Commercial agency-an agreement drafting

A commercial agency agreement (also known as an agency contract) is the agreement whereby you, as the principal, engage an independent commercial agent to mediate in the conclusion of agreements with customers for an extended period, in exchange for a commission. The agent works in your name and on your behalf, but remains an independent entrepreneur and not an employee. Article 7:428 of the Dutch Civil Code describes this agreement and stipulates that the mediation must be of a lasting nature; an occasional assignment does not fall under it.

You need a commercial agency agreement as soon as you systematically market your products or services through an agent, for example in a specific region or to a specific client base. The legal framework surrounding agency agreements is largely mandatory law to protect the agent. Anyone who fails to carefully document the agreements runs the risk that statutory rules (such as the compensation for customers) may turn out unexpectedly and unfavorably. A written agreement makes the arrangements regarding territory, products, commission, and termination crystal clear in advance.

The core of the agreement consists of defining the scope of work and the remuneration. You specify for which products or services the agent mediates, in which geographical area or for which client base, and whether the agent is granted exclusivity. Exclusivity means that you do not engage other agents in that area; this is of great value to the agent and an important point of negotiation.

The commission constitutes the consideration. Pursuant to Article 7:431 of the Dutch Civil Code, the agent is entitled to commission on agreements concluded during the term of the agreement that are attributable to his mediation, and, subject to conditions, also on clients he previously introduced for similar transactions. Explicitly set out the commission percentage, the basis for calculation, and the time of accrual. In addition, regulate practical matters such as reporting obligations, the provision of documentation and samples, and any reimbursement of expenses.

In principle, an agency agreement can be concluded without any formal requirements, but the law grants each party the right to require the other party to draw up a document signed by both parties stating the content of the agreement. Moreover, a number of clauses are only valid if they have been agreed upon in writing. This applies in any case to the non-compete clause (Article 7:443 of the Dutch Civil Code) and to any del credere clause, whereby the agent shares in the risk that a customer will not pay.

The importance of written documentation is significant: if a clause requiring this is missing in writing, that clause is unenforceable. Furthermore, a del credere clause is subject to limits, ensuring that the agent is not unlimitedly liable for non-payment by customers. By explicitly regulating these points in writing, you prevent an important agreement from being invalidated in the event of a dispute.

Termination is the most sensitive part of the agency agreement. For agreements for an indefinite period, a statutory notice period of four months applies pursuant to Article 7:437 of the Dutch Civil Code, which increases by one month after three years of service and by two months after six years. The parties may agree on longer periods, but the period for the principal may not be shorter than that for the agent. Anyone who gives notice too short a period or gives notice prematurely without valid grounds is liable for damages.

In principle, a fixed-term agreement terminates by operation of law, but a tacitly continued fixed-term agreement is treated as an indefinite-term agreement. Therefore, clearly stipulate whether the agreement applies for a fixed or indefinite period and what happens upon renewal. Immediate termination for compelling reasons is also possible, but this is subject to strict requirements.

The most underestimated risk is the compensation for clients (goodwill) under Article 7:442 of the Dutch Civil Code. At the end of the agreement, the agent is entitled to compensation if he has introduced new clients or substantially expanded existing relationships, you still derive significant benefit from this, and payment is equitable. The court generally calculates this according to the three-phase doctrine: first the principal's benefit, then an equity adjustment, and finally the statutory maximum.

That maximum amounts to one year's remuneration, calculated on the average of the last five years. This right is mandatory: you cannot exclude it in the agreement in advance. There are, however, exceptions, regulated in Article 7:442 paragraph 4 of the Dutch Civil Code, for example when you terminate the agreement due to an urgent reason attributable to the agent, or when the agent terminates the agreement himself without justified grounds. Important: the agent must make his claim known within one year after the end of the agreement, otherwise the right lapses.

If you want to prevent the agent from immediately serving your clients for a competitor after the termination of the agreement, a non-compete clause is necessary. Article 7:443 of the Dutch Civil Code imposes strict requirements: the clause must be entered into in writing, may relate exclusively to the territory or client base and the type of goods or services for which the agent was active, and applies for a maximum of two years after the end of the agreement.

A non-compete clause formulated too broadly may be limited or set aside by the court. A well-defined clause, on the other hand, offers real protection for the relationships and know-how built up during the collaboration. Align the content of the non-compete clause with the scope of work you have described elsewhere in the agreement, so that both provisions align.

Because a large part of the agency regulations constitutes mandatory law, you cannot simply use a standard template. The agreements regarding commission, exclusivity, notice period, non-compete clause, and client compensation interact with one another and must be tailored to your specific products, market, and desired collaboration. Awkward wording can cost you a lot of money upon termination or render a clause unusable.

Our legal experts draft your custom commercial agency agreement, legally sound and tailored to your situation, for a fixed price upfront. This way, you know exactly where you stand and avoid costly surprises when the partnership ends.