The main features of the commission contract

The commission contract is an essential concept in commercial law, fundamental to commercial intermediation. Through this agreement, the commission agent undertakes to perform commercial acts on behalf of another party, the principal, acting either in their own name or on their behalf. This relationship generates reciprocal rights and obligations that guarantee legal certainty for both parties and facilitate the development of economic activity.

This type of contract allows companies and individuals to carry out commercial operations more efficiently, delegating the management of certain transactions without the need to intervene directly in each one and optimizing their commercial activities. It is essential to understand its characteristics and nature in order to take advantage of its benefits.

What is the nature and legal basis of the commission contract?

The commission contract, regulated in Articles 244 to 280 of the Royal Decree of August 22, 1885, which publishes the Commercial Code (“CCom.”), is a personal contract (in tuito personae) of a commercial nature, which is perfected with consent and belongs to the category of management contracts on behalf of others, defined as a mandate whose purpose is a commercial act or transaction involving merchants or commercial agents.

From a legal perspective, the basis of the commission contract lies in the trust that the principal places in the commission agent to carry out a commercial transaction, in that, by virtue of the contract, the commission agent undertakes to perform a commercial act on behalf of and in the interest of the principal, even without the third party being aware of the latter's existence.

The commission contract differs from the civil mandate in its eminently commercial nature, as it is presumed to be onerous and is mainly applied in the field of commerce. Its regulation in the CCom seeks to provide flexibility to commercial transactions, allowing the commission agent to act independently within the limits established by the principal.

Ways in which commission agents operate

In the performance of the commission contract, the commission agent always acts on behalf of the principal, but may do so in two ways: in his own name or in the name of the principal. This distinction is fundamental, as it determines the legal effects of the relationship with third parties.

When the commission agent acts in his own name, the transaction is established directly between him and the third party, without the principal acquiring any rights or obligations towards the latter. In this case, the commission agent assumes the consequences of the transaction as if it were his own, in accordance with the provisions of Article 246 of the Commercial Code. However, this does not mean that the principal is left unprotected, as he retains the right to take action against the commission agent to demand compliance with his instructions and accountability.

On the contrary, when the commission agent acts on behalf of the principal, direct representation occurs, which means that the rights and obligations arising from the transaction fall directly on the principal. In this modality, the legal relationship is established between the principal and the third party, without the commission agent being bound by the consequences of the transaction, unless he cannot prove the existence of the mandate.

What are the obligations of the parties?

Main obligations of the commission agent

• To fulfill the assignment entrusted to them, without the assignment being delegated except with the prior consent of the principal (Article 262 of the Commercial Code).
• Obligation to inform the principal of all news or circumstances related to the successful outcome of the negotiations prior to the signing of the contract, in order to receive instructions from the principal, as well as to inform them of the moment when the contract that is the subject of the commission is finally concluded (Article 260 of the Commercial Code).
• Account for the commission and justify expenses incurred (Articles 257 and 263 of the Commercial Code). 
• Be liable for damages caused by failure to execute the mandate (Article 252 of the Commercial Code).
• Ensure the proper administration and preservation of the goods or money received by virtue of the commission, being responsible for their safekeeping (Articles 265 and 266 of the Commercial Code).
• Prohibition on acting contrary to the express instructions of the principal, diverting funds for other purposes, delaying collection, or purchasing at prices higher than market prices (Articles 256, 264, 273, and 258 of the Commercial Code)
• Prohibition on acting as a counterparty for one's own benefit in relation to what the principal wishes to buy or sell (Article 267 of the Commercial Code).
• Prohibition on mixing goods belonging to different owners (Article 268 of the Commercial Code).
• Prohibition on selling on credit or in installments without the principal's authorization (Article 270 of the Commercial Code).

