AGENCY LAW IN HONG KONG
The law of Hong Kong does not specifically afford any statutory rights and protection to “commercial agents” except in relation to “mercantile agents”. However, there is a general body of common law governing relations between principals and agents.
Common law and Statutory provisions
Under Hong Kong common law, agency law represents a body of general rules deriving principally from the law of contract. The common law also governs the rights and liabilities of principal and agent.
Parties to agency contracts may be able to contract out of the relevant common law provisions to the extent permitted by the law.
The Factor Ordinance Chapter 48 of the Laws of Hong Kong (“Factor Ordinance”) governs the rights and obligations of mercantile agents.
An agent is generally defined as a person who has the power to affect the legal relations of another person, the principal, with other third parties. This may be in relation to the sale or purchase of goods or services.
There is no statutory or common law definition of a commercial agent. However, there are statutory provisions relating to mercantile agents, defined in the Factor Ordinance. Under the Factor Ordinance the agent must be in the business of buying and selling or raising money for others to be defined as a mercantile agent.
There is no statutory definition of a principal, but case law has generally provided that a principal is the party who has granted an agent the power to affect his relationship with a third party.
Termination and assignment
Agents in Hong Kong are not entitled to any statutory notice period in relation to termination. The parties are free to agree both notice period and a form of notice. Where an agreement is silent on the notice period, the circumstances prevailing at the time when the contract was made generally determine the length of reasonable notice.
At common law, in order to revoke the authority of an agent the principal must give sufficient notice. Otherwise, it will constitute wrongful termination and a breach of contract.
An agent’s right to receive pre-termination commission depends on the terms of the agency contract. However, termination does not affect accrued rights. Consequently, the agent has the right to be paid for remuneration earned before but not payable until after termination. But the agent is only entitled to remuneration on transactions effected by the principal after termination if the agreement clearly provides so.
In relation to post-termination commission, the agent is not usually entitled to commission for bringing about a transaction on behalf of his principal unless he is able to prove that his services were the effective cause of the transaction. In contrast, the agency agreement will usually provide that the entitlement to commission will cease upon termination of the agency.
In relation to back commission, the agent will normally be entitled to commission if he causes a person to enter into negotiation with the principal and form a contract with no significant break in negotiations. Subject to any express terms or contrary clauses in the contract, an agent should be entitled to back commission.
If confidential information is involved an agent can only delegate the task entrusted to him with the express or implied authority of the principal. However, where no confidential information is involved, authority to delegate is implied.
Choice of law and jurisdiction
The parties may agree to submit disputes arising out of a particular transaction exclusively to the courts of their particular jurisdiction and chose the applicable law.
Where the agreement is silent, the courts of Hong Kong will generally consider factors such as the place of performance of the contract, the parties respective domiciles and even peripheral matters such as the language and currency which is used in the contractual documentation in order to determine whether it has jurisdiction and, if so, what is the applicable law.
The substantive laws of the Peoples Republic of China are treated as foreign law for Hong Kong.
Agentlaw.co.uk wishes to thank Fairbairn Catley Low and Kong of Hong Kong for its contribution to this page