Agency Agreement under Dutch Law.

The agency agreement, is the agreement on the basis of which the agent in consideration for a fee or commission provides conciliation in entering into an agreement between the principal and a customer. The agent enters into agreements in name and for the account of the principal. The agent is independent from and not subordinated to the principal. The agency agreement does not have to be in writing. However, each party to an agency agreement can at any given moment during the term of the agreement request the other party to provide an undersigned written document containing the applicable rights and obligations of the agency agreement.

In order to protect the interests of the agent, the specific section of the Dutch civil code dealing with the agency agreement, contains numerous stipulations having compulsory effect. Deviating contractual clauses can be null and void. The principal in this respect has the obligation to do anything within his power that is necessary in order for the agent to do his work. The principal has to provide sufficient documentation on the goods or services for which the agent acts as a middleman between principal and customer. Furthermore, the principal must give the agent any and all information necessary for the execution of the agency agreement. The principal has the obligation to warn the agent when he foresees that less agreements will be entered into than the agent had expected. The principal must warn the agent for a fall in revenues.

For agreements entered into between the principal and a customer during the term of the agency agreement, the agent is entitled to a fee or commission. The agent is however also entitled to a commission when after the termination of the agency agreement, agreements between principal and customers are entered into as a result of the agent’s efforts. As long as the agent is entitled to a commission, the principal has the obligation to inform the agent periodically on the indebted commissions and on the data forming the basis of the calculation of the indebted commissions. The principal is obliged to provide the agent on a monthly basis with a written statement consisting of the indebted commission over that month and the data used to calculate the commission. The agent has the right to look into relevant documents (e.g. invoices) in order to review the written statement. The agent that has reviewed these documents may not disclose its contents.

The agency agreement can be entered into for a definite or an indefinite term. If however an agency agreement that has been entered into for a definite term will be continued by both parties, this agreement will then bind both parties indefinitely. When parties have agreed that the agency agreement can be terminated during the term of the agreement, either party is entitled to terminate the agreement by taking into account the notice period as agreed upon. When no notice period for termination has been agreed upon, a minimum term of four months notice applies. This term will be extended with one month or with two months for (respectively) an agreement with a duration of three years or more or six years or more. If parties have agreed on a notice period for termination, the Dutch civil code prescribes that this period cannot be shorter than one month during the first year of the agreement, two months during the second year and three months for the next years.

An important feature of the agency agreement is the right to a client compensation or goodwill compensation to which the agent under circumstances is entitled upon termination of the agency agreement. The agent is entitled to the goodwill compensation if and when (i) the agent has brought the principal new customers or the agent has expanded agreements with existing customers and these agreements still give the principal significant advantages and (ii) the payment of these commissions in view of all circumstances is reasonable. The agent loses its right to the goodwill compensation if he has not informed the principal within one year after termination of the agency agreement that he claims the goodwill compensation.

The non-competition clause is a popular clause in agency agreements. As regards, the non-competition clause the Dutch civil code also contains certain compulsory rules. A non-competition clause is only valid when (i) it is in writing and (ii) it pertains to the specific goods or services for which the agent acted as the middleman between principal and customer and (iii) it applies to the territory or client base that was entrusted to the agent. Such a non-competition clause is valid only for a maximum of two years upon termination of the agreement.

In summary, the agency agreement is limited by numerous compulsory requirements. Above, only the most important or eye catching requirements are described and it should be noted that the above is not an exhaustive list of requirements. Before entering into an agency agreement as agent or as principal or in case of a threatening dispute it is therefore important to have the agency agreement reviewed.

Should you have any questions or need more information on agency agreements or related agreements, or have other questions regarding Dutch corporate and commercial law, please contact Peter Keegstra.