Obligations of the principal

• Pay the agreed commission as consideration for the services of the commission agent (Article 277 of the Commercial Code).
• Reimburse the expenses incurred by the commission agent in carrying out the assignment (Article 278 of the Commercial Code).
• Once the contract has been performed, the principal must assume the effects or consequences of the contract or commercial transaction, provided that the commission agent has acted with due diligence and unless otherwise agreed.

Commission agent autonomy

The commission contract grants the commission agent a degree of freedom in the execution of the assignment, allowing them to act quickly and flexibly in commercial transactions. However, this autonomy is not absolute, as it must always be subject to the principal's instructions. Although the commission agent may make decisions in the absence of precise guidelines, they are obliged to act with prudence, diligence, and in accordance with commercial practices, without deviating from express instructions, as this could lead to liability.

To this end, the principal's instructions constitute the fundamental basis of the commission contract, as they are the expression of the principal's specific interests, and it is therefore essential that the commission agent faithfully respects them in each specific case. Article 258 of the Commercial Code reinforces this idea by establishing that if the commission agent enters into transactions on terms more onerous than those of the market without the express authorization of the principal, he shall be liable for any damages arising from such action, emphasizing that previous experience does not exempt the commission agent from his duty to adjust each transaction to the principal's specific instructions, thus ensuring security and predictability in commercial transactions.

Termination of the commission contract

The commission contract may be terminated for various reasons, both general and specific to this type of contract. General reasons include the expiry of the term, the fulfillment of the assignment when the commission is for one or more specific transactions, and the supervening impossibility of carrying it out. However, there are some specific reasons that deserve special attention.

One of the main forms of termination is the revocation of the assignment by the principal. According to Article 279 of the Commercial Code, the principal may revoke the commission at any time, although this will not take effect until the agent is notified and becomes aware of it, so the principal will remain responsible for the actions taken prior to such notification. Although the general principle establishes the free revocability of the commission, this may be subject to contractual restrictions that limit its exercise, by virtue of the possibility of establishing an irrevocability agreement for a period of time, which is accepted by doctrine and case law.

Another relevant cause of termination is the death or disqualification of the commission agent, as the contract is personal in nature (in tuito personae), although the death or disqualification of the principal does not terminate the contract. In accordance with Article 280 of the Commercial Code, their representatives may revoke it if they deem it appropriate.

Differences with the agency contract and practical application

Although commission contracts and agency contracts share certain similarities, there are key differences that distinguish them. The main difference is the continuity of the relationship: while an agency contract establishes a lasting link between the agent and the employer, with a stable, long-term relationship, a commission contract focuses on specific, one-off transactions, with no obligation of permanence.

Another important difference is the role played by the parties, in that, as mentioned above, the commission agent has the possibility of acting both in his own name and on behalf of the principal, providing greater flexibility in transactions. However, in the agency contract, the agent always acts on behalf of and in representation of the entrepreneur, which gives them a stronger link to the entity. In addition, the latter modality usually offers the agent exclusive rights over certain geographical areas or client portfolios, which is not a common feature in the commission contract.

In terms of practical application, agency contracts are particularly popular in sectors where long-term relationships and ongoing representation are required, such as in product sales and distribution. Commission contracts, on the other hand, are frequently used in specific, one-off situations, such as international trade, transport, financial intermediation, or the distribution of goods and services. Their flexibility and adaptability make them a key tool for companies seeking to outsource specific functions without losing control over their commercial operations.

Conclusion as experts 

The commission contract is a key concept in commercial law, as it allows entrepreneurs to delegate functions without losing control over their commercial operations. Its regulation in the Commercial Code guarantees a framework of legal certainty for the parties involved, while its flexibility makes it applicable to a wide variety of sectors and economic activities. In a dynamic and constantly evolving economic environment, the commission contract remains an indispensable tool for optimizing commercial intermediation and facilitating global business development.

That is why our expert commercial lawyers can advise you on any questions you may have, driving the growth of your company. Contact them here.

Borja Pellejero y Clara Camats

Lawyers in the commercial and M&A area