Commercial agency - in the Netherlands

Commercial agency agreements - under Dutch law

Who is a commercial agent under Dutch law?

Under Dutch agency law an agent is a person who sells goods or services on behalf and in the name of a principal. Essentially the role of the commercial agent is to facilitate or procure sales on behalf of the principal. Article 7:428 of the Dutch Civil Code defines a commercial agency contract as:

a contract whereby one party, the principal, instructs the other party, the commercial agent, and whereby the latter binds himself, for a fixed or indeterminate term and for remuneration, to act as an intermediary in the conclusion of contracts, and, as the case may be, to enter into such contracts in the same and for the account of the principal, without being his servant.

An agency agreement must be distinguished from a distribution agreement. Under a distribution agreement, the distributor enters into contracts with third parties in their own name and for their own account.

How are commercial agency agreements regulated in the Netherlands?

If the principal and agent have not chosen an applicable law and the commercial agent conducts the agency in the Netherlands, the courts in the Netherlands generally are inclined to apply Dutch law. The Dutch courts furthermore are inclined not to apply a law chosen by the agent and the principal, if that law has no real connection with the relationship between parties – the parties or the agency contract at hand.

Dutch law has a specific legal regime for agency agreements, this is contained in Book 7 of the Dutch Civil Code. While Dutch law adheres to the principle of contractual freedom, a large part of commercial agency law is mandatory. The parties (the agent and the principal) are not permitted to deviate from mandatory provisions. Contractual provisions that purport to deviate from mandatory provisions will be void and without legal effect. A Dutch lawyer can assist you in drafting a commercial agency agreement that is consistent with the mandatory provisions of Dutch agency law.

Agency agreements are subject to the fundamental obligation of reasonableness and good faith that applies throughout Dutch contract law. European Competition law rules generally do not apply to agency agreements, provided that the agent does not bear the financial risks when entering into agreements pursuant to the agency agreement.

Formal requirements for a commercial agency agreement in the Netherlands

Under Dutch commercial agency law, the agent does not have to reside, have an office or be incorporated in the Netherlands. A commercial agent with a business organization in the Netherlands is required by law to register with the trade register of the Chambers of Commerce in the Netherlands. If the principal does not have an establishment in the Netherlands, the commercial agent is also required to register the principal in the trade register. If the principal does have an establishment in the Netherlands, he has direct obligation to register.

Agency agreements do not need to be in writing. However, certain clauses do need to be in writing. A Dutch lawyer can assist you in drafting an effective commercial agency agreement to ensure legal effectiveness of all clauses.

Common Clauses in agency agreements under Dutch Law

Non-competition clauses under Dutch law

Non-competition clauses will only be valid if concluded in writing and are to have effect for less than two years. A non-competition clause must be limited to the goods and (or) services and the territory of the commercial agent. Under Dutch commercial agency law, a non-competition clause can only be valid for a maximum term of two years after termination of the commercial agency agreement. If the effects of a non-competition clause in a commercial agency contract are considered to be unfair or disproportionately prejudicing the commercial agent, then the court can annul or mitigate the effects of a non-competition clause in a commercial agency contract.

Del credere provisions under Dutch agency law

A del credere provision regulates the risk of default in payment by third parties. Article 7:429 DCC provides that a commercial agent can only assume liability for the obligations of third persons arising from a contract made or concluded through his intervention if he does so in writing. The liability cannot exceed the agreed commission save where the liability applies only to specific contracts or where the clause only applies to contracts concluded by the agent in the name of the principal. Subsection 2 further provides that unless the parties have otherwise agreed in writing, a “del credere” provision means that the commercial agent will be liable only for the solvency of third parties.

Commission under Dutch agency law

The Dutch Civil Code does not specifically regulate the amount of the commission which is payable to the agent; if no specific commission has been agreed between the principal and the agent, then the agent is entitled to a reasonable commission given the circumstances at hand.

Termination of a commercial agency agreement under Dutch law

A commercial agency agreement can be entered into for a fixed period or for an indefinite period. If the commercial agency agreement has been entered into for a fixed period, termination during the course of that period can only occur if such a prior termination has been agreed to in the commercial agency contract. If and when a commercial agency agreement, entered into for a fixed period, continues after that fixed period (and no other arrangements are made between the principal and the agent), the agreement will be considered to have become an agreement for an indefinite period by operation of law.

A commercial agency agreement for an indefinite period typically has an arrangement regarding termination. In most cases, such termination provisions include regulating the observance of a termination notice period. Under Dutch commercial agency law, the minimum notice period varies from one to three months, depending on the duration of the agency contract.

If parties have not agreed to a notice period, the Dutch Civil Code provides that this termination notice period varies from four to six months, depending on the duration of the agency agreement. If the principal unilaterally terminates a commercial agency agreement and the agent is a natural person (and not a legal entity), and the termination is not for urgent cause, Dutch law provides that such termination can only be successfully done based on a permit from the Dutch authorities (UWV). Please note, that such a permit can also be required even if Dutch law is not governing the agency agreement in other respects.

Goodwill compensation upon termination under agency law in the Netherlands

Under agency law in the Netherlands, the principal may be held to pay to the commercial agent goodwill compensation upon termination. Following the commercial agency provisions in the Dutch Civil Code, this goodwill compensation shall not exceed the sum of the average yearly commission during the previous five years (or, if the agency agreement has not run for five years, the yearly average during the actual period).

Termination for urgent cause of an agency agreement under Dutch law

Termination of a commercial agency agreement under Dutch law can be effected immediately if there is an urgent cause. However, if the Dutch court finds that there was no such urgent cause, damages could be payable by the terminating party.