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An agency agreement (Art. 7:428 et seq. of the Dutch Civil Code) governs the relationship between a commercial agent and a principal. The agent mediates or independently concludes transactions in their own name for the principal. In exchange for remuneration: commission on turnover generated through the agent. Upon termination: statutory right to goodwill compensation (since 1996). For SMEs with indirect sales via agents: an important legal basis. Below are the details, commission models, and pitfalls.
The short answer
- What: Agent mediates or concludes transactions for the principal in his own name.
- Law: Art. 7:428 et seq. of the Dutch Civil Code.
- Commission: typically 5-20% of turnover via agent.
- Duration: fixed-term or indefinite.
- Goodwill at termination: statutory right to compensation (Art. 7:442 BW).
What does a sales agent do?
Agent works independently — not an employee:
- Mediation: approaching clients, preparing quotations.
- Conclusion of contract: in one's own name or on behalf of the client.
- Customer management: relationship development.
- Market information: feedback to the client.
Risk for an agent: entrepreneurial risk, own costs, no fixed income.
Content of agreement
- Parties: principal and agent.
- Products/services: what the agent sells.
- Area: exclusive or not, geographical.
- Commission rate:typically 5-20% of turnover.
- Commission calculation:gross turnover, after VAT, etc.
- Commission payment term: monthly, quarterly.
- Targets and minimum turnover:often with sanctions for failure to meet.
- Duration: fixed (1-5 years) or indefinite.
- Notice period: statutory 1-6 months depending on the term.
- Agent obligations: reporting, customer contact, price calibration.
- Client obligations: documentation, training, pricing.
- Restriction of competition:during and after agency.
- Confidentiality: business information.
- Goodwill compensation: at termination, subject to conditions being met.
Commission models
- Fixed percentage: e.g. 10% on all turnover via agent.
- Step structure: lower percentage with higher turnover (weakened incentive) or higher (strong incentive).
- Fixed salary + commission: minimum income plus revenue portion.
- Bonus structure: extra for achieving goals.
Goodwill compensation (Art. 7:442 BW)
Upon termination of the agency agreement, the agent is entitled to goodwill:
- Conditions: new clients brought in (or existing ones significantly expanded) and the client continues to benefit from those clients.
- Amount: maximum 1 year's average commission of the last 5 years (Art. 7:442 paragraph 2 BW).
- No compensation: in the event of termination by the agent without weighty cause, or in the event of dismissal due to serious breach of contract.
For SME clients: significant factor at termination — factor in beforehand.
Notice period
Statutory minimum (Art. 7:437 BW):
- First year: 1 month.
- Second year: 2 months.
- From the third year: 3 months.
- A longer period can be agreed upon by agreement, but not a shorter one.
Agent vs. employee vs. distributor
| Aspect | Agent | Employee | Distributor |
|---|---|---|---|
| Status | Independent | Employee | Independent |
| Risk | With agent | With employer | At the distributor |
| Compensation | Commission | Salary | Margin |
| Ownership of goods | At the client's | With employer | At the distributor |
| Goodwill at the end | Legal | No | Negotiable |
Honest recommendation
For SMEs with an agent network: invest in a good agency agreement (€1,500-€5,000 with a legal expert). Tailor it for specific markets and objectives. Factor in goodwill compensation in advance as an expense. For international operations: separate agreement per country and check local mandatory law (EU directive implementation varies). For agents: ensure clear agreements and retain proof of client acquisition.
For other topics: management agreement, contract for services , and cooperation agreement ..
Frequently Asked Questions
Contract between commercial agent and principal (Art. 7:428 et seq. Dutch Civil Code). The agent mediates or concludes transactions for the principal in his own name against commission. The agent is independent, not an employee.
Compensation for agent — typically 5-20% of revenue generated through the agent. Models: fixed percentage, tiered structure, fixed salary + commission, or bonus structure. Specify calculation and payment terms in the agreement.
Statutory right upon termination of the agreement (Art. 7:442 BW): maximum of 1 year's average commission of the last 5 years. Conditions: new clients introduced and the client continues to benefit from those clients. No compensation in the event of serious breach of contract by the agent.
Statutory minimum (Art. 7:437 BW): 1 month in the first year, 2 in the second, 3 from the third year onwards. A longer term is permitted by agreement, but a shorter one is not. Termination with insufficient notice: compensation to the injured party.
Agent: independent, ownership of goods by the client, commission. Distributor: independent, own stock, margin on sales. Employee: employed, salary. Choice depends on risk sharing and margin structure.
Parties, products, territory, commission percentage and calculation, term, notice period, obligations of both parties, restriction of competition, confidentiality, goodwill clause. Plus applicable law and competent court.
EU Directive 86/653/EEC has been implemented in all EU countries, but details vary. For international agents: separate agreement per country and check mandatory local law. For non-EU countries: careful choice of law.
