The strategic location of Cyprus between three continents has always been considered ideal for trading purposes. Recently, and particularly since joining the EU in May 2004, Cyprus has shown appreciable growth as an international business and financial center.
The country has a free-market, open economy. The authorities have implemented simple administrative procedures to expedite matters for foreign entrepreneurs, reflecting the importance Cyprus attaches to the development of its potential as an international business center. The attraction of foreign capital has always been among the primary objectives of the island's development policy as it contributes to the introduction of high technology and increased export prospects.
The Constitution guarantees the right of private property and does not discriminate between Cypriots and non-Cypriots. Nationalization has never been part of government policy, nor is it contemplated in the future. Cyprus is a signatory to the Multilateral Investment Guarantee Agency Agreement and the Convention for the Settlement of Disputes between States and Nationals of Other States.
The legislation of Cyprus encourages foreign investment and the establishment of corporate bodies in Cyprus. The tax reforms of 2002 created a favorable business climate with the lowest rates of corporate tax and VAT in the EU. The Cyprus tax regime, which fully complies with EU and OECD guidelines, combined with an extensive network of tax treaties, makes cross-border operations highly tax-efficient.
EU accession has removed barriers to trade, resulting in an increase in imports and exports. The adoption of the fundamental principles of free movement of goods, services and persons which lie at the heart of the Single Market was a landmark development, not only for the law but also for the economy of Cyprus. Cyprus is essentially a common law country. Most statutes relating to business matters and procedures are modeled on English law, and English case law is closely followed. The continental system of administrative law according to which the legality of administrative decisions can be judicially controlled has been introduced and applied by virtue of the Constitution.
The administration of justice is exercised by the judiciary, which is a separate and independent body. There are six District Courts which exercise civil jurisdiction, and recourse for judicial review is to the Supreme Court. The Supreme Court hears all appeals and is empowered to pronounce final judgment in all cases of constitutional and administrative law.
General Environment for Agents and Distributors
Although agency and distribution law are relatively new areas of Cyprus law, the continuous development of the island's economy has made them very significant.
Sections 142-198 of the Contract Law, Cap. 149 ("the Contract Law") are the general legislative provisions governing this area of the law and essentially reflect common law. English common law principles are applicable where no express statutory provisions are made and also offer much guidance in interpreting the provisions of the Contract Law.
The legal framework with respect to commercial agents has been improved by two further pieces of legislation which are generally in line with EU legislation, namely:
- The Commercial Agents Law ("the Commercial Agents Law"), as amended by Laws 21(I) of 1994 and 148(I) of 2000; and
- The Regulation of Relations between Commercial Agents and Principals Law, Number 51(I) of 1992 ("the Regulation of Relations Law"), as amended by Law 149(I) of 2000.
In addition, on the basis of section 13 of the Commercial Agents Law, the Council of Ministers issued the Commercial Agents (Formation and Functioning of the Board, Registration of Members and Charges) (Amending) Regulations of 2003, which came into force on 1 May 2004.
What Is 'Agent'?
At common law the word agency is used to describe the body of general rules under which one person, the agent, has the power to change the legal relations of another, the principal.
Section 142 of the Contract Law defines an agent as: 'a person employed to do any act for another, the principal, or to represent the principal in dealings with third parties'.
The most important areas of law dealing with the power of the agent to bind the principal are the law of contract and the law of property. An agent may have power to bind his principal by contract and by acts connected with the performance of a contract, or he may have power to receive property for his principal or make a valid disposition of his principal's property. Similar reasoning may appear in areas such as torts or evidence.
The legal doctrines that have developed can be divided into two broad categories. The first category relates to the agent's power to bind his principal and is of great importance to third parties dealing with such agents. The second category concerns the rights and liabilities of the principal and the agent inter se and imposes fiduciary duties on the agent, and regulates his rights to remuneration and indemnity. The first category concerns the external aspects of agency, whereas the second regulates the internal aspects of agency.
Where the agent's authority results from a manifestation of consent that he should represent or act for the principal, expressly or impliedly made by the principal to the agent himself, the authority is called actual authority, express or implied.
