📌 Like any business, an agent incurs operating expenses. These may include the cost of running an office, travelling to customers, attending trade fairs or organising marketing activities.
In practice, the question arises whether the agent can require the principal to reimburse those expenses.
✅ Yes, but this does not mean that the principal must reimburse every cost of the agent’s business.
Unless the agency agreement provides otherwise, the agent may claim reimbursement where:
➡️ the expense was connected with performing the assignment;
➡️ the expense was justified;
➡️ its amount exceeded what is usual in the relationship concerned.
In practice, an agent’s ordinary operating costs, such as maintaining an office or standard customer acquisition activities, are generally borne by the agent. Reimbursement may instead cover exceptional expenses incurred in performing a particular assignment. Each case requires an assessment of the nature of the expense and the circumstances of the parties’ cooperation.
❗ Can the parties agree different reimbursement rules?
Yes. The rules allow the parties to regulate this issue differently in their agency agreement. They may, among other things, exclude the principal’s obligation to reimburse expenses altogether.
⚠️ What should the agency agreement address?
If reimbursement of the agent’s expenses is envisaged, the agreement should specify:
➡️ which types of expenses are reimbursable;
➡️ whether the principal’s prior consent is required and, if so, in what form;
➡️ whether particular expenses are subject to monetary limits;
➡️ which documents the agent must provide to substantiate an expense;
➡️ the deadline for submitting a reimbursement request.
📌 Conclusions
An agent cannot automatically pass all their operating costs on to the principal. Unless the agreement provides otherwise, reimbursement covers only justified expenses connected with performing the assignment which exceed what is usual in the relationship concerned. Detailed provisions on incurring and settling expenses are therefore worthwhile. They help reduce the risk of disputes over both the types and amounts of expenses.
