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AGENCY AND
DISTRIBUTION AGREEMENTS
IN JORDAN
Dr. Hamzeh Haddad
Law & Arbitration Centre
P.O. Box 2696
Amman, 11821
Jordan
Telephone: 00 962 6 534 5 777
Fax: 00 962 6 534 0 666
E-mail:
sala@go.com.jo
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CONTENTS
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AGENCY AND DISTRIBUTION AGREEMENTS
IN JORDAN
Dr. Hamzeh Haddad *
Law & Arbitration Centre
P.O. Box 2696
Amman, 11821
Jordan
Telephone: 00 962 6 534 5 777
Fax: 00 962 6 534 0 666
E-mail: sala@go.com.jo
* Hamzeh Haddad, BA, in law, Damascus
University, 1971; LL.M. and Ph.D in Law,
Cairo University (1976); Ph.D in Law,
University of Bristol, 1985. Author:
Remedies of the Unpaid Seller in
International Sale of Goods under ULIS
and 1980 United Nations Convention;
Lecturer of Law; Assistant - Secretary
General of Arab Arbitration Association.
CONTENTS
1- Introduction:
1.1 Meaning of Selling Locally
1.2 Agents and Distributors
1.3 Legal Framework
1.3.1 Legal System
1.3.2 Applicable Laws
1.3.3 Courts and Administrative Agencies
1.3.4 Choice of Law / Choice of Forum
2- Agents and Distributors
2.1 Basic Concept
2.2 Obligation to Register
2.3 General Duties and Powers of Agents
2.4 General Powers and Duties of
Principal
2.5 Maintenance of Inventory
2.6 Exclusivity
2.7 Remuneration of Agents
2.7.1 Basis and Limitations
2.7.2 Restrictions on Payment
2.7.3 Reporting and Withholding
2.8 Term and Renewal
2.9 Termination
2.9.1 With Cause
2.9.2 Without Cause
2.9.3 Required Notice
2.9.4 Nonrenewal
2.10 Consequences of Termination
2.10.1 Right of Indemnification
2.10.2 Basis for Indemnification
2.10.3 Waiver of Right
2.10.4 Continuing Commissions
2.10.5 Termination of Registration
2.11 Competition Law Issues
2.12 Tax Issues
2.13 Intellectual Property Issues
2.14 Miscellaneous Clauses
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INTRODUCTION
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1.1 Meaning of Selling Locally
The term sale has only one meaning in
Jordanian Law. It is defined by Article
(465) of the Civil Code as a contract by
which a person transfers to another the
property of a thing or any other
financial right for consideration. This
definition is wide and contains some
other contract, although none of them
are regarded as sale according to the
code itself. An example of this may be
found in lease and barter contracts(1)
where each is and exchange of a
financial right for consideration, but
is not a sale in the strict legal sense.
In reviewing the meanings given in the
code to other contracts, one may say
that a contract of sale is agreement by
which a seller transfers the property of
a thing for money consideration.
It is necessary to distinguish between a
contract of sale and a promise to sell,
which means an agreement to enter into a
contract of sale in the future. The
latter is a mere promise, not a final
sale. In order to be valid, such a
promise must contain at least two
provisions(2):
1. The essential elements of the final
sale, which are the subject matter of
the sale, i.e., the thing to be sold,
and the price.
2. The time the contract of sale shall
be concluded, such as one month or seven
days.
In addition, if the intended sale is
formed, a promise to sell must comply
with such formality(3). Generally
speaking, every contract under Jordanian
law, including a contract of sale, is
made by a mere consent of the
contracting parties without any
formality whatsoever(4). In exceptional
cases, the law may require a specified
formality, without which a contract is
void(5), such as the sale of a car where
its registration at the Traffic
Department is essential(6). In that
case, the promise also is void unless it
complies with the formality so required.
A sale of goods can be made directly by
the owner, which is common is practice,
or through an intermediary who may be an
agent or distributor. The difference
between them will be explained below.
Suffice to say here that although a
foreign supplier may use either of these
two intermediaries for selling his
goods, it is important to note that it
is strictly prohibited for a foreigner
to deal with business in Jordan where
such business is confined to importing
and selling goods in the country(7).
This applies to traveling salespersons
who are employees of a foreign supplier,
and to local branches and subsidiaries
of that supplier. In short, selling
goods in Jordan may take place by
Jordanians only.
