Chapter 7 – International Commercial Agency 119

7 International Commercial Agency - Aidan O’Neill

Introduction

This Model Contract encompasses the most commonly accepted provisions governing the relationship
between a Principal and a commercial Agent.

1. The contract is intended for use in connection with the

introduction, promotion, negotiation and conclusion of sales of products
or services by an independent Agent on behalf of a Principal, within a
defined territory.

2. A main reason to appoint an Agent is that the Principal is unable

to carry out the introduction, promotion, negotiation, and conclusion of
sales of products or services in a particular territory by itself or is
unwilling to make the necessary investments that are required.

3. The Agent may be a physical person or a company. When the

Agent is a physical person, under no circumstances can it be considered
as an employee of the Principal.

4. The Agent’s strength lies in its contacts with customers and its
weakness derives from the fact that such customers belong to the
Principal. This explains why, in many countries, such as EU countries,
public policy laws aim to protect the Agent’s rights, especially upon the
termination of the contract.

5. The Parties are subject to mandatory legal provisions of public

policy that may apply regardless of the law of the contract chosen by the
Parties. Such provisions are binding, which means that the Parties
cannot ignore or decide not to apply them. These provisions may
restrict the validity of certain provisions of the contract, and may allow a
court to reduce or extend the obligations of the Parties.

6. Before any discussion takes place between the Parties, it is

therefore strongly recommended to check whether the agency contract
contemplated may be impacted by such laws.

7. When the agency contract applies to products, the Principal

may or may not be the manufacturer of these products. The Principal
may be, for instance, a distributor.
8. The main purpose of the contract is to establish the level of
each party’s obligations towards the other, such as the authority of the
Agent to commit the Principal (Article 2.2), to receive payments on his
behalf (Article 2.3), the obligation for the Principal to accept the orders
transmitted by the Agent (Articles 3.4 and 3.5), the information which
the Principal should pass on to the Agent, such as the minimum overall
orders, any change in the range of products or services, price, etc.
(Articles 3.3, 3.7), minimum orders (Article 4), advertising, fairs and
exhibitions (Article 5), Internet sales (Article 6), non-competition (Article
7), trademarks and property rights (Article 9), exclusivity (Article 10)
commissions (Articles 11 and 12), consequences on termination (Article
14 and 15) and assignment and appointment of sub-Agents (Article 19).

9. Parties should review alternatives and options proposed in

order to strike those that are irrelevant to the Parties’ common
intentions.

10. Standard provisions have been incorporated, including financial

responsibility of the Agent (optional clause 13), force majeure – excuse
for non-performance (Article 16) and change of circumstances
(hardship) (Article 17).
ITC MODEL CONTRACT FOR AN INTERNATIONAL COMMERCIAL AGENCY

PARTIES:

Principal

Name (name of company)

Alberta Pharmaceuticals Incorporated

Legal form (e.g. limited liability company)

Alberta Pharmaceuticals Incorporated LLC

Country of incorporation and (if appropriate) trade register number

Canada

Address (address of place of business, phone, fax, e-mail)

10123 99 St Edmonton Alberta T5J 3H1, 7801234567, 7801237654, albertapharm@api.com

Represented by (name, position, legal title of representation, address)

Aidan O’Neill, employed by API as a legal representative, 4612 141 St Edmonton Alberta T6H 3Z8

Referred to as the “Principal”

Agent

Name (name of company)

Pharma de Italia SA

Legal form (e.g. limited liability company)

Pharma de Italia SA

Country of incorporation, trade register number and license number (if appropriate)

Italy

Address (address of place of business, phone, fax, e-mail)

Piazza del Duomo, 21, 20121 Milan MI, Italy, pharmadeitalia@pdi.com

Represented by (name, position, legal title of representation, address)

Giuseppe Russo, owner, Via Privata Trilussa, 10, 20157 Milano MI, Italy

Referred to as the “Agent”

Collectively “the Parties”

Background

A. The Principal carries on business in the field of pharmaceuticals.

B. The Agent undertakes as part of its business the promotion of

the sale of products (or services) in relation to pharmaceuticals.

C. The Principal wishes to appoint the Agent to promote the sale

of such products (or services) in relation to the Principal’s business, and
the Agent is willing to promote the sale of such products (or services)
accordingly, on the terms of the present contract.

