Agency agreements under Dutch law
How to terminate an agency agreement in the Netherlands?
First I will discuss what an agency agreement under Dutch law is.
An agency agreeme
nt under Dutch law is the agreement on the basis of which the agent provides conciliation in entering into an agreement between the principal and a customer and receives a commission for that.
Article 7:428 of the Dutch Civil Code stipulates the following characteristics:
A. the agent is self employed;
B. the relationship between agent and principal is not of an incidental nature;
C. the agent does not act on h
is own behalf but acts for the
account of for risk of the principal;
D. the agent acts as intermediary in the conclusion of contracts between the principal and third parties, or concludes contracts himself for the account of and in the name of his principal.
There are different ways to come to a termination of agency agreements in the Netherlands.
Earlier I wrote about the termination of distribution agreements in the Netherlands.
Expiry of the agency agreement
Many commercial agency agreements are concluded for a fixed term. When the term ends, a commercial contract will then expire automatically. If both parties continue the agency agreement after the term has expired, the contract automatically continues for an indefinite period of time and under the same conditions.
So if you want to terminate the contract upon expiry of the term, make sure you do not continue business afterwards.
Termination of an agency agreement by mutual consent
Just like with distribution agreements, parties are free to end the agency agreement by termination of an agency agreement by mutual consent. Parties can then agree upon the terms of termination of the agency agreement. It is highly recommendable to involve a lawyer to draft a settlement agreement in which parties agree upon full and final discharge.
Termination of an agency contract by giving notice
An agency contract
concluded for a fixed term cannot – in principle – be terminated before the expiry date, unless otherwise agreed upon.
An agency agreement concluded for an indefinite period of time can be terminated by giving notice. This has to be given against the last day of the calendar month and has to respect the contractual notice period or, absent such agreement, the statutory notice period.
Notice period for agency agreement
If parties agreed to a notice period, that notice period for agency agreement needs to be in accordance with the statutory requirements. The notice period may not be less than one month in the 1st year of the agency contract, two months in the 2nd year and three months in the following years. If the parties contractually agree to a longer notice period, it may not be shorter for the principal than for its agent.
If no contractual notice period was agreed upon in the agency agreement, the agreement is subject to the statutory notice period. Under Dutch law in the Netherlands, the statutory notice period is four months, and one month needs to be added after a 3 year period and two months need to be added after a year period.
Rescission of an agency agreement
Just like with other commercial agreements, a party may rescind a contract in the event of a breach by the other party, unless the breach does not justify the rescission of the contract and its consequences. As long as parties have not agreed to exclude this right, parties are free to rescind the distribution contract.
For agency agreements, it is also possible to request a District court in the Netherlands ro rescind the agency contract on the basis of:
1. circumstances that give rise to ‘compelling reasons’ to terminate the agency contract, or
2. a change in circumstances that necessitates that the agency agreement is terminated immediately or after a very short time.
The burden of proof of ‘compelling reasons’ lies with the terminating party.
Lawyer in the Netherlands, specialized in agency agreements
The termination of agency agreements in the Netherlands is a complex process in which all legal consequences need to be taken into account. We therefore recommend to involve a lawyer in the Netherlands who is specialized in agency agreements. Lisa Jie Sam Foek has a lot of experience in assessing agency agreements, drafting agency contracts and providing assistance in the terminating agency contracts. Please feel free to contact lawyer in the Netherlands, specialized in agency agreements, Lisa Jie Sam Foek contractenrecht & privacy (firstname.lastname@example.org).