The Commerce Act: how to comply

According to the Commerce Act 2005, although goods have been delivered to and are paid by the agents, goods' owners are still the principals. The principals should, therefore, specify several contents to ensure their rights.

Sales obligations

With regard to the principal-agent relationship, the principals will always bear the risk of having their brand compromised since it is their goods that have to be delivered to the agents, who directly sell them to the consumers.

Thus, the agent agreement should specify as the following:

· The agents are absolutely not allowed to misuse the trademarks of the principals for the purpose of deceiving the consumers on the origin of products, including but not limited to "using the principals' brand to promote products that are not owned by the principals."

· The agents are absolutely not allowed to promote qualities, characteristics or functions of products different and inaccurate from those provided by the principals or from those mentioned on the packaging or the attached manual product.

Warranties of goods

In case the agents are capable (in terms of technical qualifications, human resources and infrastructure) and obtain consent from the principals to implement the warranty, the agreement just needs to stipulate the warranty process, requesting the agents to ensure compliance of the process and to be responsible for compensation for all damage resulted from the violation of warranty process of the consumers.

Receiving complaints from consumers

To ensure the reputation of the principals, the agent agreement should contain provisions on the responsibilities of the agents in receiving and notifying the principals of any consumers' complaints, as well as specify the time and form of the notice which the agents have the responsibility to implement.

Training for the agents

As stipulated under Article 170 of the Commercial Code 2005, although the goods have been delivered to the agents (or even been paid for by the agents), the real owner of the goods are still the principals. Therefore, damage to goods during the warranty process of the agents will result in damage to the principals.

To avoid this loss, training for agents in skills for goods preservation and for receiving and selling goods is necessary. The training must include the following:

– the number of training sessions involved; · in which form and when the notice of each training session will be sent in advance;

– the estimated time duration for each training session; · the training venues; · the responsibility for preparing the facilities (rooms, projectors, boards, etc.) and the documents (for printing and distribution); · the obligation of competent staff of agents to fully participate in training;

– the obligation to inform the number of participants in each training session of the agents.

The obligation to guarantee minimum sales

The request for sales guarantee is one of the ways to motivate the agents to fulfill the sales obligation to the principal.

It may depend on the economic situation, regional markets and other factors that the principal can flexibly use to impact sales in a period. For example, sales of food items can increase during the Tet (Lunar New Year) holiday, sales of air conditioners can reduce in the rainy season and sales of air tickets can move up in holiday seasons.

On the other hand, the principals also need to take certain measures into consideration when the agents do not reach the minimum level of sales. For example:

· The principals should come up with measures to support (with regard to human resources, ideas, promotional items) and the agents have the obligation to create all favorable conditions for the access and application of such measures;

· The principals have the right to enter the agent agreement with another agent for ensuring periodical sales in certain areas; or

 The principals have the right to unilaterally terminate the agreement; to limit sales which are directly competitive in nature.

To ensure sales and to promote the brand in the market, the principal may consider stipulating that "the agents are not allowed to sell products which are directly competitive in nature with the products of the principals except in case of prior written consent from the principals."

(Source:VNS)