Mediation and mediation contract

What is brokerage and who is the broker

Brokerage is an activity in which one person (the broker) seeks to negotiate a deal or contract between two parties. The intermediary therefore helps to establish contact between the parties and facilitates their agreement. The intermediary is not interested in the content of the contract or the outcome of the deal, but rather only in the successful completion of the mediation itself.

In practice, you may encounter mediation in various areas:

• Real estate broker: assists in the sale, lease or transfer of real estate.
• Insurance intermediary: offers various types of insurance, such as property, health or life insurance.
• Stockbroker: Arranges securities transactions on the stock exchange.
• Job Broker: Helps people find jobs or companies fill positions.
• Dating broker: Operates dating sites and helps people find a partner.

An interesting case involving a dating service recently took place in Germany, where a woman sued a dating service for not finding her a suitable partner.

Mediation as a trade

The concept of intermediation can also be viewed from the point of view of a trade. Mediation appears in several types of trades and is defined by the Government Regulation on the content of individual trades. The main ones include:

• Real estate brokerage: This is a bound trade, where the broker is looking for interested parties to conclude a contract concerning real estate. It provides advertising services, assesses the condition of the property, prepares offer prices, marketing and technical documentation. It also facilitates inspections, procures legal services and provides escrow services under the Real Estate Mediation Act.
• Arranging travel services: this is a licensed trade which consists of organising and selling combined travel services to other travel agents. It may also involve the sale of individual tourism services and related goods such as maps, plans and guidebooks.
• Arranging trade and services: This is a free trade which includes arranging the purchase and sale of movable property, transport services, handicrafts, building societies, loans, foreign study visits and other services. It also includes the representation of persons in the arts and entertainment industries, and the search for publishers and producers of works of art.

Obligations of the intermediary and the client

The main duties of the intermediary include:

• Searching for a suitable person to conclude the contract: The basic duty of the intermediary is to actively search for a suitable person to conclude the contract with the client. The person the intermediary finds must be trustworthy and capable of performing the mediated contract in accordance with the agreed terms.
• Loyalty and honesty: The intermediary should act in the interests of its clients and give priority to their best interests. This means that he should not act for his own benefit at the expense of his clients.
• Record-keeping: The intermediary is obliged to keep all documents related to the intermediary’s activities. These documents must be retained for as long as they are relevant for the protection of the client’s interests – usually for a period corresponding to the validity of the contract and any claim.
• Transparency: The intermediary should be transparent about its fees, commissions and the terms of the intermediation. Clients have the right to know what costs and conditions are associated with the intermediary’s services so that they can properly assess the overall value for money of the service.
• Information obligation: The intermediary is obliged to provide the client with all the information necessary for the client to make a final decision on the conclusion of the contract.

The obligations are not only incumbent on the intermediary but also on the person using his services. The main obligations of the client include:

• Information obligation: the client is obliged to provide the intermediary with all relevant information necessary for the correct performance of the intermediary’s services. This includes, for example, details of the requirements of the contract or business, personal details and other relevant information.
• Payment of commission: the client is obliged to pay the intermediary a commission for the successful brokerage of the contract or trade. The commission is usually paid on the date of the conclusion of the brokerage contract or the fulfilment of a condition set out in the contract. This condition may be, for example, the payment of the purchase price or other pre-agreed performance.
• Co-operation and active participation: the client should actively co-operate with the intermediary and provide answers to questions that are key to the decision to enter into a contract or deal. This includes cooperation in the preparation of necessary documents and materials.

What is a brokerage agreement

The relationship between an intermediary and its client is usually established by an intermediary contract. This is an agreement between the intermediary and the client in which the intermediary undertakes to seek a suitable person to enter into a particular contract or agreement between the client and a third party.

This contract is remunerative and the remuneration for the intermediary is called commission. The brokerage contract sets out the conditions under which the broker is entitled to a commission, such as the terms of the contract, the terms of payment of the commission, and other important aspects relating to the brokering of the deal or contract.

