13 December 2019

Commercial agency under Dutch Law

Category: Commercial contracts

In this blog an overview of (i) the requirements of an agency agreement, (ii) the primary duties of the principal and the agent, as well as iii) the rights of the agents during an agency agreement.

Commercial agents are defined as independent contractors whereby the Principal instructs the Agent, who engaged himself to act as intermediary on payment of a commission (remuneration), to provide intermediary services in arranging contracts to be constructed by the principal with third persons and to conclude such contracts in the name and for account of the principal, without being his subordinate.

Primary duties of the Agent

General duties of an Agent is to safeguard the interests of the Principal. Amongst other things, this entails:

  • To provide all necessary information, especially regarding agreements with third parties. , as well as examination of third parties solvency’s which he is doing business.
  • To examine the solvability of third parties and notify the Principal
  • To refrain from placing orders with unsolvable customers

Commission fee during the agreement

Unless otherwise agreed, the Commercial Agent can claim a commission fee if:

  • if the contract has been concluded as a result of his intermediation;
  • if the contract has been concluded with someone whom he already had put forward at an earlier stage for the conclusion of a similar contract;
  • the transaction has been concluded with customers exclusively assigned to the Agent;
  • the transaction has been conducted within the territory that is assigned to the Agent, unless it has explicitly been agreed that he has not the exclusive right with respect to that group of customers or territory.
  • Under certain circumstances the agent is also entitled to a commission for the preparation and arrangement of contracts which the principal has concluded with third persons after the commercial agency agreement has ended.The agent is not entitled to a commission if this commission is indebted to his predecessor, unless in the circumstances it is fair that the commission is divided between them both.

Primary duties of the Principal

According to the law (article 7:420 DCC), the principal has several duties towards the agent, a short overview follows:

  • The principal has the duty to do everything within the scope of his abilities, to enable the performance of the agency contract (e.g. provide all necessary documents and information concerned the goods and services).
  • The principal has the duty to notify the agent immediately if he foresees that contracts with third parties will or may be concluded to a far less degree than the agent was allowed to expect.
  • he principal must notify the agent within a reasonable period of his acceptance or rejection or of the non-implementation (non-performance) of a contract which has been put forward by the agent.

Drafting an agency agreement

Futhermore, please be aware that if there is any ambiguity in how the contract is drafted, the courts will usually construe the provisions in the agent’s favor when the contract comprises ambiguity terms.

When drafting an agency agreement, we advise to precisely formulate the duties of the Agent to limit discussion whereas the duty of care is general of nature. The main intent is to prevent discussion concerning the scope of the rights and duties of parties.