29 Apr Modifying an Agency Contract: When Is It Valid and When Is Consent Required?

Although the Commercial Agency Act (CAA) has a relatively concise body of provisions — just 31 articles — its scope covers a wide range of highly complex situations.

Within this context, one of the key questions is determining precisely when a principal may unilaterally modify an agency contract. Specifically, when do new requirements amount to mere reasonable instructions or legitimate guidance within the ordinary course of business — and therefore fall within the principal’s managerial authority — and when, on the other hand, do they constitute a material change to the contractual terms that requires the agent’s consent.

This is no minor issue; it is a decisive factor in determining whether the agent will be entitled to claim the corresponding compensation (goodwill indemnity, notice period, and damages where applicable). It is worth noting that an agency contract may be terminated unilaterally by either party, and that only in cases of breach of contract by the agent will the agent forfeit the right to receive the compensation otherwise due.

Unilateral Modification of an Agency Contract: What the Law Permits and What It Does Not

The legal basis for this debate lies, in our view, in Article 1256 of the Civil Code, which prohibits leaving the performance of any obligation entirely to the discretion of one party alone.

From this premise, it is necessary to assess each case individually, taking into account the nature of the new instruction or obligation being imposed by the principal, as well as the prior contractual relationship between the parties. Only when the modification affects essential elements of the contract — or introduces a new obligation that was not previously binding on the agent — will the agent’s consent be required for the change to take effect and be enforceable.

What Factors Should Be Considered?

In this framework, the key rule under the CAA is set out in Article 9.2(c), which provides that “the agent must carry out its activities in accordance with the reasonable instructions received from the principal, provided they do not affect the agent’s independence.”

It follows that if the principal’s new requirements can be understood as falling within the scope of these reasonable instructions, they constitute legitimate directives that are binding on the agent, who must comply with them. Conversely, if they represent a material change to the contractual terms that falls outside this framework, the agent may refuse to comply without being considered in breach — rather, such refusal would be a legitimate exercise of the agent’s contractual position.

There Is No Closed List

Each case must be assessed on its own merits, having regard to the nature of the modification itself and the history of the relationship between the parties — the analysis is inherently fact-specific. That said, case law has progressively identified certain recurring criteria, treating as material those modifications that affect matters such as:

• Remuneration.
• The imposition of sales targets that did not previously exist.
• The introduction of new obligations (such as debt collection duties or the preparation of periodic reports, etc.).
• Or even matters relating to the applicable law, jurisdiction, or dispute resolution mechanisms.

In short, those modifications that significantly affect the agent’s legal position or independence.

For all these reasons, any business decision of this nature must be carefully considered in advance. The unilateral imposition of a material modification without the agent’s consent would be deemed unlawful — and not only would it be contrary to law, but the agent could refuse to comply without incurring any breach, and it could even justify a termination attributable to the principal, triggering entitlement to the statutory compensation provided by law.

How to Modify Contract Terms: Our Approach at Navarro Llima Abogados S.L.

As outlined above, introducing new terms into an agency contract requires thorough and rigorous prior legal analysis.

This is not a straightforward process, but nor is it an insurmountable one. Even where a material modification is involved, it is possible to structure an appropriate strategy that allows for its implementation with full legal certainty.

The first step is a comprehensive review of the existing contract, identifying which provisions give rise to obligations whose modification would amount to a unilateral change to the contractual terms, and which may be adjusted within the principal’s legitimate managerial authority — drawing on our experience, knowledge of the relevant case law, and legal expertise.

Once the Analysis Is Complete

Where the modification does not affect essential contractual elements, it can be implemented directly and without complication. In those cases where a material shift in the contractual balance is identified, we develop individual or collective negotiation strategies with the agents concerned, complemented by a financial impact assessment to help quantify the real-world implications of the change and support informed business decision-making.

Our practice is not limited to advising principals. We also have extensive experience representing commercial agents, examining the validity of modifications imposed upon them and, where appropriate, pursuing the necessary legal actions to recover the compensation they are owed when the statutory limits have been exceeded.

In short, despite the apparently straightforward nature of the Commercial Agency Act, its practical application is considerably more nuanced. At Navarro Llima Abogados, we have been advising businesses and agents in this field for over 25 years, providing a technical, strategic, and results-driven approach that ensures legal certainty in every decision.