Where the agent's authority results from such a manifestation made by the principal to a third party, the authority is called apparent authority.1 Section 147 of the Contract Law provides that implied authority may be inferred from the circumstances of the case. Any written or oral evidence or the usual business practice may be regarded as circumstances of the case. As a result, the agreement between agent and principal need not be contractual. An agent can act gratuitously. The consent may also be given subsequently by ratification.
Cyprus law recognizes seven categories of agents:
A general agent has authority to act for his principal in all matters concerning a particular trade or business, or to do some act in the ordinary course of his trade, profession or business, for example, as a solicitor or factor.
A special agent is an agent who has authority only to do some particular act or to represent his principal in some particular transaction not being in the ordinary course of his trade, profession or business as an agent.
A sub-agent is defined under section 151 of the Contract Law as 'a person competent to contract, employed by and acting under the control of the original agent in the course of business of the agency'.
Section 152 provides that if a sub-agent is properly appointed, the principal is, as far as third parties are concerned, represented by the sub-agent and is bound by and accountable for his acts as if he were an agent originally appointed by the principal. The agent is responsible to the principal for the acts of the sub-agent, and the sub-agent is responsible for his acts to the agent, but not to the principal except in case of fraud or willful wrong.2
Section 154 clearly states that where an agent appoints without authority a person to act as a sub-agent, the agent is liable for his acts both to the principal and to third persons. The principal is not represented by or liable for the acts of the sub-agent, nor is the sub-agent liable to the principal.3
The definition of a mercantile agent can be found in section 2(1) of the Sale of Goods Law, Law Number 10(I)/1994. He is the person who has in the customary course of his business as such agent authority either to sell goods, or consign goods for the purposes of sale, or to buy goods, or to raise money on the security of goods.4 The significance of the term 'mercantile agent' has been greatly reduced nowadays and has become very scarce.
A canvassing agent is a person who represents others, such as an estate agent or an insurance agent, in order to introduce business. Strictly speaking, canvassing agents are not agents in the legal sense but certain doctrines established by the law of agency, especially those relating to the fiduciary obligations they owe to the principal, are applicable.
Distributors and Franchises
Franchise holders and distributors of particular products are often referred to as agents. Though it is possible that such persons are agents in the sense that their obligation to their principal is that of an agent, even though they deal with the outside world in their own name, such persons are regarded at common law as purchasers for resale and agency principles are not strictly applicable.
A 'commercial agent' is defined by section 2 of the Commercial Agents Law as amended as:
Every legal or natural person who, by his capacity as an independent intermediary, has the permanent authority to negotiate on behalf of another person, the principal, the sale or purchase of goods or negotiate and conclude such actions in the name and on behalf of the principal.
Officers of companies or associations, partners, administrators appointed by the Court, insolvency practitioners, and liquidators are expressly excluded from the ambit of the definition. It should be noted that prior to the amendment of the Commercial Agents Law which took place in 1994 the definition of commercial agent covered distributors as well; Law 21(I) of 1994 amended the definition to exclude distributors.
The 1986 Law and its amending laws were enacted to align domestic law with European Union law, and contain similar provisions to those of the European Community's Council Directive 86/653/European Community ("the 1986 EEC Directive").
Section 3 of the Commercial Agents Law establishes a Council responsible for the registration of commercial agents and sets the qualifying conditions for registration. Under section 4, a register of commercial agents is established. Section 5 empowers the Council to remove the name of a commercial agent from the register in accordance with its provisions and also empowers it to issue regulations. Breach of any of the provisions of the Commercial Agents Law is an offence punishable by six months' imprisonment or a maximum fine of â,¬519, or both.
The 1992 Law regulating relations between commercial agents and their principals was enacted to align domestic law with Community law. It covers the duties of agent to principal and vice versa, remuneration and commission, termination of the contract and rights to indemnity and compensation upon such termination, and restraint of trade clauses.
Together, these laws incorporate verbatim the text of the 1986 EEC Directive on the coordination of the laws of member states relating to self-employed commercial agents. Consequently, any interpretation of the laws given by the European Court of Justice is likely to be followed by the Cyprus courts regardless of whether it follows common law principles.
