Regulations on agency contract

In January 2017, my company signed an agency contract with X Fresh Milk Company. According to the contract, we will be the agency of this company for 3 years. In December 2019, Y Yogurt Company offered us signing an agency contract. In the contract between my company and X Company, there is no term on banning us from signing the contract with a third party. I wonder if it is possible for us to sign the agency contract with Y Company.  

FDVN’s opinions:

Thank you for concerning and trusting in FDVN’s legal services. We have studied the law provisions to provide you with our advice. Please kindly see the answer below:

[1] According to Clause 1, Article 11 of Law on Commerce 2005: “Parties have the right of freedom to reach agreements not in contravention of the provisions of law, fine traditions and customs and social ethics in order to establish their rights and obligations in commercial activities. The State respects and protects such rights.”

It is stated in Article 174 of Law on Commerce 2005 on the rights of agents that “To enter into agency contracts with one or more principals, except for cases specified in Clause 7, Article 175 of this Law”.

Clause 7, Article 175 of Law on Commerce 2005 states that: “Where it is specified by law that an agent shall be allowed to enter into an agency contract with a principal for a certain type of goods or service, such provision of law must be complied with.”

Thus, when considering the agents’ right to sign the agency contract with a third party, we have to consider the goods and/or services as agreed by the parties. If an agency contract for certain goods and services, as provided by law that the agent enters into a contract with a certain principal, the agent must not enter into other contracts with a third party for such goods and services.

In case the type of goods or services are not provided in Clause 7, Article 175, we consider the agreement between the parties on restricting the agency contract with a third party. In case there is no term on restricting, the agent is allowed to sign the agency contract with other principals.

[2] It is understood from your case that Y Company’s goods is not the particular type of goods according to the law. Your company does not need to be the only agent of a certain Company for this type of goods. So, we have to consider the agreement between your company and X Company.

According to the information provided by you, there is no term on restricting the agency contract, your company is allowed to sign the agency contract with Y Company.

That is the advice of FDVN to your request, based on the study of legal regulations. Hopefully FDVN's advice will be useful to you.

Legal expert: Nguyen Thi Lan Anh

FDVN Law Firm

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