Various companies increasingly use commercial agents and thus may choose to draft commercial agency contracts for that purpose. The commercial agent does not sell his own goods at his own expense and risk but receives compensation from the principal for a portion of the turnover he achieves (the principal is the seller on whose behalf the intermediary is acting, e.g. a supplier). In an agency agreement, it is usually agreed in which area the commercial agent may operate (exclusively) and what the mutual rights and obligations are. Read more about commercial agency contracts in the Netherlands.
Commercial agency attorney in the Netherlands
As a commercial agency attorney in the Netherlands, I often see that stipulations in agency agreements governed by Dutch law are not properly or clearly regulated. Sometimes there is only a verbal agreement or the agreement is in conflict with the commercial agency Articles in the Dutch Civil Code. This can be a breeding ground for unnecessary discussion and leads to questions such as: can several commercial agents be active in the same area? How high is the commission for the commercial agent? Is goodwill owed if the commercial agent quits? What is the notice period of an agency contract? In this article I will answer 10 common questions from my practice.
1. What topics should be included in an agency agreement?
There are no formal requirements for the formation of commercial agency contracts in the Netherlands. The Dutch agency agreement can therefore also be concluded verbally, but that is not advisable as it is difficult to prove what has actually been agreed. In addition, certain clauses can only be agreed in writing: for example, the non-competition clause. It is advisable to always have a written agency agreement. The following subjects belong in an agency agreement:
- the identity of parties;
- exclusivity (or not) and the contract territory;
- when commission is due;
- the amount and calculation of the commission;
- the obligations of both the commercial agent and the principal;
- the duration of the agency contract and the period of notice for termination;
- The non-compete clause;
- which law is applicable and which forum is competent in the event of a dispute.
Tip: It is important to record these agreements properly in order to prevent later discussion. For example, if nothing about exclusivity is agreed and the commercial agent is the only one active in the contract area, a presumption of exclusivity can be assumed. This may even mean that commission is owed on sales that the principal has achieved himself (without using the commercial agent).
2. When is a commercial agent generally entitled to commission?
A commercial agent under Dutch law is generally entitled to commission if a purchase agreement is concluded during the period of the agency contract:
- if the contract was concluded through the intermediary of the commercial agent;
- if the contract was concluded with someone whom he had previously brought in for such a contract;
- if the contract has been concluded with a person who is a member of the customer base or is established in the territory allotted to the commercial agent, unless it is expressly stipulated that the commercial agent does not have an exclusive right in that territory.
A commercial agent under Dutch law is also entitled to commission if a contract is concluded after the agency contract has ended, if:
- the contract is primarily due to the work performed by him during the term of the agency contract and is concluded within a reasonable period of time after termination of that contract;
- the commercial agent or principal has received the order from the third party before the agency contract expires.
Please note that the parties may also agree in the contract to derogate from the right to commission during the term of the agency contract. This does not apply to the right to commission after the agency agreement has ended.
3. When does the contract between the principal and the purchaser come into being?
It is sometimes difficult to determine when a contract between the principal and a buyer has actually been concluded as a result of the commercial agent’s mediation. However, this is usually of importance for the question of when commission is due. In the end, it is always the principal himself who decides whether or not to enter into the agreement with the potential buyer. Possible moments for the conclusion of the agreement are:
- the time when the commercial agent transmits the order to the principal;
- the moment the contract between the principal and the buyer has been performed (and the buyer has paid). If the parties opt for this moment, this must be explicitly included in the agency agreement;
- all moments that occur between the two times mentioned above, for example: order confirmation from the principal to the third party and delivery of the products to the third party.
4. How much is the commission for the commercial agent?
There is no minimum or maximum amount for the commission to the commercial agent. The amount can be linked to the purchase price or the quantity of products sold through the agent. Often a percentage is agreed. In order to properly measure what is owed, the parties should agree on how the commercial agent can see which purchase agreements have been concluded (and paid for).
