Agency and Distribution in Bosnia and Herzegovina

First part

agency and distribution
Agency and distribution

Introduction on agency and distribution contracts

Institute of agency is not explicitly regulated by any of the valid laws in B&H. Having in mind, the definition of the agency as contractual relation between two parties, in which on party – agent – functions in the interest and under control of other party –client, above mentioned Institute is independent contract, which, on the territory of B&H, are regulated by Law on Obligatory Relations, primary to contract on trade representation.

Accordingly, the issues relating to implementation of this contract are being resolved by the implementation of general provisions of contractual law consisted in the following laws: the Law on Obligatory Relations (“Official Gazette SFRJ” number: 29/78), which has been taken over in FB&H by the Law about taking over of the Law on Obligatory Relations (“Official Gazette SFRJ” number:2/92) and the Law on Obligatory Relations (“Official Gazette SFRJ” numbers: 29/78, 39/85, 45/89, 57/89 and “Official Gazette RS”, numbers: 17/93, 3/96, 39/2003 and 74/2004) which has been taken over in the RS by the Constitutional Law for Implementation of the RS Constitution (“Official Gazette RS” number: 21/92).

Bearing in mind the similarity of provisions of these two laws originating from the same Law on Obligatory Relations, in further text they shall be jointly referred to as the “Laws on Obligatory Relations”. Furthermore, the Law on Resolving the Issues of Conflicting Laws and Regulations of Other Countries (“Official Gazette” number: 43/82), which has been taken over by the Law about taking over of the Law on resolving the issues of conflicting laws and regulations of other countries (“Official Gazette R BiH” number: 2/92) and the Law on Resolving the Issues of Conflicting Laws and Regulations of Other Countries (“Official Gazette SFRJ” numbers: 43/82 and 72/82) which has been taken over in the RS by the Constitutional Law for Implementation of the RS Constitution (“Official Gazette RS” number: 21/92) stipulates possibility of implementation foreign laws and jurisdiction of courts.

Having in mind legal nature of the agency and its analogy primarily with contract on trade dealership, regulated by the Law on Obligatory Relations, short overview of general issues in relation to above mentioned law, will be given here.

Term of contact on trade dealership and contractual parties

According to the Law on Obligatory Relations, dealer commits himself, by the contract on trade dealership, to make sure that the third parties conclude contracts with his order-issuing authority, and in that context, liaises between them and the order-issuing authority as well as concludes contracts with third parties in the name and in the interest of order-issuing authority, upon receiving of authorization. As opposed to that, order-issuing authority, commits oneself to settle certain remuneration (commission) to dealer, for every concluded business. With this, exclusive rights for dealer, need to be explicitly contracted, considering that the above mentioned Law, starts off from the non exclusivity of the dealership, determining that order-issuing authority can have more dealers, for the same type of business, on one territory.  Contract on trade dealership must be concluded in writing form.

Contractual Parties of agency and distribution contracts

Contractual parties with the contract on trade dealership, are “consignee” and “dealer”.  Ability of foreign entity to act as an order-issuing authority, or the consignee is to be estimated in accordance with  Law on Resolving the Issues of Conflicting Laws and Regulations of Other Countries (“Official Gazette R B&H” number: 2/92) depending on the domicile right of the consignee. With the contract on trade dealership, with the international element, subjects that have B&H determination, in accordance with the Law on Foreign Trade of B&H, can conclude contract if they are registered for conducting of Foreign Trade business. 

Responsibilities of the order-issuing authority

In the purpose of allowing the performance of activities of the dealer, order-issuing authority is obliged to deliver necessary material and documentation to the same. Since order-issuing authority can freely accept or reject entering into agreement/contract prepared from a side of dealer, the same is responsible to inform dealer, without delay, about decision made, as well as about the need to decrease the extend of businesses concluded by dealer’s liaison. Also, one of the most important responsibilities of the order-issuing authority is settlement of remuneration for the dealer.

In addition to everything already mentioned, order-issuing authority is obliged to reimburse, to the dealer, special expenses, which have not been accounted into commission, and which are result of the activities of the dealer in the interest of order-issuing authority or in accordance with order-issuing authority’s order. At last, order-issuing authority is obliged to cope with law of pledge of the dealer on the amounts which the dealer collected in the name of order-issuing authority and in accordance with the authorization of the order-issuing authority, and on all of the order-issuing authority’s belongings that the dealer received from the order-issuing authority or third party, in accordance with the contract, as long as mentioned belongings are in the possession of the dealer.

Responsibilities of the dealer within agency and distribution

Primary obligation of the dealer is permanent research of market and detection of  potential contractors, and in accordance with this, permanent liaison for the order-issuing authority and concluding of contracts in its name and its interest, upon receipt of the authorization from the side of order-issuing authority. With this, the dealer cannot request or receive fulfillment of claims of its order-issuing authority, if not authorized for that.  In accordance with main responsibility of the dealer, the same is responsible to perform in accordance with the orders from the order-issuing authority, as well as to inform order-issuing authority about market circumstances important for the concluding of each individual legal affair.  In addition to already mentioned, the agent is responsible to keep all of the information about order-issuing authority, its partners and their relations, as business secret. After the termination of the contract, the dealer is responsible to return to order-issuing authority, all of the belongings given for the use from the side of the order-issuing authority, for the period of time of duration of the contract.

Responsibilities between order-issuing authority and the dealer

Considering that the relations between order-issuing authority and the dealer are based on the contract about trade dealership, the reason for the responsibility of contractual parties is non-execution or false execution of the contractual responsibilities, on which occasion the responsibility is based on the existence of culpability on one of the contractual parties, so that the general rules about responsibility under the Law on Obligatory Relations, are implemented.  Also, by regulating the issue of termination of contract on trade dealership, Law on Obligatory Relations determines obligation of the order-issuing authority to remunerate to dealer, the damage of the lost commission, in cases of termination of the contract about trade dealership for which the dealer ha to cease its activities. As opposed to that, the dealer is obliged to remunerate to order-issuing authority, the damage incurred for the reasons of groundless termination of the contract about trade dealership.

The contract on trade dealership can be ceased by the expiration of contract, accomplishment of the agreement or termination of contract, which can occur based on the agreement of the parties or based on their termination.   Each party can terminate the contract about trade dealership, unilaterally, with the allowance of termination period. Parties can agree upon duration of termination periods, but the same ca not be shorter than one month.  According to Law on Obligatory Relations, the termination needs to be given at least one month prior to expiry of calendar term, and if the contract about trade dealership lasted more than three years, then the mentioned period cannot be shorter than two months. Contract is considered ceased on the day of expiry of calendar term, which follows beforehand termination of the contract.

As opposed to this, it is possible to terminate contract about trade dealership, without respecting of contractual or terms regulated by the law, for the serious reasons, but this type of termination of contract gives the right for the reimbursement of the damage caused, to the other contractual party.

Please note that this information is given on the basis that it is to be governed by and construed in accordance with the laws of Bosnia and Herzegovina, without review of any document, contract or legal document.