Implementing regulations governing, inter alia, the procedure of registration and renewal of the commercial agent's annual license were passed in January 1988. The Cyprus National Committee of the International Chamber of Commerce (ICC) has implemented a firm policy to educate and train Cypriot businessmen on issues relating to the smooth conduct of international trade.
The ICC has prepared a model form of international commercial agency contract and distributorship contract to assist business people engaged in international trade. The model form of international commercial agency contract was prepared specifically to cover only international agency agreements with self employed commercial agents acting for the sale of goods.
The model form of a distributorship contract is intended to apply only to international agreements where distributors act as buyers or re-sellers and as importers in their own country. The set of uniform contractual rules devised by the ICC seeks to strike a balance by protecting the interests of both exporters and importers. At the same time, it attempts to provide flexibility by allowing the insertion of a choice of law clause. The ICC model form of contracts may offer useful guidance if adopted to meet the parties' specific requirements and the particular circumstances.
General Business Climate
As noted above, Cyprus has an open, free-market, economy. It is service-based with some light manufacturing. According to the latest IMF figures, Cyprus's per-capita GDP at purchasing power parity was (PPP) $28,256, placing it thirtieth in the world. The United Nations Human Development Index for 2010 ranks Cyprus thirty-fifth in the world as regards quality of life.
The government's economic policy is aimed at promoting and maintaining favorable investment conditions and supporting private initiatives. Foreign participation in the economy has been officially encouraged and liberalized for some time. Administrative procedures have been simplified and in all but a few strategic industries such as banking there are no limits on foreign investment. This has led to a growing awareness among foreign corporations and individuals of the particular advantages of using Cyprus as a business base for both inward and outward investment. In recent years, the inflow of approved foreign investment has increased considerably.
Cyprus has 24 bilateral treaties for the encouragement and reciprocal protection of investments and more are under negotiation. The purpose of the treaties is to create and maintain favorable conditions for investments made by nationals of one treaty state in the other treaty state for their mutual benefit on a long-term basis, to guarantee the protection of such investments (including the repatriation of profits) and to establish procedures for settling any disputes that may arise. Cyprus is a signatory to the convention which in 1988 established the Multilateral Investment Guarantee Agency, a member of the World Bank Group.
Import Regime, Customs and Duties
As an EU member, Cyprus is a member of the European Customs Union and applies the Community Customs Code. The EU and the neighboring Middle Eastern countries absorb the majority of Cyprus's exports.
Cyprus imports large quantities of durable consumer goods, capital equipment, and raw materials, mainly from the European Union, and oil from the neighboring Middle East countries in order to satisfy its growing domestic market and industrial needs.
Following the abolition of exchange controls on 1 May 2004, both residents and non-residents of Cyprus, whether individuals or corporate bodies, may hold and manage assets and liabilities in any currency and in any country, including freely convertible and transferable balances with banks on the island. There is no distinction between nationals of Cyprus, nationals of other EU member states or third-country nationals.
The Director of Inland Revenue, who also is the Commissioner of Income Tax and is responsible for tax policy and tax collection, administers the tax system in Cyprus.
Cyprus has a modern tax system which is among the world's most business friendly. It is fully compliant with EU and OECD best practice and Cyprus is on the OECD's "white list" of jurisdictions complying with the global standard for tax cooperation and exchange of information.
Cyprus residents are taxed on the basis of worldwide income, irrespective of whether it is remitted to Cyprus. The tax year is the calendar year. An individual is resident in Cyprus if he is physically present for more than 183 days in the tax year. For companies, the test for residence is the locus of management and control. A company is regarded as resident in Cyprus if it is managed and controlled in Cyprus. Mere registration or incorporation in Cyprus may not be enough to render a company liable to tax in Cyprus.
Non-resident individuals and companies are subject to tax on income accruing or arising from sources in Cyprus. There is a comprehensive participation exemption and a wide network of double tax treaties offering attractive tax planning opportunities. Combined with the lowest corporate tax rate in the EU and low rates for individuals, these make the Cyprus tax regime one of the most attractive in the EU.
Value Added Tax
The value-added tax (VAT) registration threshold is â,¬15,600 per annum. Cyprus's standard rate of 17 per cent is among the lowest in the EU and reduced rates of five per cent and eight per cent apply to certain goods and services. Businesses that do not have trading activities within the EU need not register for VAT but, if they do not, they will be unable to recover input tax.
