Foreword

Basically, in terms of relations between representatives and the parties, two separated contracts (relations) shall be identified. The first one is the relation between the representative (hereinafter called rep) and the principal (employer). And the second one is the relation with the third parties; hereinafter called ‘main transaction’. In this note, different probable types of these relations are examined.

1-Branch

Branch is the own principal (independent legal personality).There is no third party, just principal (the branch) and the third party (buyer) are involved.

2-Broker

Rep plays role in one legal relation (with principal) which is brokerage agreement. Therefor Rep sells no goods on behalf of principal andmain transaction is concluded between principal and third parties.This kind of relation corresponds to art. 335-356 of the Iranian commercial code.

3-Commission agent (Factor)

Rep plays role in two legal relations;1-with principal (commission agreement);2-with third parties (sale & purchase (S&P) agreement). Rep sells principal’s goods under rep’s name. Main transaction is concluded between commission agent (rep) and third parties (buyer).Principal may not even be identified by the other party because rep sells in his name (it’s the specification of this kind). One of thefunctions of this type is in a sanctioned commercial environment or when principal is willing to be hidden in transactions.This kind of relation corresponds to article 357-376 of the Iranian commercial code.

4-Agent

Rep plays roles in two relations:1-with principal (agency agreement). 2-with the other party (sale & purchase (S&P) agreement).Rep sells principal’s goods (e.g. to sell Hyundai cars, or to sell cosmetics, …). This kind of relation corresponds to article 656-683 of the Iranian civil code.Main transaction is concluded between agent (in the name of principal) and third parties (buyer).

5-Franchisee

Rep plays roles in two various relations.1-with principal (franchise agreement). 2-with the parties (sale & purchase (S&P) agreement). Rep sells goods made by his/her own material based on principal’s “operational standards, know-how and trademark” e.g. selling KFC foods with rep-provided materials, chicken, bread, … . but principal performs supervision on the process and franchisee shall observe principal’s code of conduct. Main transaction is concluded between franchisee (rep) and third parties (buyer).

6-Distributor

Rep plays roles in two relations.1-with principal (distribution agreement).2-with the third parties (sale & purchase (S&P) agreement).Rep buys goods from principal in a lower (wholesale) price and then re-sells his own goods; e.g. selling clothes, cars, cosmetics, … . Main transaction is concluded between distributor (rep) and third (buyer).From a commercial point of view, distributor needs more capital.

7-Manufacturer

Rep plays roles in two various relations.1-with principal (manufacturing agreement).2-with the other party (sale & purchase (S&P) agreement).Manufacturing includes a spectrum of different contracts.It should be noted that rights and obligations of manufacturer are volatile with regards to materials to be provided principal and manufacturer’s scope of work, e.g. selling Hyundai cars with rep-provided materials (or not), or just assembling parts, but principal performs supervision on the process.Main transaction is concluded between manufacturer (rep) and third parties (buyer).

Sources: Iranian commercial code, Iranian civil code, principles of drafting and negotiating international commercial contracts (SDIL)

Created by Abdolhossein Irani

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