Drafting an agency agreement: what belongs in it

Drafting an agency agreement means recording the agreements between the principal and the commercial agent within the mandatory legal framework of Article 7:428 et seq. of the Dutch Civil Code. A good agreement regulates at least the scope of work and products, the commission, the duration and notice periods, the non-compete clause, and what happens at the end — including the compensation for the client. Because large parts of the law are mandatory in favor of the agent, a tailor-made agreement is more important than with many other contracts.

The short answer

1. Parties and mandate: who is the principal, who is the agent, what is the mediation area.
2. Products and area: which goods/services, which territory or which customer base.
3. Commission: basis, percentage, payment date and trailing commission.
4. Duration and termination: fixed-term or indefinite, with statutory notice periods.
5. Non-compete clause: in writing, clearly defined, maximum of two years.
6. End: customer compensation and settlement of pending orders.

Why drafting an agency agreement must be done carefully

Unlike a standard contract for services, you cannot freely regulate everything under an agency agreement. The legislator protects the agent because they are often economically dependent on a single principal. Provisions that deviate from the law to the detriment of the agent are voidable or null and void. A carelessly drafted contract can therefore result in you being bound by rules that you specifically wanted to exclude.

At the same time, the law allows room for customization: you can make sound agreements regarding commission rates, exclusivity, reporting obligations, and the scope of work. That is where the benefit of a tailor-made agreement lies.

The essential provisions

• Scope of work and products. Define for which products or services and in which area or with which client base the agent acts as an intermediary. Determine whether exclusivity applies.
• Commission arrangement. Establish the basis, the percentage, and the time of accrual (Art. 7:431 BW), including commission on repeat orders and after termination.
• Reporting and information. Obligations regarding order reporting, customer data, and the information provided by the principal to the agent.
• Duration and notice periods. Fixed-term or indefinite-term, with the statutory periods as the lower limit (Art. 7:437 BW).
• Non-compete clause. In writing, limited in scope and duration (Art. 7:443 BW).

Document commission properly

Commission is the core of remuneration and at the same time the biggest source of disputes. Rule explicitly:

• on which turnover commission is calculated (net, excluding VAT, after deduction of discounts).
• When the commission becomes due: upon conclusion, upon delivery, or upon payment by the customer.
• Whether commission also applies to orders from previously referred customers without new mediation.
• Residual commission: orders received shortly after the end and attributable to the agent (Art. 7:431, paragraph 2, Dutch Civil Code).
• What happens in the event of cancellation or non-payment by the customer.

Notice periods and duration

Choose consciously between a fixed-term and an indefinite-term contract. For an indefinite-term contract, the statutory notice periods apply: one month in the first year, two in the second, and three from the third year onwards (Art. 7:437 BW). Longer periods are permitted, but the period for the principal may never be shorter than that for the agent. A fixed-term agreement that is tacitly continued is subsequently deemed to have been entered into for an indefinite period.

The non-compete clause

If you wish to restrict the agent after the contract has ended, the clause must comply with Article 7:443 of the Dutch Civil Code: it must be in writing, limited to the type of goods or services brokered and to the territory or client base entrusted to the agent, and valid for a maximum of two years. A clause formulated too broadly is void — in that case, you ultimately have no protection.

Don't forget the customer compensation

At the end of the contract, the agent may be entitled to a client compensation (Art. 7:442 BW), up to a maximum of one year's remuneration based on the average of the last five years. You cannot exclude this right in advance, but you can take it into account in the contract — for example, by properly documenting the commission structure and the composition of the client base.

Practical example

A garden furniture wholesaler has an agent drawn up without retroactive commission and with a vague non-compete clause (“the agent may not compete for two years”). Upon termination, the clause proves void because it is not defined by territory or client base, and the agent claims commission on orders received shortly after the end. A custom-drafted contract would have clearly regulated both points.

Honest recommendation

For a small, simple partnership with limited turnover and no non-compete clause, a solid standard model will suffice — a lawyer is not necessary in this case. However, do seek legal assistance as soon as exclusivity, a non-compete clause, substantial commission interests, or cross-border trade are involved. Precisely because the law is mandatory, an error in the contract will usually cost you more than drafting a custom-made one.

Read more: what is an agency agreement, having an agency agreement drafted , and the agency agreement.

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