way is to calculate it based on the agent's actual expenses. Then, in order not to go broke on compensation, it is important for the principal to define in the contract:

• what expenses he reimburses (so that the agent does not include his morning coffee in the list) and their maximum amount;
• documents with which the agent confirms expenses.

Force majeure circumstances (force majeure)

6.1. The Parties are released from liability for non-fulfillment or improper fulfillment of obligations under the Agreement if proper fulfillment turned out to be impossible due to force majeure, that is, extraordinary and unpreventable circumstances under the given conditions, which mean: ____________________ (prohibited actions of the authorities, civil unrest, epidemics, blockade, embargo , earthquakes, floods, fires or other natural disasters).

6.2. If these circumstances occur, the Party is obliged to notify the other Party about this within _____ (___________) business days

6.3. A document issued by _________________________ (authorized government agency, etc.) is sufficient confirmation of the presence and duration of force majeure.

Duration, modification and early termination of the contract

7.1. The contract has been concluded (select the one you need)

• for a period up to "___" __________ _____ g . inclusive .
• For undefined period.

7.2. The Agreement may be amended and (or) terminated early by agreement of the Parties or in another manner provided by law.

7.3. All changes to the Agreement and additions to it must be in writing and signed by the Parties. The corresponding additional agreements are an integral part of the Agreement.

7.4. In the event of termination of the Agreement for any reason, the Parties have the right not to return everything performed under it until the moment of its termination, unless otherwise provided by law (clause 4 of Article 453 of the Civil Code of the Russian Federation).

Essential terms of the agreement

Essential conditions include:

• subject - the obligation to carry out an agreed list of actions of the agent that have legal consequences for the principal;
• parties - indication of the full names of the parties participating in the agency agreement;
• rights and obligations of the parties - this condition is especially important for the principal, since this part of the agreement specifies the agent’s powers to perform certain legal actions.

The law does not prohibit agreeing on other conditions that do not contradict the current legislation of the Russian Federation, and also do not infringe on the rights and interests of participants in legal relations.

Dispute Resolution

8.1. All disputes related to the conclusion, interpretation, execution and termination of the Agreement will be resolved by the Parties through negotiations.

8.2. If an agreement is not reached during negotiations, the interested Party shall submit a claim in writing, signed by an authorized person.

8.3. The claim is sent in any of the following ways:

• by registered mail with acknowledgment of delivery;
• courier delivery. In this case, the fact of receipt of the claim is confirmed by a receipt, which must contain the name of the document and the date of its receipt, as well as the surname, initials, position and signature of the person who received this document.

8.4. The claim must be accompanied by documents substantiating the demands made by the interested Party (if the other Party does not have them), and documents confirming the authority of the person who signed the claim. These documents are submitted in the form of duly certified copies. If a claim is sent without documents confirming the authority of the person who signed it, then it is considered unsubmitted and is not subject to consideration.

8.5. The Party to which the claim is sent is obliged to consider the received claim and notify the interested Party in writing about the results within ___ (_____) business days from the date of receipt of the claim.

8.6. In the event of failure to resolve disputes through the claim procedure , as well as in the event of failure to receive a response to the claim within the period specified in clause 8.5 of the Agreement, the dispute is referred to the arbitration court in accordance with the law.

Final provisions

9.1. The Agreement comes into force from the moment it is signed by the Parties.

9.2. The Agreement is drawn up in two copies , one for each of the Parties.

9.3. Unless otherwise provided by the Agreement, notifications, demands and other legally significant messages (hereinafter referred to as messages) may be sent by the Parties by fax, e-mail or other means of communication, provided that it allows one to reliably determine who the message came from and to whom it was addressed.

9.4. Messages entail civil consequences for the Party to which they are sent from the moment they are delivered to the specified Party or its representative. Such consequences also arise in the case when the message was not delivered to the addressee due to circumstances beyond his control (Clause 1 of Article 165.1 of the Civil Code of the Russian Federation).

9.5. The following are attached to the Agreement:

• Specification for the sale of real estate (Appendix No. 1) (if the Agent is selling the Principal’s property) or Specification for the acquisition of real estate (Appendix No. 1) (if the Agent is purchasing the property for the Principal);
• Agent's report (Appendix No. 2);
• ________________________________.

Addresses and payment details are filled in at the end of the agreement on the last page. Where the name of legal entities, location, TIN/KPP, OGRN, etc. are indicated.

Legal essence of the agency agreement

At its core, an agency agreement is closer to a service agreement, and its nature makes the subject of the agreement intermediary services. In paragraph 1 of Art. 1005 of the Civil Code of the Russian Federation states that an agent has the right to perform legal and other actions for his principal. This means that he can convince someone, check the readiness of something and the conditions for fulfilling various contracts, contact experts, analyze and disseminate information. In other words, act as if he were the principal, but without having his material interests. Moreover, his actions can be physical, but in such cases they are of an auxiliary nature. So, if a law firm has found some documents that require examination, its employees can deliver them to the principal. From this, the agent does not become a delivery service, but the action is performed by him as part of the execution of the same agency agreement.

The agent's behavior cannot be directed against the interests of the principal. For example, if under an agency agreement someone must sell an apartment, then he is obliged to set the average market price and strive to ensure that the sale and purchase transaction is completed in such a way that any discounts do not go beyond its limits. The very fact that the apartment will be sold at a price below the market price, if this happens, will be grounds to believe that the agent and the buyer have entered into a conspiracy and are committing an offense. If this is proven, the court may declare the transaction invalid on the basis of Art. 179 of the Civil Code of the Russian Federation. Clause 2 of this article will become relevant, which equates the concealment of certain circumstances to deception, and transactions made under the influence of deception are recognized by the courts as invalid.

The economic consequences of transactions relate only to the principal. Therefore, it is important to select only those agents whom the principals fully trust, and to enter into contracts with them correctly.

The legislation does not put forward any requirements for the preparation of agency agreements, therefore they are concluded according to the general rules governing all contractual relations in the Russian Federation. Obviously, the contract must stipulate the subject, subject and conditions, describe the duties and responsibilities of the parties, and ways to resolve disputes if they arise. The timing of its validity, which can be tied to the occurrence of some events, is also important. An important feature of an agency agreement is its continuing nature, compared to an assignment and a commission. It must be compiled in such a way that it is clear that it has time boundaries. For example, the formula “sell until you sell” indicates the presence of a clear time period. And the formula “try to sell, if it doesn’t work, then don’t sell” contains too vague indications of the nature of the relationship between persons and the responsibilities of the one who will sell not only to his actions, but also to the time at which the agreement will be relevant.

All this has a certain significance, since the form of the contract can be not only written, but also oral. But this does not mean that all people who were asked to do something, and did it in the interests of the person asking, acted as agents in the legal sense. The signs of an oral agreement of this type are compensation and clarity in indicating the nature of mediation and its goals.

The vast majority of agency agreements are in writing. Most often, the parties enter into agreements in such a way that they are permanent in nature and not related to the execution of one-time orders. For example, literary agents become intermediaries between writers and publishing houses, taking on responsibilities not only in managing the editing of works and their publication, but also in reaching bookstore shelves. They also organize meetings with readers and participation of writers in various conferences. And this can last forever as long as the writer and his agent are satisfied with everything.

The activities of some agents are specialized in nature and may affect public and state interests. In such cases, it is regulated by special legislation. It also indicates mandatory aspects that should be reflected in contracts. An example is the activity of a maritime agent, which is reflected in the Navigation Code.