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Agency agreements under Dutch law are defined in book 7 of the Dutch Civil Code (DCC). Book 7 contains a number of specific type of agreements that need a specific form of protection. Agency agreements and employment agreements are examples of such specific agreements.
Agent agreement have specific protection such as termination of the agency agreement, damages, goodwill compensation and the notice period to terminate the agency agreement. Some of these provisions in the DCC are of a compulsory nature for both the parties concerned, meaning that these provisions cannot be deviated from.
Can you terminate an agency agreement?
In the event that the agency agreement falls within the definition of agency agreements set out in article 7:428 DCC, either party may terminate the agency agreement and the notice period for the principal must be the same as for the agent. The notice period must also be given at the end of the month, meaning that the termination notice needs to have reached the receiving party before the end of the month (article 3:37 (3) DCC). The length of the notice period of an agency agreement is dependent on whether the agency agreement contains a notice period in the agency agreement or not.
What if the Agency agreement does contain a clause with a notice period?
If the agency agreement is entered into for a fixed term with the right to terminate during the term, or if the agency agreement is entered into for an indefinite term, the agency agreement may be terminated by either party in accordance with the notice period provided for in the agency agreement. However, article 7:437(2) DCC states that a minimum legal notice period must be applied. This is one month for an agency agreement with a term of one year, two months for an agency agreement with a term of up to two years and three months with a term of three years or more. The notice period for both parties must be the same.
What if the Agency agreement does not contain a clause on a notice period
The general rule is that if the agency agreement is entered into for a fixed term or an indefinite term, and it does not contain a clause for termination, then a notice period of at least four months applies, article 7:437 (1) DCC.
This minimum legal notice period shall be increased by one month for every 3 years that the agency agreement has lasted since the date of commencement. So, the notice period for an agency agreement is five months (4 months plus one month) in the event that the agency agreement commenced 3 years ago. If the agency agreement commenced 6 years ago or longer, then the notice period is 6 months, which is the maximum legal notice period permitted by law.
What happens if the above legal notice period is not complied with?
If either party does not comply with the above legal requirements regarding the legal notice period without the approval of the other party, that party is under an obligation to pay damages provided that there is no urgent ground for terminating the agency agreement, article 7:439 DCC. The rule of thumb is that the damages payable is determined based on the provision that the agent would have earnt if the legal notice period was correctly applied. However, certain facts and circumstances may influence the actual amount further.
Which legal requirements need to be met in the actual notice period itself?
The notice is form-free but needs to have reached the other person (article 3:37 DCC). The wording of the notice is important as well as the facts and circumstances surrounding it. The courts will look at not only the wording but also the intentions of the parties to determine the meaning that the parties, given the circumstances at hand, reasonably could have attributed or expected at the time.
Are you looking for an attorney at law specialised in the termination of an agency agreement, please feel free to contact Madelon van Breemen.