In Uruguay the Code of Commerce 1865 (“the Code”) provides the rules that govern all contractual relationships between parties. In the absence of an express agency agreement, the provisions contained in the Code will apply to the relationship between commercial agents and principals. Unlike the European Directive on Self Employed Agents, the Code does not specifically protect the rights of agents, but applies to contracts generally. Currently, there is no new proposed legislation to explicitly protect agents’ rights in Uruguay.
The term “commercial agent” is defined as an individual, company or partnership ‘assuming the duty to promote or conclude, on behalf of another person or entity, a transaction or agreement regarding orders for the sale of goods or services’. Consequently a “principal” is an ‘individual or company on whose behalf the agent promotes business’.
There is no special protective legislation in Uruguayan Law. Parties are permitted to contract freely, and only on failing to do so, will the Code prevail. If the parties wish to exclude the Code, they must prepare a full and precise contract to reflect both parties’ intentions. The agreement must satisfy the general principles of contract, such as the duty of good faith.
Uruguayan law does not exclude agents whose agency activities are secondary (i.e. not the primary purpose of their agency agreement with their principal). Neither of the contracting parties may assign the agency agreement to another party unless an express provision in the agreement authorises assignment.
If a contracting party wishes to terminate the agency agreement, it must give reasonable or adequate advanced notice prior to terminating the agreement. The notice must be made in writing and delivered to the other contracting party by a reliable means of communication.
Occasionally, certain acts may be appropriate as a tacit form of notice.
The agency agreement may include a clause providing for a termination indemnity. However in principle, in the absence of such an express provision, the agent is entitled to such an indemnity only in lieu of reasonable advanced notice.
The parties are generally free to agree the indemnification terms in the manner they deem most adequate. For an early termination of an agency agreement of indefinite term, the general rule suggests that indemnification should be in line with net profits corresponding to the omitted pre-notice period, (i.e. the amount due for the full term had there been advanced notice of termination) in the absence of relevant contractual provisions in this regard.
Where an agent suffers damage and lost profits in excess of the amount of indemnity, the agent may claim compensation for the excess damage. However, there are no punitive damages in Uruguayan law. An agent’s loses its entitlement to damages and/or indemnity where the agent has breached the agreement.
Under Uruguayan Case law a terminated agent is entitled to the following commission:
Pre-termination commission, i.e. commission on transactions concluded during the agency contract. The agent is entitled to commission on transactions which are mainly attributable to work done by the agent during the agency contract.
Post-termination commission, i.e. commission on transactions concluded within a reasonable period after the agency contract has terminated. The agent is entitled to commission on transactions which are mainly attributable to work done by the agent during the agency contract.
Back commission, i.e. commission on orders obtained by the agent and accepted by the principal, but where the customer does not pay the principal in respect of the order for a reason for which the principal is to blame (for example, delivery of defective goods). Normally the agency agreement will specify the precise treatment of commission, in the absence of any specific case law
According to the Code the agent has no other entitlements on termination of the agency agreement. However, in case of breach, the appropriate remedies are compensation for damages and lost profits.
Choice of Law and Jurisdiction
Uruguayan law will apply even if the agency agreement provides for the law of another country to govern the contract. However, as a Hague Convention signatory, Uruguayan law permits the courts of another country to have jurisdiction over the agency agreement.
agentlaw.co.uk wishes to thank Estudio Bergstein of Montevideo for its contribution to this section.