Comments on representative activities of traders

Acting on behalf of a trader is the process by which a person or a trader represents another trader in business transactions. The role of the representative activity of traders brings a number of benefits such as: Helps strengthen relationships with customers, enhances reputation and increases the ability to effectively approach customers in business transactions. This is extremely necessary and important, from the perspective of a commercial intermediary activity recognized by law. However, there are certain risks involved in acting on behalf of traders. Hereafter, BiLaw Firm will comment on the representative activities of traders.

1. What is the act of representing traders?

According to the provisions of Clause 1, Article 141 of the Commercial Law 2005: Representing a trader is the act by which a trader receives an authorization (referred to as the representative) of another trader (referred to as the principal) to perform commercial activities on behalf of, under the direction of that trader, and receive remuneration for representation.

Clause 2, Article 141 of the Commercial Law 2005 provides that a trader who appoints his/her person to represent that trader is also considered to act on behalf of the trader.

2. Comments on representative activities of traders

Based on the criteria of the representative subject, it can be divided into: Acts on behalf of traders performed by other traders and activities on behalf of traders performed by people of traders.

2.1 Activity on behalf of traders by other traders

Acts of representing traders by other traders must comply with commercial laws. In which, this representative activity is always empowering and reciprocal between the representative trader and the represented trader in the form of a representative contract. The parties to a contract representing a trader will normally agree on the following contents: Agreement on the scope of representation, term of representation, rights and obligations of the parties, representative remuneration, development costs arising in the process of representation, dispute settlement methods and commitments of the parties. Some representative activities for traders such as: Representing a law firm X for Company A on behalf of Company A to participate in court proceedings or Company B negotiating a sale contract on behalf of Company C. Acting on behalf of traders is a fairly common commercial intermediary activity in the market, bringing many benefits, contributing to boosting the world’s economy. However, this activity also contains certain risks such as:

First, lose control. When a trader allows another trader to represent him/her, he/she is taking the risk of not having direct control over his/her business. Failure to strictly control may result in loss of control over the represented party’s assets, information and interests. Although the agency contract has provisions on the scope of representation, if the representative trader performs beyond the scope of his representation, the excess will not be effective. Therefore, the act of representing a trader by another trader needs to be strictly observed according to the agreement in the contract, increasing responsibility for the benefit of both parties to limit legal disputes that may arise. may happen.

Second, reputational risk. When a trader allows another trader to represent him, the represented party is at risk of reputation. If the agent fails to function properly or violates regulations, traders may lose credibility with their third-party counterparty. This is a risk in the course of a trader’s business. Besides economic resources, reputation is an extremely important factor in the operation of traders. Loss of reputation means losing the roots of the business and the merchant cannot survive. Especially in the age of technology, the impact of the press, media and public opinion is a huge pressure on a trader.

Third, legal risk. When a trader allows another trader to act on his/her behalf, the represented trader is taking on legal risks. If the representative party violates the law during the performance of the contract or the contents of the contract, the represented trader may be jointly responsible before the law. Legal risk is an issue that the parties to the contract must really pay attention to. When negotiating the contents of the representation contract, the content of the contract must not be contrary to social ethics, fine customs and traditions and prohibited by law. In addition, violations of the contents of the representation contract that cause damage to the represented party may lead to litigation.

2.2 Activity on behalf of a trader performed by a trader’s person

Representative activities of traders performed by traders’ people must comply with the 2015 Civil Code. Besides, this representative activity must also comply with the provisions of the Labor Law, Commercial Law and other documents. Because, the person appointed by the trader to represent the trader is the employee who has signed a labor contract with the trader. In this case it may be an employment-based agency act, i.e. the act of representation is the job of the appointee. The second case is signing an authorization contract, if it is not the job of the person appointed under the employment contract. The content of the authorization contract, as agreed upon by the parties and governed by the Civil Code, may include the following main contents: Scope, work of representation, duration of representation, rights and obligations of parties. The act of representing a trader by a trader’s person is more flexible, popular and cost-effective than the act of representing a trader by another trader. Even so, there are some legal risks in this act of representation, but the responsibility that the appointee bears is usually not too high. Because the form of handling with employees according to the law includes: Reprimand, prolongation of salary increase period not exceeding 06 months, dismissal and dismissal. Therefore, when a trader appoints his/her person to represent him/her with a partner, he/she needs to choose people with responsibility, reputation, qualifications and experience in order to minimize risks for traders. .

Above are comments on representative activities of traders, looking forward to comments from readers. Contact our BiLaw Firm to discuss more details.