Represent The Deales

III. COMMERCIAL INTERMEDIARY UNDER VIETNAMESE AND US COMMERCIAL LAW

1. Types of commercial intermediaries

1.1. According to Vietnam Commercial Law

According to the 2005 Law on Commerce of Vietnam, commercial intermediary activities include: representing traders, commercial brokerage, consignment of goods purchase and sale, and commercial agency.

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1.1.1. Represent the Dealers

Article 141 of the 2005 Law on Commerce of Vietnam defines: “Representing a trader is when a trader receives authorization (called the representative) from another trader (called the principal) to carry out commercial activities in the name and under the direction of that trader and receives remuneration for the representation” . This form appears when the trade turnover is not large, setting up a representative office is not beneficial, or the principal encounters many difficulties in terms of personnel... For example, in the Eastern European market, after the collapse of the Soviet Union, Vietnam's trade and payment relations with countries in this market were disrupted, but this was Vietnam's traditional market at that time. Many factories, enterprises, machinery and equipment are in need of raw materials, spare parts... To establish trade relations, companies have used the form of establishing representative offices, branches or subsidiaries. This method has many advantages, but the costs will be very high: office costs, travel costs, accommodation, transactions, salaries, etc. Vietnamese companies can also send their people to the host countries to act as representatives, but many times these representatives are not familiar with the roads, foreign languages, and do not grasp the market situation, etc., so the operating efficiency is very low, and many contracts have been broken. To avoid these risks, companies have actively used international students, postgraduates, and workers as their representatives. These representatives were initially paid a monthly salary by the company, including necessary operating expenses. This has led to losses for many companies due to uncontrolled costs. In order to improve the efficiency of the representatives, companies have used the form of remuneration based on the results of the work that the representatives have done. Method

This has contributed to the development of the form of representative for traders, one person can represent many companies for different types of goods and services to earn more remuneration. When working for a company, they take the name of that company. However, the contract signed by the representative with the customer will be in the name of the principal, this has made the customer lack confidence in the legal status of the partner. Many contracts have been signed with traders who are unable to pay or have low credibility in recent years between Vietnamese companies and foreign customers, which are examples of this.

1.1.2.Broker​

*. Concept

Commercial brokerage has existed for a long time in human society, since the social division of labor. The field of activity of brokers is very broad, from connecting parties in finding customers to freight forwarding, buying insurance, doing customs procedures, borrowing capital... The concept of commercial brokerage may have different points, but in general they still have similar common features.

According to Article 150 of the 2005 Law on Commerce of Vietnam, “Commercial brokerage is a commercial activity in which a trader acts as an intermediary (called the broker) for parties buying and selling goods and providing services (called the brokered party) in negotiating and concluding contracts for the purchase and sale of goods and services and is entitled to remuneration according to the brokerage contract” . In the above concept, the Law on Commerce of Vietnam only mentions the scope of activities of a broker in the field of buying and selling goods and providing services related to the purchase and sale of goods, such as buying and selling at the Exchange, finding customers... while other related services such as chartering ships, purchasing insurance, delivery, customs procedures... are mentioned in other laws such as the Customs Law, Maritime Law, Insurance Law...

In the maritime field, Article 166 of the 2005 Vietnam Maritime Code stipulates: “Maritime brokerage is an intermediary service in transactions, negotiations, and signing of transportation contracts, marine insurance contracts, ship charter contracts, and other contracts.

Ship purchase and sale contracts, towage contracts, crew hire contracts and other contracts related to maritime contracts under maritime brokerage contracts” . Through the above concept, we can visualize the field of activity of brokers. This concept is different in terms of wording compared to the 2005 Commercial Law, but basically describes the nature and work of brokers.

The Law on Insurance Business of Vietnam 2000 also stated that an insurance brokerage enterprise is an enterprise that conducts brokerage activities according to the provisions of the Law on Insurance Business and relevant legal provisions.

Although providing consultancy and protecting the interests of insurance participants, insurance brokers receive insurance commissions from insurance companies. Insurance practices and insurance laws of countries around the world, when referring to brokerage activities, all regulate this issue. Clause 1, Article 91 of the Law on Insurance Business of Vietnam stipulates: “Insurance brokerage companies are entitled to receive insurance brokerage commissions. Insurance brokerage commissions are included in insurance premiums”.

To prevent brokers from using pressure to force insurance companies to accept poor service, wide coverage and low insurance premiums, Decree 42/2001/ND-CP dated August 1, 2001 of the Government stipulates: "Insurance brokerage companies are only allowed to advise and introduce to insurance buyers the rules, terms and insurance premium schedules that have been issued and approved by the Ministry of Finance or the insurance companies have registered with the Ministry of Finance" .

Article 92 of the Law on Insurance Business stipulates: “Insurance brokerage enterprises must purchase professional liability insurance for insurance brokerage activities at insurance enterprises operating in Vietnam” . In Vietnam today, there are many ways to understand brokerage depending on the industry and that can also lead to different interpretations of the same general issue in commercial activities. Therefore, Article 4 of the 2005 Law on Commerce of Vietnam stipulates:

“- Commercial activities must comply with the Commercial Law and relevant laws.

- Specific commercial activities regulated in other laws shall apply the provisions of that law".

Thus, it can be seen that the concept given in the 2005 Vietnam Commercial Law is the most typical.