Operative provisions

1. Scope of appointment

1.1 The Principal appoints the Agent as its commercial Agent, to promote the sale of the product(s) (or
services) within the territory (and in the promotion channels) hereafter defined.

1.2 Product(s) (or service(s)). The following product(s) (or service(s) shall be promoted by the Agent
under this contract:

– Flu-Max Vaccine, a vaccine that gives 95% immunity to 98% of flu

viruses

1.3 Territory. The product(s) (or service(s)) shall be promoted by the Agent under this contract within
the following territory:

– Pharma de Italia SA wants the exclusive rights to promote the Flu-Max

vaccine in the European Union

1.4 Promotion channel(s). The product(s) (or service(s)) shall be promoted by the Agent throughout the
following promotion channel(s):

– Through a network of local pharmaceutical companies throughout the

EU and with their large following as being the top drug company in Italy.
 2. Obligations of the Agent

2.1 In performing its activities, the Agent shall look after the Principal's interests and act dutifully and in
good faith.

2.2 The Agent shall promote the sale of the Flu-Max vaccine in Italy and through the European Union in
accordance with the terms agreed in this contract. The Agent has no authority to make contracts on
behalf of, or in any way to bind the Principal, but it shall pass any offer received to the Principal.

2.3 The Agent is not entitled to receive payments in the name and on behalf of the Principal without its
prior written authorization to that effect. If the Agent has been authorized, it must transmit the
payments as soon as possible to the Principal and until then hold them separately on deposit on the
Principal's behalf.

2.4 The Agent shall strictly observe the contractual provisions communicated by the Principal and shall
bring to the attention of the customers the terms and conditions of sale (particularly the delivery period,
price and payment) communicated by the Principal.

2.5 The Agent shall with due diligence keep the Principal informed about its activity, the market
conditions and the state of competition. The Agent shall provide all the necessary information in English
to the Principal available to it concerning the laws and regulations within the territory that shall apply to
the product(s) (or service(s)) as well as its activity. The Agent shall further send every two months a
report on its activities.

2.6 The Agent shall perform its activity independently and shall, in no case, be considered as an
employee of the Principal.

3. Obligations of the Principal

3.1 In its relation with the Agent, the Principal must act dutifully and in good faith.

3.2 The Principal shall in particular remunerate the Agent according to the commission and terms of
payment provided for in this contract.

3.3 The Principal shall inform the Agent before it starts to perform the obligations mentioned in
paragraph 2.2 of the minimum overall orders that should be collected in order for the Principal to be
able to supply the product(s) (or service(s)).

3.4 The Principal shall in addition inform the Agent without delay of its acceptance, refusal or non-
execution of any offers/orders transmitted by the Agent.

3.5 The Principal shall not reject the offers/orders transmitted by the Agent unless:

3.5.1 There are serious doubts, supported by any written evidence, on the solvency of the customer.

3.5.2 The offer does not meet the Principal’s expectations in terms of image and standards.
3.5.3 The overall orders collected by the Agent are below the minimum overall orders referred to in
paragraph 3.3.

3.6 The Principal’s unjustified refusals of offers/orders shall be considered as a breach of the contract by
the Principal.

3.7 The Principal shall immediately inform the Agent of any change in its range of product(s) (or
service(s)) its prices, conditions of sale or terms of payment as well as of any change of the technical
specifications or capacity of supply of the product(s) (or service(s)). Should the Principal expect that its
capacity of supply will be significantly lower than the Agent’s normal expectancy, it shall inform the
Agent without delay.

3.8 The Principal shall provide the Agent, free of charge, with all information and documentation needed
for the performance of the present contract, including, but not limited to, the terms and conditions of
sale, price lists, technical documents.

3.9 The Principal shall furthermore keep the Agent informed of any relevant communication with or for
the attention of the customers in the territory.

4. Minimum orders

4.1 The Agent will have to meet the annual minimum orders objectives set out in schedule 1.

4.2 These objectives will be revised quarterly

4.3 If, at the end of the quarter, the minimum number/ volume of orders applicable to such year is not
met by the Agent, the Principal shall be entitled, subject to giving a one month’s notice and not later
than three months after the end of that year at his choice:

4.3.1 To terminate the present contract, under Article 14;

4.3.2 To cancel the Agent’s exclusivity (whenever applicable); or

4.3.3 To reduce the extension of the territory, by excluding the territories where the Agent has made
less promotion.

5. Advertising, fairs and exhibitions

5.1 The Parties shall agree on the advertising campaign to be made within the territory.

5.2 The cost of all agreed advertising campaigns shall be at the Principal’s expense.

5.3 The Principal shall supply the Agent, free of charge, with any advertisement content and materials in
relation with the product(s) (or service(s)) needed for the performance of this contract.