Formation of Agency Relationship
Creation of Contract
A contract of agency may be created by:
- Express appointment;
- Implication of law from the conduct or situation of parties or from the necessity of the case; or
- Subsequent ratification by the principal.
The actual relationship of the parties is determined by all the circumstances of each case and not merely from the use of the word 'agent' or 'agency' in an agreement. The relationship of principal and agent can only be established by the consent of both parties. An agency relationship usually arises by way of an agreement. However, this need not be in writing.
Section 143 of the Contract Law provides that any person who has capacity to contract may appoint an agent. Section 11 provides that any person of sound mind whose capacity to contract is not restricted by reason of any other law has capacity to contract. The law applicable in England concerning contracts concluded with minors is applicable in Cyprus in contracts concluded with any person under the age of 18.
Under the Companies Law, Cap. 113 ("the Companies Law"), which closely resembles the United Kingdom Companies Act 1948, a company registered in Cyprus has capacity to enter into any contract or to do any act provided for in its memorandum of association.
Agent's Rights and Duties
Under section 171 of the Contract Law, it is an agent's duty to conduct the business of his principal in accordance with the directions given by the principal. If the agent encounters difficulties, he is obliged to communicate with the principal and seek to obtain his instruction.5 In the absence of any such directions, the agent is bound to conduct the business according to the prevailing trading customs of the particular business at the place where the agent conducts such business.
If the agent does not comply with these requirements and any loss or damage results, the agent is liable to compensate the principal. If any profit accrues, the agent must account to the principal for it.6
Section 172 places agents under a duty to conduct the business of the agency with the skill and diligence generally possessed by persons engaged in similar business.
An agent must exercise reasonable care in the execution of his duties. What is reasonable will depend on the circumstances of the given case and trade practice. If direct and foreseeable losses result from the agent's negligence, want of skill or misconduct, the agent is liable to compensate the principal. However, an agent is not liable if the damage is unforeseeable or too remote.
The agent must submit proper accounts to the principal upon request.
Section 3 of the Commercial Agents (Amendment) Law 1994 ("the 1994 Law"), which amended section 4 of the Commercial Agents Law, provides that not every person is capable of becoming a commercial agent.
The necessary requirements are that the commercial agent:
- Should not have been convicted within the last 10 years from the date of the submission of the application of any offence under the Exchange Control Law, or the Customs and Consumption Taxes Law or any other offence which entails immorality or dishonesty;
- Should never have been declared bankrupt; and
- Should be a high school graduate.
Section 3 of the Regulation of Relations Law places a commercial agent under a general duty to act according to the law and in good faith vis-Ã -vis the principal and act in the best interests of the principal. Specifically, every commercial agent is under a duty to put every possible effort to negotiate or conclude the transactions entrusted to him and pass to the principal all necessary information he has acquired.
Under section 9 of the Commercial Agents Law breach of any of the provisions of the law renders commercial agents liable to a fine of up â,¬519, up to six months' imprisonment or both.
Under section 182 of the Contract Law, the principal is obliged to indemnify the agent against the consequences of every legal act of the latter within the authority conferred on him. The principal must indemnify the agent under the consequences of any act performed under his instructions by the agent in good faith even if they harm third parties' rights. However, the principal is not liable as against his agent to indemnify him for any act entailing criminal liability even if performed under his command. Under section 185, the principal is under a duty to compensate the agent for damage or any loss incurred by the agent as a result of the principal's omission or lack of skill.
The principal has the right to repudiate the agency agreement if the agent, in the course of conducting the agency business, transacts for his own benefit and without the principal's consent, provided that it is obvious either that the agent dishonestly failed to disclose to the principal any material fact or that the transactions of the agent have damaged the principal. In such case, the principal may claim from the agent any profit the latter has acquired from such transactions.
Express or Implied Authority
The authority of an agent may be express or implied. If there is an express agreement between principal and agent, this agreement will regulate their relationship. The scope of the agreement is determined by applying the ordinary principles of the construction of contracts, including any proper implications from any express words used, trading customs, and the course of business between the parties.7
The agreement may be contractual, in which case the relations between principal and agent are regulated by the law of contract.
