Israel Law of Agency

An agent, sometimes referred to as a commercial agent, doesn’t purchase the products from the manufacturer, nor obtain ownership of them. The agent is usually an independent contractor who operates on the manufacturer’s behalf and according to his instructions. The agent’s role is to market, locate, and create a market for the products. In return for his services, the agent is entitled to a commission, usually calculated as a specific percentage of the amount of business that the agent brokered.

The commercial agency may take on different characteristics, arising from the agency agreement between the agent and manufacturer. When an agent operates as a “legal agent,” the provisions of the Agency Law 1965 apply.

Israel Agency Law

Israel’s Agency law is contained in the Agency Act 1965 and legal agency is defined as the granting of power to an agent to undertake, on behalf of the manufacturer, a legal act with respect to a third party. A manufacturer could decide to vest an Israeli representative or employee with authority to act in its name with binding force, thus making the representative an agent. The granting of such authority is recommended only if the foreign entity either trusts the agent to make the right decisions or can exercise significant control over the agent’s actions. This would be the case where the agent is an employee or a wholly-owned subsidiary of the manufacturer.
 

The acts performed by the agent bind the manufacturer and it would therefore be wise for the manufacturer (the foreign entity) to agree on the extent of the agent’s authority and his power to bind him.

According to the Agency Law 1965, a manufacturer shall not be bound by the agent’s acts which are outside the scope of his powers. A third party unaware of the lack of authority may either regard the agent as a party to the act or withdraw from the transaction and claim damages from the agent.
The Agency Act 1965 lists the basic obligations of the agent to include loyalty, promotion of the manufacturer’s interests and a prohibition to represent different manufacturers regarding the same issue (unless so agreed by the parties). The manufacturer is obliged under the Agency Act 1965 to indemnify the agent for reasonable expenditure and liabilities incurred as a result of the agency.