Commission Contract
Commission – under a commission contract, one party (the commission agent) undertakes, at the request of the other party (the principal), to conclude one or more transactions in their own name but at the expense of the principal, for a fee. Under a transaction concluded by the commission agent with a third party, the commission agent acquires the rights and obligations, regardless of whether the principal was disclosed to the third party or had direct dealings with them.
The commission contract may be for a fixed or indefinite term. The contract may specify or omit the geographical area in which it is executed, and may establish or not establish the principal’s obligation not to authorize third parties to conclude contracts, in their name and at their expense, which have been entrusted to the commission agent. The contract may also specify or not specify the goods or items that are the subject of the commission.
The principal is obliged to pay the commission agent a fee. If the commission agent has guaranteed that the third party will fulfill the transaction, the principal must also pay an additional fee as agreed in the contract. If the commission contract was not performed due to reasons attributable to the principal, the commission agent retains the right to their commission and reimbursement of incurred expenses.
The commission agent is not liable to the principal for a transaction not fulfilled by the third party, unless they guaranteed performance or failed to exercise due diligence in selecting the third party. If the third party fails to perform the transaction, the commission agent must immediately inform the principal, gather the necessary evidence, and, upon request, assign the claim to the principal. The commission agent may do so even if the agreement with the third party prohibits or restricts such an assignment. However, assigning the claim does not exempt the commission agent from liability to the third party for breaching the assignment restriction.
The commission agent is liable to the principal for the loss, shortage, or damage of the principal’s item in their possession unless it is proven that the damage occurred through no fault of their own. If, upon receiving the item from the principal or a third party, the commission agent notices visible damage or shortages, or if the item is later damaged, they must take steps to protect the principal’s rights, gather evidence, and promptly notify the principal.
The commission contract terminates when:
- The principal withdraws from the contract;
- The commission agent withdraws from the contract in cases provided by law or contract;
- The commission agent dies, is declared legally incapable, has limited legal capacity, is declared missing, is liquidated, or becomes insolvent (bankruptcy is initiated).
If bankruptcy proceedings are initiated against the commission agent in Lithuania, all rights and obligations under transactions made at the principal’s direction are transferred to the principal.