5.4 The Principal shall also authorize the Agent to issue advertising content and materials for use in
relation with the product(s) or service(s) and not otherwise. All advertisement content and materials
issued by the Agent in relation with the product(s) (or service(s)) shall strictly conform to the Principal’s
guidelines and marketing policies.

5.5 In any event, the Agent shall ensure that the advertising campaign as well as the advertisement
content and materials strictly comply with local rules and regulations.

5.6 The Parties shall participate in the fairs or exhibitions within the territory listed in schedule 2.

5.7 The Principal will bear the expenses incurred for the participation in a fair or exhibition.

6. Internet

The Agent is not authorized to advertise or promote the sale of the products or its activity as Agent of
the Principal on Internet without the Principal’s prior written approval.

7. Non-competition

7.1 The Agent undertakes not to compete with the Principal or to enter any business relationship with
competitors of the Principal for the entire duration of the present contract.

7.2 In particular, the Agent undertakes not to represent, manufacture, provide or sell, directly or
indirectly, in the territory (and in the promotion channels) any product(s) (or service(s)) identical with
the product(s) (or service(s)) which compete with the product(s) (or service(s)) without prior written
authorization of the Principal.

7.4 The Agent shall inform the Principal of any existing agreement, binding the Agent, towards any other
product(s) (or service(s)), whether as manufacturer, representative, Agent, or retailer, and shall
thereafter keep the Principal informed of any such activity. With regards to this undertaking, the Agent
declares that, on the date on which the present contract is signed, it represents (and/or manufactures,
distributes, sells directly or indirectly), the products (or service(s)) listed in schedule 3. The exercise of
such activity by the Agent shall in no case prejudice the fulfilment of its obligations towards the Principal
under the present contract.

7.5 This undertaking shall remain valid during a period of three years after the termination of the
present contract.

8. Restriction of territory

8.1 The Agent shall not solicit orders outside the territory, unless expressly agreed by the Principal.

8.2 The Agent shall notify the Principal of any inquiry received from outside the territory. Such
notification shall not entitle the Agent to any commission.
 9. Trademarks and property rights

9.1 The Principal hereby grants to the Agent the right to use the trademarks, trade names or intellectual
property in relation to the product(s) (or service(s)) for the purpose of exercising its rights and
performing its obligations under this contract.

9.2 The Agent shall use the Principal’s trademarks, trade names or intellectual property in relation to the
product(s) (or service(s)) in the form and manner specified by the Principal and in the Principal’s sole
interest, and not otherwise.

9.3 Any use of the Principal’s trademarks, trade names or intellectual property on the Agent’s letter
paper, on advertisement materials or on any other materials addressed to third parties or on Internet
shall require the prior consent of the Principal.

9.4 The Agent agrees neither to register, nor to allow or favour the registration by third parties of any of
the trademarks in the territory. The Agent further agrees not to include the trademarks in its own trade
or company name.

9.5 The Agent shall notify the Principal of any infringement of the Principal’s trademarks, trade names
and symbols or any other property rights it may become aware of.

9.6 The Principal warranties to the Agent that the products as well as the Principal’s trademarks, trade
names or any other symbols do not infringe intellectual any property rights of any third parties in the
territory.

9.7 In this respect, the Principal undertakes to hold harmless the Agent from any and all costs, losses,
damages and liabilities which may occur due to trademarks infringement by the use of the Principal’s
trademarks, trade names or any other symbols by the Agent.

10. Exclusivity

The Principal grants exclusivity to the Agent, which means that it undertakes not to appoint other
Agents within the territory (and in the promotion channels) for the duration of the present contract.

11. Agent’s commission – right to commission

11.1 Unless when the right to commission has been expressly excluded by the Parties, the Agent is
entitled to the commission provided for in schedule 4 on all sales of the product(s) (or service(s)) made
within the territory throughout the duration of this contract, whether such sale was generated by the
Agent or not, in accordance with Article 10.

