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Explanatory Notes
Chinese Commission Agreement
This Agreement is very simple and straightforward and is intended to cover a situation where an individual or company introduces business to a manufacturing company and the manufacturer pays commission on sales made as a result of each introduction which is made. This is not a formal agency agreement but is more suited for a 'one-off' arrangement between someone who has good contacts in a particular area and a company which wishes to sell into that area. We hope the terms of the Agreement are reasonably self-explanatory but a few comments by reference to the clauses are as follows: 1. APPOINTMENT This confirms the appointment of the Consultant and defines the Territory which is covered by the Agreement. If the Agreement is not intended to be restricted to any particular Territory, then the wording would need to be adjusted accordingly. 2. DUTIES OF CONSULTANT While this sets out the obligations of the Consultant, it is different from an agency agreement where, for example, the agent has clear obligations to develop its principal's business in the territory. Here the Consultant does have duties to try to find customers but there will be no penalty if it fails to do so. The only incentive is that commission will become payable if business is introduced to the Company. 3. COMMISSION This clause specifies the commission which is payable - it will normally be a percentage of the sale price, but whether this should be the F.O.B or C.I.F price or some other formula will depend upon the individual circumstances. As written, commission only becomes payable once payment is received by the Company. If, for example, a customer is found but fails to pay for the goods which it orders, the Consultant will not receive any commission. 4. DURATION The length of the Agreement is clearly a matter for negotiation between the parties as is any arrangement with regard to its renewal. Here we have provided for an initial period, to be specified, with one automatic renewal period unless either Company or Consultant terminates prior to the renewal date. In 4.2 we have made it clear that if the Agreement is terminated, commission on sales which have arisen as a result of the Consultant's efforts in a specified period prior to termination, will still be honoured. 5. CONFIDENTIALITY Commission arrangements are usually kept strictly confidential and this is reflected in our wording. 6. LAW & DISPUTES Since commission arrangements relating to a particular territory are likely to be international covering more than one country, it is advisable to specify what country's law will govern the interpretation of the Agreement is there is a dispute. Largely because of the confidential nature of the transaction, an arbitration clause has been incorporated. Arbitration is a private method of resolving disputes and more appropriate in an arrangement such as this than the courts of a particular country. Arbitration awards are frequently enforced by the courts if a party against whom an award is made fails to honour that award. The Chinese version contains the following text dealing with governing language, governing law and jurisdiction: “1. The governing language of this agreement is Chinese/English/other. 2. This agreement shall be governed by and interpreted in accordance with English/Chinese law. 3a. The parties will negotiate in good faith any dispute arising between them and if they cannot resolve the dispute within 15 days, either party may bring legal proceedings in the courts of [ ]; or 3b. The parties will negotiate in good faith any dispute arising between them and if they cannot resolve the dispute within 15 days, either party may commence arbitration in [Beijing, China/London, England] in accordance with the rules of the [China Arbitration Centre/ .....................]. There will be an arbitration tribunal comprising three arbitrators and the award of the arbitrators will be final.” As already mentioned, this is a very short and simple Agreement and it is not intended for use in a sophisticated transaction or one which is more akin to a formal agency agreement.
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