Article 7: 428 of the Dutch Civil Code defines the agency agreement. A commercial agency agreement is an agreement in which one of the parties ('the principal') instructs the other party ('the agent'), who has engaged himself to this instruction on payment of a commission (remuneration), to provide intermediary services in arranging contracts to be concluded by the principal with third persons and, where appropriate, to conclude such contracts in the name and for account of the principal, without being his subordinate; the commercial agency agreement may be effective between the principal and the agent for a fixed term or for an indefinite term.
As soon as an agreement meets this definition, the provisions of section 4 of book 7 of the Dutch Civil Code apply to it. Some of its provisions constitute mandatory law. Deviation from this is not permitted and the other party can invoke the invalidity of deviating provisions in the agency agreement.
The law was amended at the time to implement EU Directive 86/653 / EEC on self-employed commercial agents. As a result, the interpretation of the law must take into account the judgments of the Court of Justice of the European Union. This is particularly important when determining the amount of goodwill compensation.
Article 7: 437 of the Dutch Civil Code provides that agency agreements can be terminated. Each of the parties is entitled to terminate the agency agreement with due observance of the agreed cancellation period. If no cancellation period has been agreed, the cancellation period is four months, plus one month after three years of the agreement and two months after six years. The cancellation period cannot be shorter than one month in the first year of the agreement, two months in the second year and three months in the following years. If parties agree on longer terms, they may not be shorter for the principal than for the commercial agent. Finally, cancellation must take place at an effective termination date at the end of a calendar month.
It is not always necessary to observe the cancellation period. Both parties may terminate the agreement earlier due to an urgent reason immediately communicated to the other party. But the party that terminates the agreement without respecting its duration or without observing the applicable notice period and without the other party's consent, is liable for damages, unless there has actually been an urgent reason.
What is an urgent reason? According to Article 7: 439 of the Dutch Civil Code, it concerns circumstances of such a nature that the party that terminates the agreement cannot reasonably be expected to have the agreement, even temporarily, maintained. And if such an urgent reason arises, then it is the other party that is liable for damages.
Article 7: 442 stipulates that the commercial agent is entitled to a goodwill compensation at the end of the agency agreement. According to the law, the commercial agent is entitled to this in so far as he has introduced new customers to the principal or he has considerably extended the number or value of the contracts with existing customers and, in both events, the contracts with these customers still produce considerable advantages for the principal, and the payment of this goodwill compensation is fair, in view of all circumstances, in particular of the lost commission from the contracts with these customers.
This is where Directive 86/653 / EEC comes in. In the so-called T-Mobile case, referring to the judgment of the Court of Justice of 26 March 2009, case C-348/07, LJN BI0016 (Turgay Semen / Deutsche Tamoil), the Supreme Court has defined a step-by-step plan for testing whether a goodwill payment must be paid and, if so, how high it should be.
This is a three-step plan. First of all, the benefits that transactions with customers made by the commercial agent bring to the principal must be quantified (Article 7: 442 (1) (a) of the Dutch Civil Code). In step 2, an assessment must be made as to whether there is reason to adjust the determined amount in order to ensure fairness. In doing so, account must be taken of all the circumstances of the case and in particular of the commission lost by the commercial agent (Article 7: 442 paragraph 1, under b, Dutch Civil Code). And in step 3 it must be checked whether the amount calculated in step 1 and step 2 is in conformity with paragraph 2 of art. 7: 442 BW i.e. does not exceed the maximum amount of one year of commission.
This seems simple, but there are situations where step 1 is difficult to take.
Do you have questions about a commercial agency contract that is subject to Netherlands law? Get to know the services of our Dutch Law Firm. Please contact us for a complementary call, so we can see what we can do for you. We are there to help you. Not for nothing, our motto is "Your problem, our concern"!
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