11.2 The Agent shall also be entitled to commission on sales concluded on the basis of offers/orders
transmitted to or received by the Principal after the termination of this contract, provided the Agent
informed the Principal in writing of the pending negotiation upon termination of the contract.
11.3 The Agent shall acquire the right to commission upon full payment by the customer(s) of the
invoiced product(s) or (service(s)). In case of partial payment by the customer(s), made in compliance
with the sales contract, the Agent shall be entitled to a proportional commission.

11.4 In any event, no commission shall be due in respect of offers/orders accepted by the Principal,
which could not be executed for reasons beyond the Principal’s control.

12. Method of calculating commission and payment

12.1 The commission shall be calculated on the net amount of the sale invoiced by the Principal to the
customers, clear of any additional charges and of all taxes of any kind, and provided that such additional
charges and taxes are separately stated in the invoice.

12.2 The commission shall cover any and all costs and expenses incurred by the Agent in fulfilling its
obligations under the present contract.

12.3 The commission shall be calculated in the currency of the contract of sale on which the commission
is payable, unless otherwise agreed by the parties.

12.4 Any taxes imposed in the Agent’s country on its commission shall be for the Agent’s account,
including whenever applicable, any withholding taxes payable by the Principal on the Agent’s behalf.

12.5 The commission shall be paid to the Agent not later than on the last day of the month following
every two months in which it became due.

12.6 If payment is not made on the due date, the Agent shall be entitled, without limiting any other
rights it may have, to charge interest on the outstanding amount (both before and after any judgment)
at the rate of 2% per annum.

12.7 The Principal shall provide the Agent with a statement of the commissions due in respect of each
quarter and shall set out all the business in respect of which such commission is payable.

12.8 The Agent shall be entitled to demand that it be provided with all the information, and in particular
an extract from the books, which is available to its Principal and which it needs in order to check the
amount of the commission due.

13. Financial responsibility (Option)

13.1 The Agent shall satisfy itself, with due diligence, of the solvency of customers whose orders are
transmitted to the Principal. The Agent shall not take orders from customers whose financial standing
and capacity of meeting their financial commitments towards the Principal are questionable without
informing the Principal in advance of such a fact.
 14. Term, termination and consequences of termination

14.1 This contract shall enter into force at the date of its signature (or at the date of the latest signature
if signed by the Parties at different dates) and shall continue for an indefinite period. Each party may
terminate the present contract at any time by giving 3 months written notice to the other party.

14.2 If the Agent is a physical person, this contract will end automatically at the death of the Agent.

14.3 Each party may terminate this contract with immediate effect by written notice in case of:

14.3.1 A substantial breach by the other party of its obligations which could be qualified as gross
negligence or willful misconduct;

14.3.2 Exceptional circumstances beyond the control of the Parties, which render the continuation of
this contract impossible;

14.3.3 Failure to remedy to any other breach by the other party of its obligations under this contract,
after 15 days written notice to remedy to such breach.

14.4 The termination of this contract for any reason shall not affect:

14.4.1 Each party’s accrued rights, remedies, or liabilities, including payments due at the effective date
of termination; or

14.4.2 The application of provisions of this contract that are meant to survive after the expiration of this
contract.

14.5 At the end of this contract, the Principal shall pay all and any commissions due to the Agent.

14.6 At the end of this contract, the Agent shall return to the Principal any advertising material and
other documentation provided free of charge to the Agent as well as any products and samples which
are still in its possession.

15. Indemnity or compensation on termination

15.1 At the end of this contract, the Agent will be entitled to receive a termination indemnity which will
be equivalent to one-year commissions based on the average annual commissions paid to the Agent
over the preceding 3 years.

15.1.1 In order to receive this termination indemnity, the Agent will have to notify the Principal in
writing its wiliness to receive same within one year after the end of the contract. Failure to do so will
result in the Agent losing its right to receive the termination indemnity.

15.1.2 The termination indemnity shall be due in the event of the Agent’s death and payable to the
Agent’s heirs.

15.1.3 The Agent shall have no right to receive the termination Indemnity in the following cases:
 – When the Principal has terminated the contract for the
reasons set out in paragraph 14.3 above.