What must not be missing from the brokerage contract

The agency relationship is established by the agency agreement. It must be in writing and contain some basic information:

• The purpose of the mediation: clear specifications of what the mediator is to mediate specifically (e.g. selling a property, concluding a business contract, finding a job, etc.).
• Details of the intermediary and the seller: Identification details of the intermediary and the client must be included in the contract.
• Amount of commission and its payment: The commission to the intermediary for the successful mediation, including the conditions for its payment (e.g. at the conclusion of the contract or upon fulfilment of other conditions).
• Obligations of the parties: Obligations of both the intermediary and the client in the course of the mediation (e.g. provision of information, cooperation in the preparation of documentation).
• Duration of the contract: Specification of the period of time for which the contract is valid or the conditions under which the contract may be terminated.
• Data protection: Compliance with data protection regulations where the client’s personal data is processed in the context of the mediation.
• Other important provisions: Specific conditions that should be included based on the particular type of mediation.

Termination of the agency contract

An agency contract may be terminated for several reasons:

• Fulfillment of the purpose: The contract may be terminated after the successful conclusion of a contract between the client and a third party if this is stipulated as a condition for termination.
• Expiry: If the contract has a specified period of time after which it will expire.
• Termination by either party: The contract may be terminated by either party if agreed or stipulated by the contract (e.g. notice period).
• Termination or dissolution of a party: If one of the parties to the contract ceases to exist (e.g. by dissolution of a legal entity) or has been dissolved (e.g. by dissolution of a trade licence).

Mediation contract – model

Intermediary contract – model model

Concluded pursuant to Section 2445 et seq. of Act No. 89/2012 Coll., Civil Code.

1. Contracting parties

Interested party:

Name/Name: [INSERT]
ID: [FILL IN]
Seat/Address: [ADD]
Represented by: [ADD]
E-mail: [ADD]
Telephone: [ADD]

(hereinafter referred to as “Applicant”)

Agent:
Name/Name: [ADD]
TAX ID: [FILL IN]
Registered Office/Address: [ADD]
Represented by: [ADD]
E-mail: [ADD]
Telephone: [ADD]

(hereinafter referred to as “Intermediary”)

(hereinafter collectively referred to as “Parties”)

2. Subject matter of the Contract

The Broker undertakes to undertake activities aimed at securing the conclusion of a contract between the Applicant and a third party for [insert subject of the contract, e.g. purchase/sale of property, conclusion of a business partnership, etc.].

The Interested Party undertakes to pay the Intermediary a fee for this activity in accordance with Article 5 of this Agreement.

3. Obligations of the intermediary

3.1. to actively seek suitable third parties willing to enter into a contract with the Applicant.

3.2. keep the Applicant informed about the progress of the mediation and provide the necessary documents.

3.3. to act with professional care and in accordance with the law.

4. Obligations of the interested party

4.1. to provide the Intermediary with all information and documents necessary for the proper performance of its duties.

4.2. to act in good faith and not to enter into contracts with third parties circumventing the Intermediary.

4.3. to pay the agreed remuneration according to the terms of this contract.

5. Remuneration and payment terms

5.1. The Intermediary is entitled to a remuneration of [ADD %, fixed amount] of the value of the contract concluded between the Client and the third party.

5.2. The fee shall be payable within [ADD] days of the date of conclusion of the contract between the Client and the third party.

5.3. The fee is payable by wire transfer to the Intermediary’s account No [ADD].

6. Duration and termination of the contract

6.1. The contract shall be concluded for a fixed period until [ADD] / for an indefinite period.

6.2. Either party may terminate the contract by giving [ADD] days’ notice.

6.3. Termination of the contract is possible in the event of a material breach of the other party’s obligations.

7. Final provisions

7.1. This contract shall be governed by the law of the Czech Republic.

7.2. Any amendments to this contract must be made in writing.

7.3. The parties declare that they have read the contract and agree with its contents.

At [ADD], on [ADD]

For the Applicant:
[Signature, Name, Function]

For the Agent:
[Signature, Name, Function]

Summary

Mediation is an activity in which an intermediary helps to conclude a contract between two parties. Typically this involves real estate agents, insurance brokers, stockbrokers, employment agencies or dating agencies.

There are three main types of intermediation in trade law: real estate intermediation (tied trade), travel intermediation (licensed trade) and trade and service intermediation (free trade).

The intermediary is obliged to actively seek out suitable persons, to act honestly, to be transparent about the commission and to keep documentation. The client must provide the necessary information, cooperate and pay the agreed commission.

The relationship between the parties is governed by a written brokerage agreement which sets out the purpose, remuneration, obligations of the parties and the period of validity. The contract terminates upon fulfilment of the purpose, expiry of the term, termination or dissolution of one of the parties.