However, an agency may be implied where each party has acted in a way that would be reasonable for the other to infer from his conduct that they have consented to an agency relationship.
A contract entered into through an agent, and any obligations arising from the acts of the agent, may be enforced in the same manner and will have the same legal consequences as if the contract had been entered into and the acts done by the principal in person.8
An agent having authority to do an act has authority to do every lawful thing that is necessary to complete such an act. An agent having authority to carry on a business has authority to do every lawful thing necessary for the purpose, or usually done in the course of conducting such business. In an emergency, an agent has authority to do whatever is necessary to protect his principal from any loss.9
If an agent appoints and delegates the execution of acts and duties to a subagent, without express or implied authority to do so, the agent is liable for the sub-agent's acts both to the principal and to third parties.
The principal is not represented by the sub-agent nor is he responsible for the acts of the sub-agent, nor is the sub-agent accountable or liable to the principal. Where an agent has express or implied authority to appoint a person to act for the principal in the business of the agency, such a person is not a sub-agent but an agent of the principal for such part of the business of the agency as is entrusted to him. So long as the agent exercises the diligence of a man of ordinary prudence in selecting a sub-agent, the agent is not responsible to the principal for the acts or negligence of the selected sub-agent.10 Section 14 of the Regulation of Relations Law provides that the parties to a commercial agency agreement must conclude and sign a written contract which will determine the terms of the commercial agency agreement and any other terms which are to be agreed on subsequently.
Section 15 provides that where the parties to a commercial agency agreement of a defined duration continue to assume obligations after its expiry, the agreement is transformed into a commercial agency agreement of indefinite duration.
Mandatory, Prohibited or Reserved Activities or Purposes
Section 156 of the Contract Law provides that where one person acts on behalf of another without that person's knowledge or authority, the latter may elect to ratify or to disown such acts. If he ratifies them, the same effects will follow as if they had been performed with his authority.
Ratification may be express or may be implied by the conduct of the person on whose behalf the acts are done, but there can be no valid ratification by a person whose knowledge of the facts of the case is materially defective.11 An authorized act done by one person on behalf of another which, if done with authority, would have the effect of subjecting a third person to damage, or of terminating any right or interest of a third person, cannot by ratification be made to have such an effect.
Actual (Express) or Implied Authority
An agent who is appointed by a contract must act in accordance with the terms of that contract and may not exceed his authority. The authority of an agent may be actual (express or implied) or apparent. Actual authority is the authority which the principal has given the agent wholly or in part by means of words or writing (express), or is regarded by the law as having been given to him because of legal interpretation or the relationship and dealings of the two parties (implied).
An actual authority is a legal relationship between principal and agent created by a consensual agreement to which they alone are parties. Its scope is to be ascertained by applying ordinary principles of construction of contracts, including any proper implications from the express words used, the usage of the trade, or the course of the business and the parties. Where the express authority is not clear the court will interpret it.
Apparent authority involves the assumption that there is no authority at all. Under this doctrine, where a principal represents that another person has authority, he may be bound as against a third party by the acts of that person within the authority which that person appears to have; in such a case the principal may be bound although he had not given that person such authority or had limited that authority by instructions not made known to the third party. The authority, express or implied, of every agent is confined within the limits of the powers of his principals.
If an agent deals on his own account in the business of the agency without first obtaining the consent of his principal and acquainting him with all material circumstances which have come to his own knowledge on the subject, the principal may repudiate any transaction in respect of which any material fact has been dishonestly concealed from him by the agent, or where the dealings of the agent have been disadvantageous to him. The principal is also entitled to claim from the agent any benefit that may have resulted to the agent from the transaction.