– When the Agent has terminated the contract, unless

such termination was caused by the breach of the Principal’s
obligations, or by the age, infirmity, or illness of the Agent,
which render the continuation of this contract impossible.

– When, with the agreement of the Principal, the Agent

assigns its rights and duties under the present contract to
another person.

15.2 The above provision shall not affect the Agent’s right to claim damages for breach of contract by
the Principal.

16. Force majeure – excuse for non-performance

16.1 “Force majeure” means war, emergency, accident, fire, earthquake, flood, storm, industrial strike or
other impediment which the affected party proves was beyond its control and that it could not
reasonably be expected to have taken the impediment into account at the time of the conclusion of this
contract or to have avoided or overcome it or its consequences.

16.2 A party affected by force majeure shall not be deemed to be in breach of this contract, or otherwise
be liable to the other, by reason of any delay in performance, or the non-performance, of any of its
obligations under this contract to the extent that the delay or non-performance is due to any force
majeure of which it has notified the other party in accordance with Article [16.3]. The time for
performance of that obligation shall be extended accordingly, subject to Article [16.4].

16.3 If any force majeure occurs in relation to either party which affects or is likely to affect the
performance of any of its obligations under this contract, it shall notify the other party within a
reasonable time as to the nature and extent of the circumstances in question and their effect on its
ability to perform.

16.4 If the performance by either party of any of its obligations under this contract is prevented or
delayed by force majeure for a continuous period in excess of four months, the Parties shall negotiate in
good faith, and use their best endeavors to agree upon such amendments to this contract or alternative
arrangements as may be fair and reasonable with a view to alleviating its effects, but if they do not
agree upon such amendments or arrangements within a further period of 45 days, the other party shall
be entitled to terminate this contract by giving written notice to the party affected by the force majeure.
 17. Change of circumstances (hardship)

17.1 Where the performance of this contract becomes more onerous for one of the Parties, that party is
nevertheless bound to perform its obligations subject to the following provisions on change of
circumstances (hardship).

17.2 If, however, after the time of conclusion of this contract, events occur which have not been
contemplated by the Parties and which fundamentally alter the equilibrium of the present contract,
thereby placing an excessive burden on one of the Parties in the performance of its contractual
obligations (hardship), that party shall be entitled to request revision of this contract provided that:

17.2.1 The events could not reasonably have been taken into account by the affected party at the time
of conclusion of this contract;

17.2.2 The events are beyond the control of the affected party; and

17.2.3 The risk of the events is not one that, according to this contract, the party affected should be
required to bear.

17.3 Each party shall in good faith consider any proposed revision seriously put forward by the other
party in the interests of the relationship between the Parties.

17.4 If the Parties fail to reach agreement on the requested revision within 3 weeks, a party may resort
to the dispute resolution procedure provided in Article 25; the Alberta courts shall have the power to
make any revision to this contract that it finds just and equitable in the circumstances, or to terminate
this contract at a date and on terms to be fixed.

18. No partnership

Nothing in this contract shall be deemed to constitute a partnership in law between the Parties.

19. Assignment and appointment of sub-Agents

19.1 This contract is personal to the Parties and neither party shall without the prior written approval of
the other:

19.1.1 A sign, mortgage, charge or otherwise transfer or deal in, or create any trust over, any of its
rights; or

19.1.2 Subcontract or otherwise delegate the whole or any part of its rights or obligations under this
contract to another person.

19.2 The Parties agree not to engage sub-Agents, delegates and/or employees of the other party.
 20. Notices

20.1 Any notice under this contract shall be in writing (which may include e-mail) and may be served by
leaving it or sending it to the address of the other party as specified in Article 20.2 below, in a manner
that ensures receipt of the notice can be proved.

20.2 For the purposes of Article 20.1, notification details are the following, unless other details have
been duly notified in accordance with this Article:

– Notices are used to make a formal announcement of a relevant fact to the agreement. It is a formal
declaration in accordance with the policies.

21. Entire agreement

21.1 This contract sets out the entire agreement between the Parties. Neither party has entered into
this contract in reliance upon any representation, warranty or undertaking of the other party that is not
expressly set out or referred to in this contract. This Article shall not exclude any liability for fraudulent
misrepresentation.

21.2 This contract may not be varied except by an agreement of the Parties in writing (which may
include e-mail) in accordance with Article 17.4.

