Mediation Contract: Simple on the surface, risky underneath

SHORT ANSWER TO THE MAIN QUESTION

Under Czech law, a brokerage agreement is a contract under which a broker undertakes to arrange an opportunity for the client to enter into a particular contract with a third party. In return, the client agrees to pay the broker a commission.

The broker therefore typically does not enter into the target contract instead of the client. The broker creates an opportunity for the client to conclude that contract with someone else.

In practice, it is essential to clearly define when the right to commission arises, what type of transaction is to be brokered, and how long the cooperation will last.

Unclear rules regarding entitlement to commission are one of the main sources of disputes.

YOU MAY BE THINKING…

“Is giving me a contact enough to earn the commission?”

“Do I still have to pay if I eventually negotiate the transaction myself?”

“What if I enter into the contract with that person several months later?”

“Is the broker entitled to commission if the transaction ultimately does not go ahead?”

“Can the broker act on my behalf?”

THE REAL PROBLEM IN PRACTICE: THEORY VS REALITY

The theory sounds simple.

The broker finds a suitable opportunity. The client enters into the contract. The broker receives a commission.

But real business rarely works that neatly.

A broker may, for example:

• simply provide a contact,
• introduce the parties,
• organise meetings and negotiations,
• actively assist during negotiations,
• identify several potential business partners,
• create an opportunity that the client only uses much later.

And then the key question arises:

Which of these events is enough to trigger the right to commission?

This is precisely what the agreement should define as clearly as possible.

Otherwise, the client may believe that commission is payable only for a successfully completed transaction, while the broker may consider their work completed as soon as a relevant business opportunity has been introduced.

BIGGEST RISKS AND COMMON MISTAKES

In practice, I would pay particular attention to:

• vague definitions of the transaction to be brokered,
• unclear conditions for entitlement to commission,
• undefined or poorly calculable commission,
• failing to address situations where the client completes the transaction without further involvement of the broker,
• no time limit for commission claims,
• unclear exclusivity arrangements,
• failing to address the broker’s expenses,
• confusing brokerage with representation, mandate, commission agency, or commercial agency,
• insufficient rules for terminating the cooperation.

A typical mistake?

The agreement states very precisely what percentage the broker will receive, but is much less precise about what the broker must actually do to earn it.

HOW TO APPROACH IT: REALITY, NOT THEORY

Before drafting a brokerage agreement, I recommend clarifying several basic questions:

1. What transaction should be brokered?
   What exactly should be the result of the broker’s activities?
2. What should the broker actually do?
   Is identifying a suitable contact enough, or should the broker actively assist with negotiations?
3. When does the right to commission arise?
   When an opportunity is created, when the contract is concluded, or upon another agreed event?
4. How will the commission be calculated?
   A fixed amount, a percentage, or a combination of both?
5. What happens if the transaction is concluded later?
   Can the broker still claim commission after the cooperation has ended?
6. Is the arrangement exclusive?
   Can the client use other brokers or find a business partner independently?

Only once these points are clear does it make sense to translate them into contractual terms.

PRACTICAL EXAMPLES

👉 A contact that eventually leads to a transaction

A broker introduces a business owner to a potential commercial partner. The initial negotiations lead nowhere. Several months later, the parties reconnect and conclude a contract without any further involvement from the broker.

The broker claims commission.

The client argues that the broker had nothing to do with the eventual transaction.

Without clear contractual rules, this can quickly become a dispute.

👉 Several brokers

A business works with several brokers simultaneously to find a buyer for an asset. The eventual buyer appears in the databases of more than one broker.

Once the transaction is completed, a dispute arises over who actually brokered the deal and who is entitled to commission.

👉 Unclear commission calculation

The agreement defines the commission as a percentage of the “transaction value” but does not explain what this means.

For a simple sale, this may not cause difficulty.

For a more complex transaction, however, each party may calculate the commission using a completely different amount.

WHY YOU SHOULD BE CAREFUL WITH “I’LL DO IT MYSELF”

A brokerage agreement may seem like the perfect contract for a simple online template.

Describe the transaction. Add the commission. Sign.

But most disputes do not arise because the agreement forgot to state the percentage of commission.

They arise because nobody clearly defined what successful brokerage actually means.

A generic template does not know how your business model works, how long your sales process takes, how customers are acquired, or what the actual result of the broker’s work should be.

That is why the first step is understanding the transaction.

Only then should the contract be drafted.

LAWYER’S RECOMMENDATION + CHECKLIST

With brokerage agreements, I recommend starting with one simple question:

What exactly must happen before I am willing to pay the broker a commission?

If both parties give the same answer, you have a good starting point.

If their answers differ, the agreement needs to be considerably more precise.

Quick checklist

✔ The transaction to be brokered is clearly defined.
✔ The broker’s actual role is clear.
✔ The conditions for entitlement to commission are precisely established.
✔ The amount or calculation method of the commission is clear.
✔ Any exclusivity arrangement is addressed.
✔ Transactions concluded after termination are covered.
✔ The termination of the cooperation is regulated.

FAQ

What is a brokerage agreement under Czech law?

Under a brokerage agreement, the broker undertakes to arrange an opportunity for the client to enter into a particular contract with a third party, and the client agrees to pay the broker a commission.

When is the broker entitled to commission?

This is one of the most important issues in the entire agreement. The answer depends both on Czech statutory rules and on the specific contractual arrangement. For this reason, the conditions triggering entitlement to commission should be defined as clearly as possible.

Is simply providing a contact enough?

Not necessarily. It depends on what the broker was engaged to achieve and how the conditions for earning commission were defined. Providing a contact may have very different consequences under different agreements.

Can the broker claim commission after the agreement has ended?

In certain circumstances, yes. Where the business process is lengthy, it is particularly important to address what happens to introduced contacts and pending transactions after the brokerage relationship ends.

Is a brokerage agreement the same as a commercial agency agreement?

No. Commercial agency is a separate contractual arrangement under Czech law with its own legal rules and typically involves an ongoing activity by the commercial agent. Correctly distinguishing between the two may have significant legal consequences.

Does a broker act on my behalf?

Brokerage itself does not automatically authorise the broker to enter into contracts or perform legal acts in your name. If the broker is also expected to represent the client, the authority to do so should be addressed separately.