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South Korea

General

In Korea, there is no specific separate regulation with respect to commercial agency agreements, but the Korean Commercial Code (the “KCC”) sets out several provisions that apply to the relationships between commercial agents and principals.

Definitions

According to the KCC, a commercial agent is defined as “a person who makes it his business to act on behalf of a particular merchant not as an employee of any person but as an agent or broker in transactions falling within the class of business carried on by the principal.”

Therefore, a commercial agent is one who (i) is legally independent from the principal, (ii) arranges direct business transactions between the principal and its customers and (iii) receives from the principal a commission for its activities.

Termination

Where the parties have not fixed the duration of an agency contract, the agent or principal may terminate the agency relationship by giving two months’ prior notice (KCC, Article 92).  However, where unavoidable reasons, such as repeated non-payment exist, the affected party may terminate the agency relationship at any time.

Compensation

Article 92-2 of the KCC provides an agent with the right to claim payment of “reasonable compensation” upon termination of an agency relationship if (i) the agent has brought in new business or had made positive contributions to the development of the principal’s business, (ii) the principal will be able to enjoy the results of the agent’s contributions following the termination, and (iii) the termination is not due to reasons attributable to the agent.  The rationale of this KCC provision appears to be that if the agent has created “goodwill” that the principal will benefit from, then the principal should compensate the agent for such “goodwill.”  The ceiling for such compensation is the average annual commission of the agent during the preceding five years (or the period of the agency contract, if it is less than five years).  The limitation period for a claim under Article 92-2 is six months from termination.

Governing Law

The principal and the agent may agree that the contract governing their relationship shall be construed according to the laws of a jurisdiction other than Korea.  However, if a dispute in respect of such contract were brought before a Korean court, certain provisions of Korean law, such as the Fair Trade Law, the Standard Contract Regulation Act, etc., which are considered 'mandatory', might be applied by the court regardless of the governing law specified in the contract.

Restrictive Covenants

Without the permission of the principal, a commercial agent shall not effect, for his own account or for the account of a third person, any transaction which falls within the class of business performed by the principal, or become a member with unlimited liability or a director of a company whose purpose is to engage in the same kind of business as the principal. 

Any transaction effected by the commercial agent on his own account in contravention of the preceding sentence may be regarded by the principal as having been effected on the principal’s account or, if such transaction is effected for the account of a third person, the principal may request that the commercial agent transfer the profit accrued from such transaction to the principal.

Fox Williams LLP would like to thank Kim & Chang for its contribution to this page.

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