22. Effect of invalid or unenforceable provisions

If any provision of this contract is held by any court or other competent authority to be invalid or
unenforceable in whole or in part, this contract shall continue to be valid as to its other provisions and
the remainder of the affected provision, unless it can be concluded from the circumstances that, in the
absence of the provision found to be null and void, the Parties would not have concluded this contract.
The Parties shall use all reasonable efforts to replace all provisions found to be null and void by
provisions that are valid under the applicable law and come closest to their original intention.

23. Confidentiality

23.1 Both parties understand and acknowledge that, by virtue of the present contract, they may both
receive or become aware of information belonging or relating to the other party, its business, business
plans, affairs or activities, which is confidential and proprietary to the other party and/or its suppliers
and/or customers and in respect of which they are bound by a strict duty of confidence (“Confidential
Information”).

23.2 In consideration of such Confidential Information being disclosed or otherwise made available to
either party for the purposes of the performance of the present contract, both parties hereby undertake
that they will not at any time, either before or after the termination of the present contract, and either
directly or indirectly, disclose, divulge or make unauthorized use of any Confidential Information, except
to the extent to which such Confidential Information:

23.2.1 Is publicly known at the time of its disclosure or is being made available to them.
23.2.2 After such disclosure or being made available to them, becomes publicly known otherwise than
through a breach of this undertaking.

23.2.3 Is required by law, regulation, or order of a competent authority (including any regulatory or
governmental body or securities exchange) to be disclosed by one of the Parties, provided that, where
practicable, the other party is given reasonable advance notice of the intended disclosure.

23.3 Upon the earlier of a request from the other party or the termination of this contract, each party
shall return to the other all documents or records in any medium or format containing any Confidential
Information which are in its possession or control and will not retain any copies of them.

23.4 This undertaking, and the obligations contained herein, will continue without limit of period.

24. Authorizations

24.1 This contract is conditional upon the following authorizations first being obtained from both the
Canadian and Italy governments.

24.2 The relevant party shall use all reasonable efforts on its part to obtain such authorizations and shall
notify the other party promptly of any difficulty encountered.

25. Dispute resolution procedure

Any dispute, controversy or claim arising out of or relating to this contract, in particular its conclusion,
interpretation, performance, breach, termination, or invalidity, shall be finally settled by the courts of
Edmonton, Alberta, Canada which will have exclusive jurisdiction.

26. Applicable law

Canadian law shall apply to the contract.

If the Agent has its place of business and/or performs its activity within the European Union, the
mandatory provisions of the EC Directive of 18 December 1986 shall also apply.

Schedule 1: Minimum orders

(Article 4.1)

Schedule 2: Fairs and exhibitions

(Article 5.2)

The parties shall participate in the following fairs or exhibitions within the territory:
 The Agent The Principal

ICSE Worldwide IHCMC

CPhl Worldwide ICMHS

P-MEC Worldwide Family Medicine Summit

Schedule 3: List of non-competing products (or service(s)) represented, manufactured, distributed, or

sold by the agent

(Article 7.4)

At the time of the conclusion of the present contract, the agent represents (manufactures, distributes or
sells) the following product(s) (or services):

Medical products

Pharmaceuticals

Pain medication

Schedule 4: Agent's commission

(Article 11.1)

DATE AND SIGNATURE OF THE PARTIES

Agent

Pharma de Italia SA

Principal

Alberta Pharmaceuticals Incorporated

Date: December 14, 2020

Notes to Draft:

o I added in section 5.4 because I believe the Agent should be able to advertise the product if they
are so please.
o I added options 7.4 and 7.5 because a business relationship should be transparent and open
about other business dealings so that there are no conflicts. I also agree that the undertaking
should stay valid for an additional three years after the termination of the contract.
o I added option 11.2 because I agreed with the Agent being entitled to commissions after the
contract is over.
o I took the alternative answer to 11.3 because I do not think the Agent should receive his
commission until the full payment is received from the customers.
o I took the alternative for section 16.4 because I think the parties should have a chance to
renegotiate alternative arrangements under good faith instead of just an automatic termination
of the contract
o I added section 17.4 because it makes sense for a party to go straight to the courts and open a
dispute. It is there for these problems.
o I decided on alternative #2 for section 25 because I like the idea of a dispute being resolved in
courts and having the same body resolve every issue.