Act CXVII of 2000 on the Commercial Representation Contracts of Self-employed Commercial Agents
|•||1 month if less than or equal to 1 year|
|•||2 months if more than 1 year and less than or equal to 2 years|
|•||3 months if more than 2 years|
Indemnity or compensation or both
Calculation of indemnity/compensation
|•||Capped at a maximum of the average annual commission over last 5 years or, if less than 5 years, over the agency|
|•||Agent may also be entitled to damages in case the indemnity does not cover his damage for loss of customers|
Act CXVII of 2000 on the Commercial Representation Contracts of Self-employed Commercial Agents (the “Act”)
1) Under Hungarian law is it possible to have a restraint of trade clause operating during the agency agreement and, if so, is it subject to any qualifications?
Section 6 (2) of the Act requires the prior consent of the principal if the commercial agent wishes to enter into another commercial agency contract for transactions of a similar nature and under the duration of the commercial agency agreement. The consent must be given in writing.
2) Under Hungarian law is it possible to have a restraint of trade clause operating following the termination or expiry of the agency agreement and, if so, is it subject to any qualifications?
Section 22 of the Act has the same scope of application as Article 20 of the Council Directive 86/653/EEC, setting forth the same definition for restraint of trade clauses as the Directive.
Similarly to the Directive, a restraint of trade clause shall be valid only if concluded in writing for not more than two years after termination of the agency contract. However, unlike the Directive, the wording of the Act only allows restraint of trade clauses relating to the scope of activity covered by the agency under the contract, while the wording of the Directive allows restraints relating to the geographical area or the group of customers and the geographical area entrusted to the commercial agent and to the kind of goods covered by his agency under the contract.
Furthermore, the Act - contrary to the Directive - requires that the agent receives compensation for the restraint. Also, the Act specifies that if the commercial agent has terminated the contract with immediate effect on the grounds of the principal's breach of contract, the agent may also terminate the restraint of trade clause in writing within one month from the termination of the contract.
It should be noted that such a restraint of trade clause (either during or following the expiry of the agency contract) may be qualified as a restrictive agreement under competition law and may be subject to the approval of the Hungarian Competition Office pursuant to the Competition Act.
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