The agency agreement is a key legal instrument under Spanish commercial law. Governed by Law 12/1992, it allows a commercial agent, acting as an independent intermediary, to continuously promote commercial transactions on behalf of a principal, and even to conclude them in the principal’s name when expressly authorized. Unlike other forms of intermediation, the agency relationship is defined by the stability of the contractual link, the agent’s independence, and the absence of commercial risk for the agent unless otherwise agreed. It is therefore an essential tool for businesses seeking to expand their market presence without creating additional internal structures.

Contents

1. The parties to the agreement
2. Obligations and functioning of the agency relationship
3. Formalization of the agreement
4. Remuneration and commissions
5. Grounds and modalities of termination
6. Indemnities payable upon termination
7. Conclusion
   
   

1) The parties to the agreement

Two main figures participate in the agency relationship: the commercial agent and the principal.

The agent is an independent professional who, on a regular and autonomous basis, promotes commercial operations for the principal and, where agreed, concludes contracts on their behalf. An agent may work simultaneously for several principals, unless an exclusive agreement has been expressly established.

The principal engages the agent’s services to expand, maintain or develop their commercial activity.

Both parties must act in good faith, cooperate in the performance of the agreement and respect one another’s interests, ensuring a balanced and purpose-driven collaboration.

2) Obligations and functioning of the agency relationship

The core of the agency agreement lies in the continuous promotion of business opportunities on behalf of the principal. When expressly stipulated, the agent may also represent the principal in the conclusion of contracts, without requiring a separate power of attorney: the representative authority forms part of the agency agreement itself.

The agent must act with the professional diligence required in the sector, possess sufficient knowledge of the principal’s products or services, inform clients, and transmit to the principal any relevant information obtained in the course of their activity. They must also follow the principal’s reasonable instructions, provided these do not compromise their independent status.

Furthermore, the agent is prohibited from carrying out competing activities, whether on their own behalf or for third parties, unless expressly authorized. This restriction serves as a key safeguard for the principal’s commercial interests.

In return, the principal must provide all necessary information, supply appropriate business documentation, and communicate any circumstance that may affect the proper performance of the agency relationship.

3) Formalization of the agreement

Although the agency agreement is consensual and valid once the parties reach an agreement, Law 12/1992 allows either party to request its formalization in writing at any time. A written form provides clarity and legal certainty, especially when certain provisions require documentary expression to produce legal effect.

It is advisable to set out in writing the clauses that determine the legal scope of the relationship, such as:

• Allocation of commercial risk to the agent.
• Authorization of subagents.
• Definition of the agent’s representative powers.
• Granting of exclusive rights to the agent.
• Authorization to perform similar or competing activities.

Economic provisions should also be recorded to prevent future disputes:

• Remuneration: structure, amount and payment deadlines.
• Deadline for the principal to deliver the commission statement.
• Commission payment periods when shorter than those established by law.
• Reimbursement of expenses incurred by the agent.
• Allocation of risk and venture in transactions.

Organizational and duration-related elements should equally be formalized:

• Post-contractual non-compete restrictions.
• Duration of the agreement.
• Notice period exceeding the statutory minimum in case of unilateral termination.
• Notice expiry date different from the last day of the month.
• Definition of the geographical area or client portfolio assigned to the agent.

A written agreement enhances predictability, reduces interpretative conflicts and ensures a transparent, balanced agency relationship.

4) Remuneration and commissions

The agent’s remuneration generally takes the form of commissions, calculated according to the value or number of transactions completed. A commission becomes due when the transaction has been executed wholly or partly by the principal or by the third party, and must be paid within the agreed period, not exceeding the last day of the month following the quarter in which it accrued.

The principal must provide a detailed commission statement and, where necessary, allow verification of the relevant aspects of their accounting.

Where the agent has exclusive rights over a territory or portfolio, they are entitled to commission even for transactions in which they did not directly participate, provided they fall within the assigned scope. Commissions may also accrue after termination, if the transactions result directly from the agent’s activity during the contractual relationship.

5) Grounds and modalities of termination

The agency agreement may be terminated for several reasons established by law or commercial practice. A primary ground is the serious breach of contractual or legal obligations by either party. In such cases, the terminating party must notify its decision in writing, specifying the precise grounds, and ensuring receipt. Termination becomes effective on the date the notification is received.

Termination may also arise from insolvency proceedings affecting either party, as well as from the death or declared death of the agent—a ground that only the principal may invoke. The death of the principal does not automatically end the agreement; their heirs may continue or terminate it unless agreed otherwise.

Where the agreement is concluded for a fixed term, it ends upon expiry of the term. However, if the parties continue performing it normally, it automatically converts into an open-ended agreement.

For agreements of indefinite duration, either party may terminate by giving written notice of one month per year of the relationship, up to a maximum of six months. If the agreement originated as a fixed-term contract, both periods are added to calculate the notice. The law permits longer notice periods but never shorter notice for the agent.

Termination is effective only when the other party receives the notification, making reliable proof of receipt essential.

6) Indemnities payable upon termination

When the agency agreement ends, Law 12/1992 provides two possible indemnities in favor of the agent, provided the statutory requirements are met and termination is not due to a serious breach by the agent.

1. Goodwill indemnity (indemnity for clientele)

This indemnity is payable when the agent has brought new clients or significantly increased transactions with existing clients, and such activity continues to generate substantial benefits for the principal after termination. It must be equitably assessed and cannot exceed the annual average remuneration earned by the agent over the previous five years—or over the entire duration of the agreement if shorter.

2. Indemnity for damage suffered

This indemnity applies only to agreements of indefinite duration and when early termination is decided by the principal. It is due when the agent has incurred specific expenses—commercial investments, staff recruitment, structural costs—that they have not been able to amortize due to the timing of termination.

Limitations and time limit

No indemnity is due when termination results from the agent’s serious breach or when the agent terminates the agreement without justified cause.
The action to claim either indemnity is subject to a one-year limitation period from the date of termination.

7) Conclusion

The agency agreement plays a central role in Spanish commercial law, enabling long-term business relationships within a clear legal framework. Proper understanding of its mechanisms—independence, exclusive rights, commission rules, termination grounds, and indemnities—is vital to avoid disputes and ensure a balanced collaboration.
A carefully drafted and fully formalized agreement helps anticipate risks and guarantees an implementation consistent with the commercial interests of both parties.

In practice, many disputes arise from vague clauses, undocumented agreements, divergences over exclusivity or disagreements on commission calculations. Obtaining specialized legal guidance allows businesses and agents to prevent such issues and address conflicts effectively when they arise.

For any questions regarding agency agreements, or in the event of a dispute, Morillon Avocats remains at your disposal to provide rigorous, discreet and tailored legal support at every stage.

Miguel Morillon

Lawyer

MORILLON AVOCATS