Commercial Agency Contracts

The nomination of a commercial agent is frequently the first step to develop business abroad. Why not nominate your agent in The Netherlands, in the Benelux Countries (Belgium, the Netherlands and Luxemburg) or the European Union? Drafting a contract is not very difficult and as commercial agents will have to earn their commission by concluding deals for the principal, such a contract is usually considered to be for the mutual benefit of both parties.

What can go wrong?

What can go wrong? As a law firm dealing with international conflicts on a daily basis, we can tell you what can go wrong. Suppose you have concluded an exclusive agency agreement and your agent seems to have fallen asleep. Suppose your agent starts working for a competitor and even likes the products of your competitor better. Is it possible to terminate agency contracts? What about compensation? The relationship between the principal and the commercial agent is defined by law and by the contract concluded between them. This article is to give you an indication of the Dutch Legal System.

The Law on Commercial Agency in Holland

The law on commercial agency has been incorporated in the Dutch Civil Code. Commercial agents are defined as independent contractors who agree to act as intermediary in conclusion of contracts for the principal or to enter into contracts on behalf of and for account of principal during a specified period or for an indefinite period of time and for commission. The Dutch Civil Code is in line with the EC-Directive 86/653 of 31 December 1986 on self-employed commercial agents.

Under Dutch law there is no necessity to immediately provide a written agency contract. However, the law contains an obliation for both parties to provide the other party with a signed document containing the contents of the verbally agreed agency agreement upon first request of the other party. Obviously it is advisable to make up a written contract immediately. We can provide you with a check list and after receipt of your wishes, we can send you a draft based thereon, if necessary at short notice.

"Goodwill” Compensation"

It is also possible to use your own document or standard contract. However, one should always recognise that the Dutch Civil Code contains some provisions designed to protect the commercial agent. A well known example thereof is the obligation for the principal to pay the agent upon termination of the agency agreement a goodwill compensation of up to one year’s commission based on the average commission over the last five years. The amount of compensation will be fixed by the Court and may vary from this maximum to nothing at all.
Compensation will only be awarded if the agent has developed business and has thereby substantially increased the value of the principal’s business. Moreover the judge will consider all circumstances of the case. There are also other compulsory applicable rules, like the rules on termination of the contract.

Some principals will prefer to have the same contracts with all their agents, wherever they are located. Under certain circumstances, the Dutch rules on Private International Law make it possible to conclude a contract under foreign law.

The services of our firm

Some frequently used services of our firm relating to agency contracts are:

  • advice on the conclusion of commercial agency contracts
  • drafting of commercial agency contracts
  • negotiation with principal or agent
  • advice regarding disputes and termination
  • litigating commercial agency disputes

If you have any questions regarding the drafting or termination of commercial agency contracts, please feel free to contact our Transport and International Trade contact person for assistance.

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