5. Is a fee due if the commercial agent is not used after all?
Where an agency contract has been concluded, but the principal has not made use of it, or has used it to a significantly lesser extent than would normally have been expected, the commercial agent shall be entitled to remuneration. In determining the amount of remuneration account shall be taken of the commission earned in the preceding period or other circumstances which may have a bearing on it.
6. What are the main obligations of the commercial agent during the contract?
The principal’s principal obligation is to approach potential buyers and then to mediate in the conclusion of contracts between the principal and the potential buyer. In addition, the commercial agent has a general duty of care, which includes complying with timely and responsible instructions given by the principal and keeping the principal informed of the activities involved in the performance of the contract.
7. What main obligations does the principal have during the contract?
The principal’s main obligation is to pay the commission. The amount or percentages are generally well regulated in commercial agency contracts in the Netherlands. In addition, the principal must do everything that is necessary on his part in the given circumstances to enable the commercial agent to perform his work. For example, the principal must provide all the information necessary for the performance of the agency contract. The principal must also inform the commercial agent within a reasonable period of acceptance or refusal of an agreement made by the commercial agent.
Tip: make an agreement in commercial agency contracts in the Netherlands on the way in which insight is provided into delivered and paid orders. This prevents much discussion. It is in any case a legal obligation that insight be provided, so it is better to make a good agreement on this.
8. How long is the notice period for a commercial agency contract under Dutch law?
In the event of termination of commercial agency contracts in the Netherlands, the period of notice must be taken into account. The period of notice stipulated in the contract must not be less than one month in the first year of the contract, two months in the second year and three months in the following years. If no period of notice is included, the period of notice is four months, increased by one month after three years of the contract and by two months after six years. In short, the longer the contract lasts (and the greater the dependency) the longer the period of notice must be. In the event of the death of the commercial agent, the agency contract shall end with immediate effect. In the event of the principal’s death, both the principal’s heirs and the commercial agent may terminate the contract subject to four months’ notice. In the event of bankruptcy, the agency contract can be terminated with six weeks’ notice.
Tip: If it is not clear when notice may be given and by when, it is advisable to seek advice. An invalid notice of termination can lead to the contract remaining in force and additional damages possibly being due.
9. When is a commercial agent under Dutch law entitled to a customer fee / goodwill?
The right to customer compensation (goodwill) must be determined in three stages:
- Stage 1: The commercial agent must have brought in new customers or significantly expanded the agreements with existing customers and these agreements must still yield a significant benefit to the principal
- Step 2: It must be assessed whether the amount determined in Step 1 needs to be adjusted for reasons of fairness, taking into account all the circumstances of the case, in particular the lost commission from the agreements with these customers.
- Stage 3: A check must be made to ensure that the amount set does not exceed the maximum amount. The goodwill compensation shall not exceed the commission for one year and shall be calculated on the basis of the commission received over the last five years or, if the agreement has been in place for a shorter period, on the average over the whole period of the agreement.
Tip: sound the alarm in good time if you think you have a claim on goodwill. When Dutch law applies, a claim lapses after one year.
10. What obligations may exist after termination of the contract?
After termination of commercial agency contracts in the Netherlands, the principal and the commercial agent must take the interests of the other into account. In addition, there is an obligation to hand over documents that the commercial agent had in his possession within the scope of his agency. It is also possible that a non-competition clause has been included. The conditions for a valid non-competition clause are:
- agreed in writing;
- only to the type of goods or services which the commercial agent was representing and to the territory which was entrusted to him;
- valid for a maximum of two years after the end of the contract.
Dutch Lawyer specialized in commercial agency agreements
For questions regarding the conclusion or termination of an agency agreement, we will be happy to assist you. We have extensive experience in advising and litigating about agency agreements. We can also help you draw up your contract, so that common pitfalls can be avoided and opportunities can be exploited.