Chapter 21: Contracts For Commission

Article 396     A commission contract refers to a contract whereby the principal and the agent agree that the agent shall handle the matters of the principal.

Article 397     A principal may specially entrust an agent to handle one or several items of matters, or generally entrust the agent to handle all matters.

Article 398 The principal shall pay the expenses for handling the entrusted matters in advance. In case that the agent has prepaid the necessary expenses for handling the entrusted matters, the principal shall reimburse the expenses and the interest thereof.

Article 399 The agent shall handle the entrusted matters according to the instruction of the principal. Where the instructions of the principal need to be modified, consent of the principal shall be obtained; in case of such emergency that it is difficult to contact the principal, the agent shall handle the entrusted matters properly and report to the principal the case promptly afterwards.

Article 400     The agent shall handle the entrusted matters himself/herself. With the consent of the principal, the agent may sub- entrust the matter. If the sub-entrustment has obtained consent, the principal may directly give instructions to the sub-entrusted third party, and the agent shall be liable only for the selection of the third party and his own instructions to the third party. If the sub- entrustment has not obtained the consent, the agent shall be liable for the third party's acts, except that in an emergency the sub-entrustment is necessary for the protection of the interests of the principal.

Article 401     The agent shall report the handling of the entrusted matters according to the requirements of the principal. The agent shall report the result of the entrusted matters when the commission contract is terminated .

Article 402     If within the scope of the power delegated by the principal, the agent, in his/her own name , concludes a contract with a third party, and the third party knows the proxy relationship between the agent and principal at the time of concluding the contract, the contract shall directly bind the principal and the third party, unless there are conclusive evidences to prove that the said contract only binds the agent and the third party.

Article 403     When an agent concludes a contract in his/ her own name with a third party, and the third party does not know the proxy relationship between the agent and principal, and if the agent does not perform the obligation in respect of the principal due to causes of the third party, the agent shall disclose the third party to the principal. The principal hence may exercise the agent's rights against the third party, except that the third party will not conclude the contract with the agent if he knows the principal at the time of concluding the contract.

If the agent does not perform the obligations in respect of the third party due to causes of the principal, the agent shall disclose the principal to the third party. The third party hence may choose the agent or the principal as the counterpart to claim its rights, but the third party may not change the chosen counterpart.

Where the principal exercises the agent's rights against the third party, the third party may claim its demur in respect of the agent against the principal. Where the third party chooses the principal as its counterpart, the principal may claim its demur in respect of the agent as well as the demur of the agent in respect of the third party against the third party.

Article 404     The agent shall hand over to the principal the property obtained from handling the entrusted matters.

Article 405     When the agent has finished the entrusted matters, the principal shall pay remuneration to it. If, due to causes not attributable to the agent, the commission contract is rescinded or the entrusted matters cannot be finished, the principal shall pay the agent corresponding remuneration. If otherwise agreed upon in the contract, the terms of the contract shall be applied.

Article 406     In respect of a non-gratuitous commission contract, where the principal suffers from losses due to the fault of the agent, the principal may claim compensation for the losses. In respect of a gratuitous commission contract, where the principal suffers from losses due to the deliberate intention or gross fault of the agent, the principal may claim compensation for the losses.

Where the agent is ultra vires and causes losses to the principal, the agent shall compensate for the losses.

Article 407     If, in handling the entrusted matters, the agent suffers from losses due to causes not attributable to its own, the agent may request the principal to compensate for the losses.

Article 408     With the consent of the agent, the principal may entrust a third party other than the agent to handle the entrusted matters. In respect of losses thus incurred to the agent, the agent may request the principal to compensate for the losses.

Article 409     Where two or more agents jointly handle the entrusted matters, they shall assume joint and several liabilities to the principal.

Article 410 The principal or agent may rescind the commission contract at any time. The party who causes losses to the other party due to the rescission of the commission contract shall compensate for the losses, except for causes not attributable to the said party.

Article 411     A commission contract shall be terminated when the decease of the principal or agent occurs, or the principal or agent loses civil capacity of conduct or goes into bankrupcy, except as otherwise agreed upon by the parties in the contract or except that it is inappropriate to terminate the contract according to the characters of the entrusted matters.

Article 412     If the termination of a commission contract due to the principal's decease, loss of civil capacity of conduct or bankruptcy will harm the principal's interests, the agent shall continue to handle the entrusted matters before the principal's heir, statutory agent or liquidation group take over these matters.

Article 413     If a commission contract is terminated due to the agent's decease, loss of civil capacity of conduct or bankruptcy, the agent's heir, statutory agent or liquidation group shall notify the principal promptly. If the termination of the commission contract will harm the principal's interests, the agent's heir, statutory agent or liquidation group shall take necessary measures before the principal makes appropriate arrangements in dealing with the situation.