Goodwill compensation for commercial agents in The Netherlands
Dutch commercial agency law contains a number of clauses that aim to protect the interests of the agent. Most of this clauses – among which the clause that entitles the agent to goodwill compensation – are mandatory, and cannot be waived by the agent, or set side. Dutch agency agreement lawyer Thomas van Vugt explains.
Dutch business lawyer on agency contract
Considering the substantial mandatory nature Dutch agency law, it is always important to consider whether a contract might qualify as a commercial agency contract. A commercial agency agreement is defined as an agreement pursuant to which the principal authorizes the agent, and on its turn the agent undertakes, to render intermediary services, against remuneration, for the purpose of concluding agreements directly between the principal and third parties. In case the “agent” buys from the principal, and sells to third parties, this will probably not be commercial agency but distribution. Commercial agency agreements can be concluded for a specific period, or for an indefinite period. In most cases, the agent is authorized to directly conclude agreements in the name and for the account of the principal. The agent therefore mostly organises his own business, and is completely independent from the principal. Under Dutch law, a commercial agency agreement is not necessarily concluded in writing.
Commercial agency in The Netherlands: obligations
The principal is held to do everything that is necessary under the given circumstances to enable the commercial agent to perform its services. The principal must provide the commercial agent with sufficient documentation regarding the goods and services which shall be subject of the agency agreement, and with all such information that is necessary for the agent to perform his duties under the agreement. The principal is furthermore held to notify the agent if sales volumes are expected to be significantly lower.
Obligations of the commercial agent
Generally spoken, the commercial agent must act diligently, or as we speak “as a good agent”. He is required to follow all reasonable instructions of the principal. If the commercial agent is unwilling to follow the principal’s instructions, the principal shall under circumstances be entitled to terminate the agreement on this ground. Furthermore, the agent has to keep the principal informed of all his relevant activities and must notify the principal of all contracts that haven been negotiated or concluded on behalf of the principal. The commercial agent is entitled to the agreed commission, usually a percentage of the purchase price.
If no percentage or other fee is agreed, Dutch law stipulates that the commercial agent is entitled to “a reasonable commission”. The agent has the right to commission for contracts concluded during the term of the commercial agency agreement if (1) the a contract is concluded in respect of which the commercial agent has acted as intermediary, (2) if a contract is concluded for between the principal and a third party that was introduced by the commercial agent had previously introduced to the principal in connection with a similar contract, or (3) if the contract is concluded with a third party who is a client of the commercial agent, or is resident in the territory allocated to the commercial agent, unless it is expressly stipulated that the commercial has no exclusivity in that territory.
The commercial agent is furthermore entitled to the commission with respect to preparatory work for contracts which have been concluded after the termination of the agency agreement (1) if these contracts have been concluded mainly as result of his actions, and within a reasonable period after the termination of the agency agreement, or (2) if the order of the third party reached the agent or the principal before such termination.
Termination of the agency agreement
A fix term agreement without a provision allowing early termination will expire automatically at the end of the fixed term. Such agreement is extended silently on the same conditions in a different period of time, if it is continued. When an agency agreement is entered into for an indefinite period of time with a provision making early termination possible, both parties can terminate subject to the contractual notice period, which may however not be less than one month for first year, two months for the second year and three months during the third and following years of the agency agreement. If parties have agreed longer periods, these must be observed. Commercial agency may be terminated immediately when there are “pressing reasons”, making that it cannot be reasonably required for the terminating party to continue the agreement any longer. Those pressing reasons must be notified to the non-terminating party. Each of the terminating parties is furthermore allowed to request the cantonal judge to dissolve the agreement.
Goodwill compensation under Dutch law
Without prejudice to the commercial agents’ right to claim damages, he is, on termination of the agency agreement, entitled to compensation for goodwill if he has brought the principal new customers or has achieved a significant extension of the agreements with existing customers, provided that (1) this new business is still substantially beneficial, and (2) such compensation is reasonable in view of all circumstances and particular to the agents’ commission lost on the contracts with these customers. The amount this compensation cannot exceed the equivalent of one year’s compensation, based on the average of the last 5 years. It is, of course, possible that a higher goodwill compensation is agreed upon in writing.
Non-competition clauses are only valid in so far as they are in writing and relate to the kind of products or services, territory and groups of consumers covered by the agency agreement. A non-compete in a commercial tenancy agreement is only valid for a period of maximum two years after termination of the agreement. The agent is always allowed to request the court to set aside the non-competition clause.
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