For instance, a foreign agricultural machinery company can hire an agent in Santa Cruz to represent its commercial interests without the need to incorporate locally.
WHAT IS AN AGENCY AGREEMENT AND HOW DOES IT WORK?
An agency agreement establishes a commercial relationship whereby an agent acts as an intermediary to promote or develop business activities within a specific sector and defined geographic area. The agent retains legal and operational independence, which allows them to engage in other business activities, unless otherwise agreed by the parties.
WHAT ARE THE LIMITATIONS OF AN AGENCY AGREEMENT?
One of the most important clauses in an agency agreement is the non-compete clause. Unless expressly agreed otherwise, the agent is prohibited from representing competing businesses within the same industry and territory. Likewise, the principal is not allowed to appoint other agents in the same sector and geographic area. These restrictions aim to protect the commercial interests of both parties and prevent conflicts of loyalty or unfair competition.
REMUNERATION IN AN AGENCY AGREEMENT
The agent is entitled to receive compensation for each transaction promoted, whether concluded directly or through the intervention of the principal. This remuneration must be specified in the contract. If the agreement does not define the form or timeline for payment, the agent may demand payment within thirty days of the transaction’s completion.
If the principal agrees to cover agency expenses, reimbursement must be made under the terms previously established. Moreover, the agent retains the right to receive compensation for deals that were not finalized if the failure was attributable to the principal—unless otherwise stipulated in the agreement.
AGENT’S OBLIGATIONS UNDER THE AGENCY AGREEMENT
The agent is required to fulfill the mandate in accordance with the agreed terms, following the principal’s instructions. They must report on market conditions in the assigned territory, provide regular performance reports, and refrain from collecting payments without express authorization. The agent cannot modify prices, offer discounts, or grant payment terms without prior approval, ensuring that the principal retains reasonable control over the commercial strategy.
CAUSES FOR TERMINATION OF AN AGENCY AGREEMENT
Several causes can lead to the termination of an agency agreement. These include breach of contractual obligations, significant harm to either party’s interests, a notable decline in the volume of business entrusted to the agent, as well as unforeseen events such as bankruptcy, death, or incapacity of either party. The contract also ends upon expiration of its term, unless a renewal or extension has been agreed upon.
In summary, the agency agreement is a legal framework that enables business expansion without the need to establish branches or subsidiaries. Its regulation covers essential elements such as agent independence, protection against unfair competition, fair compensation, and clearly defined termination conditions. Bolivian law applies to the execution of the agreement within the country, even if it was signed abroad—affirming national legislative sovereignty over commercial activities conducted in Bolivia.
Our law firm offers specialized legal advice on agency agreements, including drafting, reviewing, execution, and dispute resolution. If you have questions or need legal assistance in this area, please feel free to contact us.
Frequently Asked Questions (FAQs)
Is agency agreement registration mandatory?
Yes, it must be registered with the Registry of Commerce to be enforceable against third parties.
Can the agent represent other businesses in the same sector?
No, unless expressly authorized by agreement, it is prohibited by law to prevent conflicts of interest.
What happens if the agreement is signed abroad?
If the agreement is executed within Bolivia, Bolivian law applies without exception.
When can the agent demand payment?
If no other payment deadline is agreed upon, the agent may request payment within thirty days of the transaction’s completion.
Does the contract automatically terminate when the term ends?
Yes, unless there is a renewal or extension clause in place.
The content of this article does not reflect the technical opinion of Rigoberto Paredes & Associates and should not be considered a substitute for legal advice. The information presented herein corresponds to the date of publication and may be outdated at the time of reading. Rigoberto Paredes & Associates assumes no responsibility for keeping the information in this article up to date, as legal regulations may change over time.