1.2 Agents and Distributors
The Jordanian Commercial Code makes a
distinction between civil and commercial
agents. Where the object or subject
matter of an agency (wakalah) contract
is a commercial matter, the agency is
commercial (tijari), otherwise it is
civil(8) (madani). The commercial
matters include, inter alia, the
purchasing of goods for the purpose of
selling them with the intent of
obtaining profits, and the selling of
such goods regardless of whether the
seller has achieved profits(9). In
particular, an agency shall be
commercial when it is for a commission (umoula),
the agent acts in his own name or under
a commercial title, i.e., a commercial
artificial name, and for the account of
the principal. If an agent acts in his
principal's name and for his account,
the agency is civil. While the agency in
the former case is subject to the
commercial law, the latter is governed
by the civil law(10).
According to the Commercial Agents and
Intermediaries Act No. 44/985,
(hereinafter referred to as the Act), a
commercial agency includes a distributor
(muwazz'a) who deals either for his own
account or the account of a foreign
company of a merchant whose head office
is outside Jordan(11). where the
distributor acts for the account of a
foreign company by way of commission, he
is governed by the rules applicable to
the commission agent. Again, it should
be noted that a commercial agent in all
cases must act in his own name.
There are other groups, which include
brokers and dealers, who are known as
commercial intermediaries. The function
of an intermediary (waseet or simsar) is
to facilitate business by reconciling
two different views until the parties
concerned reach an agreement(12). For
instance, a may wish to sell his goods
for JD 10 while B wants to by them for
JD 7. As an intermediary, C interferes,
and as a result, A and B conclude the
contract of sale between them for JD 9.
In such capacity, C is not an agent,
though the agency rules generally apply
to the agreement he has already made
with A, B, or both. His remuneration is
to be determined in accordance with that
agreement or, if the agreement is
silent, according to the custom.
Otherwise, the court shall determine it
depending on all surrounding
circumstances(13). It is important to
note that C has no claim for the
remuneration unless he has registered
his name as an intermediary in the
Register of Agents kept by the Register
at the Ministry of Industry and Trade in
Jordan(14) (hereinafter referred to as
the Ministry).
Another type of intermediary may be
called a messenger (rassoul). His only
function is to transfer a message,
exactly as it is, from one person to
another. While an agent, when concluding
the agreement expresses his own will,
the messenger expresses the will of
another person(15). Indeed, a messenger
is not more than a message courier
although he may be called an agent. This
type of intermediary may exist in all
transactions, including commercial
sales.
Franchising, or the permission to use a
trademark for certain services by the
franchisor to the franchisee, may be
regarded as an agency depending on the
real interpretation of the contract. As
was mentioned, a person is an agent in
each case where he acts for another
person or where he is a distributor
acting for his own account. If a
franchising contract bears either of
these tow meanings, it is an agency.
Other wise, it is an unnominated
contact(16) and shall be governed by the
general principles applied to every
contract(17) and to the rules applied to
that specific contract to which the
franchising is more closely related.
--------------------------------------------------------------------------------
(1) Article 658 of the Civil Code
defines a lease contract as agreement by
which a lessor transfers the benefit of
something for a specific period of time
for fixed consideration. Article 552
defines a barter as an agreement by
which there is an exchange of something
for consideration not of money.
(2) Article 105/1 of the Civil Code.
(3) ِArticle 105/2 of the Civil Code.
(4) Article 87 and 90 of the Civil Code.
(5) See, for example, Court of
Cassation, Judgment No. 850/86. Bar
Association Journal (BAJ), 1987, p.
1190; No. 609/86, (BAJ), 1987, p. 1185;
No. 153/85, (BAJ), 1987, p. 1347.
(6) By virtue of Article 4 of the
Traffic Act No. 14/84. See also, Court
of Cassation, judgment No. 609/86, (BAJ),
1987, p. 1185.
(7) Article 5 of the Ordinance No. 4/974
relating to the control of foreign works
in Jordan.
(8) Article 80/1 of the Commercial Code.
(9) Article 6/1, a, and c of the
Commercial Code.
(10) Article 80/2 and 3 of the
Commercial Code.
(11) Article 2 of the Act, and Article
99 of the Commercial Code.
(12) Id.
(13) Article 100 of the Commercial Code.
(14) Article 3 of the Act.
(15) Al- Sanhouri, Civil Law (Al-Wassit),
Vol., 1, 85.
(16) A nominated contract is one the
legislature regulates by specific
provisions, such as sale, lease, agency,
and insurance contracts. Otherwise, a
contract is unnominated.
(17) Article 89 of the Civil Code.
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