You may encounter a brokerage agreement in a number of situations – when selling a property, trading on the stock exchange or even when looking for a life partner. In this article, we take a closer look at the whole concept of brokerage and tell you what the obligations of the broker and the client are, what the brokerage agreement must contain, and in what case it can be terminated.
Are you about to sign a brokerage contract? Have it checked by a lawyer beforehand. In such contracts, it is often the apparent details that make the difference, which then have a direct impact on whether you have to pay a commission and under what conditions.
Brokerage is an activity where 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:
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.
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:
Better have it checked by a lawyer. This is the only way to make sure you really know what you’re signing and won’t be fooled.
The main duties of the intermediary include:
The obligations are not only incumbent on the intermediary but also on the person using his services. The main obligations of the client include:
Are you planning to sell your apartment or house? Learn how to sell a property without a realtor.
Ms. Kalabova contacted us after signing a brokerage agreement in search of a buyer for her commercial space. However, working with the broker soon became complicated. The client felt that the broker had hardly any activity, while the other party claimed that it was already entitled to a commission if the client sold the property to anyone who became aware of the offer during the term of the contract.
We first reviewed the contract itself, the email communications and the exclusivity terms. It turned out that the problem was not just the commission, but mainly the imprecise timing of when it should have been due and the overly broadly written protection of the broker after the end of the cooperation. We prepared a legal opinion for the client, suggested a negotiation procedure and modified the arguments to make it clear which obligations the intermediary had actually fulfilled and which had not.
The relationship between an intermediary and its client is usually established by an agency agreement. This is an agreement between the intermediary and the client in which the intermediary undertakes to seek a suitable person to conclude 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.
Just at the moment when you are dealing with commission, exclusivity or termination of cooperation, it makes sense to have the contract reviewed by an attorney before signing. In practice, it is often a problem that the text of the contract appears standard at first glance, but in fact contains a broadly worded claim for commission or unfavourable termination terms.
You can find out what the brokerage agreement should look like in case of mediation of the sale of a property in our next article.
An agency contract may be terminated for several reasons:
Concluded pursuant to Section 2445 et seq. of Act No. 89/2012 Coll., Civil Code.
1. Parties to the contract
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: [INSERT]
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 Intermediary 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 a 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]
Mediation is a common legal and commercial tool, but in practice it often only works well if the rules are clearly set from the outset. The intermediary has to actively seek out suitable opportunities to enter into a contract, act honestly and transparently, while the client has to provide the necessary cooperation and pay a commission for meeting the agreed conditions.
The key document is therefore the intermediary contract, which should define exactly what is to be intermediated, when the right to remuneration arises, whether the cooperation is exclusive and how it can end. It is unclear commission, exclusivity or termination of the contract that are the most frequent sources of disputes in practice. It therefore pays not to underestimate the value of checking the contract before signing.
From a practical point of view, yes. Without a written text, it is very difficult to prove exactly what was to be mediated and when the commission is due.
Typically, when a mediated contract is concluded or when another agreed condition is met. The specific text of the contract is decisive.
Yes, if the contract explicitly says so or if the decisive result of his activity was achieved during the term of the contract. This is a frequent source of disputes.
It depends on the contract. In an exclusive brokerage contract, the commission claim may be set for such a situation.
Only if the contract or the legal regime of the relationship allows it. It is important to check the notice period and the impact on commission.
In an exclusive contract, the client usually agrees not to use another intermediary for the duration of the cooperation and sometimes not to act independently.
Yes, especially when it comes to higher trade value, exclusivity or a more complex commission mechanism. Most problems arise because of wording that the client does not interpret correctly when signing.
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Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.
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