Contracts entered into through an agent and obligations arising from acts done by an agent may be enforced in the same manner and will have the same legal consequences as if the contracts had been entered into and the acts done by the principal in person. If an agent exceeds his authority and the authorized and unauthorized elements can be separated from each other, then the authorized element will be binding upon the principal. The principal may choose to affirm or reject the unauthorized element.12
However, where the unauthorized act cannot be separated from the authorized act the principal is not bound to recognize the transaction. Any notice given, or information obtained by the agent, in the course of the business transacted by him for the principal, will have the same legal consequences as between the principal and third parties.13
Unless it is a term of any contract, an agent cannot personally enforce contracts entered into by him on behalf of his principal, nor do they personally bind him. Such a term will be presumed to exist where:
- The contract is made by an agent for the sale or purchase of goods to a merchant who is residing abroad;
- The agent does not disclose the name of his principal; and
- The principal, though disclosed, cannot be sued.14
Where an agent, acting without authority, assumes obligations on behalf of his principal towards third parties, the principal is bound by such acts or obligations if his words or his conduct had induced third parties to believe that such acts and obligations were within the agent's authority.
Similarly, misrepresentations made or frauds committed by an agent, acting in the course of his business for his principal, have the same effect on agreements made by the agent as if they had been made or committed by the principal.
However, where the agent has made misrepresentations or committed fraud in matters which do not fall within his authority, the principal is not liable.15 Under the Regulation of Relations Law,16 the commercial agent must, during the exercise of his duties, act according to the law and in good faith towards the principal and safeguard the principal's interests.
Every commercial agent is under a statutory duty to:
- Make proper efforts to negotiate and, where appropriate, conclude the transactions appointed to him; and
- Communicate to his principal all the relevant information available to him.
Disclosed and Undisclosed Agency
A 'disclosed principal' is a principal, whether identified or unidentified, whose existence as principal is known at the time of the transaction to the person dealing with the agent (namely, the third party). An 'undisclosed principal' is a principal whose existence as principal is not known at the time of the transaction to the person dealing with the agent. In cases of undisclosed agency, the principal may usually bring an action as well as the agent, unless the contract includes some express or implied provision that preludes the principal from doing so. The doctrine of undisclosed agency has been severely criticized as being anomalous as it is in breach of the rules of privity (since it allows the bringing of an action by someone who was not a party to the contract) and is unfair to the contracting party who is not aware of the identity of the person with whom he is contracting. It is, however, often justified on the basis of commercial interests.
Commission on Sales
It is the duty of the principal to pay his agent any commission or other remuneration agreed on. Where there is an express term as to payment, this will determine the basis and amount of remuneration. There is an implied agreement to pay remuneration whenever a person is employed to act as agent in circumstances which raise the presumption that he would, to the knowledge of his principal, have expected to be paid.
In Tsamkoshoglou Trading Company v Cytechno Limited,17 it was held that an agent is entitled to his commission at the time he earns it. An agent has earned his commission when the agent has brought about the event on which commission is to be paid. The question whether the event has happened is a matter of interpretation of the mandate given to the agent.
The case of Kokkinomilos v Kalisperas18 decided the issue as to when the principal must pay an agreed commission to the agent, despite the fact that the sale was effected after the termination of the agency contract. The judgment is based on the construction of the agency agreement and does not create any new principles.
As established under common law, subject to any special term in the contract, the agent will not be entitled to commission unless he can show that the transaction which the third party entered into was due to his direct intervention.
The agent is still entitled to his commission if the principal contracts at a lower price or on terms other than those the agent was authorized to offer, provided that the contract as finally concluded is merely a different way of carrying out the same contract the agent was employed to arrange.
However, in such a case the terms of the agency contract will be strictly scrutinized to ascertain whether the agent was the effective cause. In Socrates Eliades v Pantelis Petrides,19 it was held that contracts under which a principal is bound to pay commission for an introduction which does not result in a sale must be expressed in clear language.
An agent is entitled to remuneration for his services as agent, if either the express or implied terms of any agency contract so provide. Where the contract contains express terms, the agent cannot claim remuneration other than in accordance with those terms.
In the absence of express terms, the right to claim any remuneration and the amount and terms of payment are determined by such terms as may be implied. In deciding what terms are to be implied the court must consider:
- All the circumstances of the case;
- The nature and duration of the services;
- The express terms of the contract; and
- The customs and usage of the particular trade.20
In the absence of any factors to the contrary, a term will be implied to hold that the agent is entitled to reasonable remuneration.