*. Commercial brokerage has the following basic characteristics:

- The relationship between the principal and the broker is a one-time, short-term contract. This characteristic is due to the nature of the broker's work. They are only a bridge between the two parties buying and selling goods or providing services. Each broker mainly operates in a certain specialized field, today they work with this person, tomorrow with another person and only in certain cases and circumstances. For example, due to lack of time or scarcity of ships, the importer and exporter can ask the broker for guidance in hiring a means of transporting goods, but at other times that service is not necessary, they can take care of it themselves.

- The broker does not represent the interests of any party.

A broker is simply an intermediary between the buyer and the seller, so he does not represent the interests of anyone. The broker is not responsible for the solvency of the brokered party, but the broker is responsible for the legal status of the brokered parties.

- The broker does not participate in the performance of the contract between the parties unless authorized by the broker in writing.

Brokers in the maritime sector can participate in the delivery of goods and customs procedures. Brokers in the import-export sector can also collect money on behalf of the shipper... but in general, there are not many jobs like the above.

1.1.3.Commodity purchase and sale commission

According to Article 155, Vietnam Commercial Law 2005: "Entrustment of goods sale and purchase is a commercial activity, in which the entrusted party carries out the purchase and sale of goods in its own name according to the conditions agreed with the entrusting party and receives entrustment remuneration" .

The consignee can be entrusted by many parties, but can only accept the purchase and sale of goods suitable for his/her business line. All circulating goods can be purchased and sold by consignment.

In the purchase and sale trust we can divide into:

- Purchase authorization

- Consignment sale or also known as consignment of goods. If divided by scope of consignment, we also encounter:

- Closing order, which is an instruction to buy and sell on a certain market, at a specified price or amount...

- Open trust, allowing the trustee to perform work without any restrictions.

The consignee has the following rights and obligations: to request information, receive remuneration, buy and sell goods according to the agreement, preserve goods and documents, notify information related to contract performance, keep secrets, and not be responsible for the goods after they have been handed over to the consignor...

1.1.4. Agent

a. In the field of commercial business, buyers and sellers of goods and services do not always have the conditions to participate in contract performance. They may encounter difficulties in terms of time or market, or if they participate, they will not benefit, so buyers and sellers really need another type of service, which is agency.

Article 166 of the 2005 Law on Commerce of Vietnam stipulates: “Commercial agency is a commercial activity in which the principal and the agent agree that the agent, on behalf of itself, buys or sells goods for the principal or provides the principal's services to customers for remuneration” . Thus, agency is not only related to simple buying and selling activities but also includes the provision of services.

accompanying services (such as services in the fields of transportation, insurance, freight forwarding, customs clearance, inspection, etc.).

b . Agent characteristics

Agents differ from brokers because they have the following characteristics:

- The agent is named on the contract.

Thus, the agent has become the subject of the contract for the purchase and sale of goods and provision of services. They represent the principal to handle all issues related to the purchase and sale with customers. This will also help the principal to resolve business deadlocks such as: not being allowed to directly import and export, using the agent's services, avoiding troubles due to not understanding the laws of the host country.

- The relationship between the agent and the principal is a long-term contractual relationship.

For various reasons, the relationship between an agent and a principal is a permanent one, and it can only be terminated by agreement in the contract, or by one or both parties wishing to terminate it by giving written notice to the other party. This is quite different from the relationship between a principal and a broker.

- The principal is the owner of the goods or currency delivered to the agent.

c. Procedures for buying and selling through agents

An agent acts on his own behalf at the expense of the principal to buy and sell goods or provide services at prices decided by the principal for customers and receives a commission. According to the regulations of the Vietnamese government, the agent will sign contracts with customers on behalf of the principal and be the person whose name is on the contract with the customer, perform the contract for the benefit of the principal and receive a commission. The commission is calculated as a percentage of the purchase price, sale price of goods or provision of services. Normally, the commission of a commission agent

Commission will be stipulated by the parties in the contract depending on the type of goods, services, method of supply, and market. Commission will be paid at the time of payment for goods, which also means that the goods are stagnant, the principal's capital cannot be circulated, so in the contract, it is necessary to pay close attention to the time and speed of performing the entrusted work.

Model 1. Buying and selling through agents

Trustee

Trust contract

d. Types of agents

Sales contract

Commission Agent

Client

Commission information

Note : Contract - TT contract - payment

Article 169 of the 2005 Law on Commerce of Vietnam divides agents into the following types:

 Exclusive agent(Merchant Agent)

This is a type of agent that buys and sells a complete volume of goods or provides a complete service. The remuneration that the underwriter receives is the difference between the purchase price, selling price, and service price for customers compared to the price set by the principal for the agent. Thus, the agent's profit depends on their performance. Using this type of agent, the principal will avoid capital stagnation and still control the agent. On the side of the underwriter, although they have to pay in advance, they will still receive a larger profit if they know how to organize the business properly. The initiative in organizing the consumption of goods belongs to the agent, so this type of agent is also often found in international trade.

Model 2.Diagram of buying and selling through a sole agent

Trustee

Exclusive agent

Client

1 3

2

4

1. The person who entrusts the provision of goods and services.

2. The agent pays for the goods according to the agent's price.

3. Agent delivers goods to customers.

4. Customers pay for goods according to the selling price.

 Exclusive agent(Sole Agent)

If in a geographical area there is not only one agent but two, three or more, the agent's interests will be affected, so they only want to be the sole agent. The principal will not then transfer the agency rights to others, nor will he be allowed to directly buy and sell goods or services in the geographical area managed by the agent. If the principal directly conducts the business related to buying and selling or through others, the agent will still receive remuneration from the above mentioned volume of work.

In essence, this type of agent can be a commission agent or a sole agent. The above classification is based on the interests of the agent.

 General Agent