These principles were applied in the following cases:
- JF Aho Et Fils Trading Under the Style Societe BEPIN and Another v Photos Photiades & Co;
- Orphanides v Michaelides; and
- Ioannis Patsalides v Georghios Th. Takkas.
In JF Aho Et Fils Trading Under the Style Societe BEPIN and Another v Photos Photiades & Co,21 the court held that the contract should be interpreted and applied as if the parties had made it, if made at all, and the court should not tailor the contract for the parties or reconstruct an agreement on equitable principles.
Where the agent is to be remunerated on the happening of an event, the question whether that event has occurred depends on the facts of the case and the express or implied terms of the agency contract.
In Ioannis Patsalides v Georghios Th. Takkas,22 Artemis DJ said: The obligation of the principal to pay remuneration (commission) to the agent exists only where it has been created by an express or implied agreement and such obligation arises mainly where the agent has earned it.
An agent is entitled, from the sums received on account of the principal, to retain any remuneration due to him for acting as agent, as well as advances he has made or expenses incurred by him in conducting the agency business. Subject to these deductions, the agent must pay to his principal all sums received on account.23
As previously stated, when there is an express contract providing for the remuneration of the agent, the amount of remuneration and conditions under which it becomes payable must be ascertained from the terms of the contract. In the absence of any special contract (which includes a contract arising by implication from custom or usage), payment for the performance of any act is not due to the agent until the completion of the act.
However, an agent may hold back moneys received by him on account of goods sold, even though the whole of the goods consigned to him for sale may not have been sold, or the sale may not be actually complete. Further, an agent is entitled to retain goods, papers and other property, whether movable or immovable, of the principal until the amounts due to him for commission, disbursements and services have been paid or accounted for.24
If services are rendered by the agent not pursuant to a contract, but the principal with full knowledge freely accepted them, the courts may award a reasonable sum to the agent as remuneration on a quantum meruit basis.25
If an agent is guilty of misconduct in the business of the agency, he is not entitled to any remuneration with respect to delinquent business. In Socrates Eliades v Pantelis Petrides, the court stated that:
A principal is entitled to have an honest agent and it is only the honest agent who is entitled to any commission; if an agent directly or indirectly colludes with the other side and so acts in opposition to the interest of his principal, he is not entitled to any commission.
Part III of the Regulation of Relations Law reflects the above principles and provides that, in the absence of an agreement between the contracting parties in relation to the amount of the remuneration, the commercial agent is entitled to a remuneration according to the trade customs which prevail in the place where he carries on his business. In the absence of such trade customs, the commercial agent is entitled to a reasonable remuneration, taking into consideration all the material facts of the commercial transaction.26
1 Bowstead on Agency, 14th Edition.
2 Contract Law, Cap 149, ss 151-152.
3 Contract Law, Cap 149, s 153.
4 Sale of Goods Act, Cap 267.
5 Contract Law, Cap 149, ss 172 and 174.
6 Contract Law, Cap 149, s 171.
7 Contract Law, Cap 149, s 146.
8 Contract Law, Cap 149, s 186.
9 Contract Law, Cap 149, ss 148-149.
10 Contract Law, Cap 149, ss 153-155.
11 Contract Law, Cap 149, ss 157-158.
12 Contract Law, Cap 149, ss 186-187.
13 Contract Law, Cap 149, s 190.
14 Contract Law, Cap 149, s 190.
15 Contract Law, Cap 149, ss 197-198.
16 Law Number 51(I), 1992, s 3(1) and (2).
17 Tsamkoshoglou Trading Company v Cytechno Limited (1974) 11 JSC 1124.
18 Kokkinomilos v Kalisperas (1967) 19 JSC 1999.
19 Socrates Eliades v Pantelis Petrides (1972) 1 CLR 5.
20 Read v Rann, 1830, 10 B&C 438.
21 Civil Appeal Number 4704-1968.
22 Ioannis Patsalides v Georghos Th Takkas, 1974.
23 Contract Law, Cap 149, ss 177-178.
24 Contract Law, Cap 149, ss 179-181.
25 Tsamkoshoglou Trading Company v Cytechno Limited (1974) 11 JSC 1124.
26 Law Number 51(I) of 1992, s 5.
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