Commercial agency agreement
Your brand is doing well in the Netherlands and you want to move into Scandinavia. An agent with a showroom in Copenhagen knows the boutiques, takes your collection to the trade fair twice a year and writes the orders. You deliver and invoice. Often it starts with a handshake and a commission percentage in an email, and only when you part ways does it become clear what was never arranged.
A commercial agency agreement is the agreement under which a commercial agent, for remuneration, negotiates the sale of your products and sometimes concludes sales on your behalf, without being your employee (Article 7:428 of the Dutch Civil Code). Dutch law gives the agent rights that you cannot entirely contract out of. Anyone who only finds that out at the point of termination often pays more than they needed to.
Need a commercial agency agreement drafted or checked? Call 020 675 88 21 or get in touch. You will have a reply within one working day.
When a working relationship is legally a commercial agency agreement
What you call the contract matters little. If someone independently negotiates the sale of your products and is paid for doing so, the rules for commercial agents apply. That holds even if the document is headed “collaboration agreement” or “sales agreement”, or if nothing is on paper at all.
In fashion the agent is sometimes called a showroom or a sales agent. Under Dutch law that makes no difference. In a 2024 case before the kantonrechter, the subdistrict judge, in Groningen, a clothing company had only made oral arrangements with an agent for its western sales region. That did not stand in the way of a goodwill indemnity for the agent (ECLI:NL:RBNNE:2024:4604).
The difference between a commercial agent and a distributor
A distributor buys your collection, resells it in its own name and earns the margin. The boutique is then the distributor’s customer. A commercial agent buys nothing. The orders come in to you, you deliver, and the boutique remains your customer. The flip side is that the protective rules in Article 7:428 and onwards of the Dutch Civil Code apply to the agent.
For you as a brand, the choice is mainly about control. With an agent you set the price, the presentation and which shops carry your collection, and you keep the customer data. With a distributor you hand most of that over, and the risk of unsold stock lies with the other party.
What to agree with a commercial agent on commission, territory and exclusivity
Commission causes the most disagreement. Record whether it is calculated on the order value or on what the boutique actually pays, and whether repeat orders in the middle of the season count. If a shop in the agent’s territory orders directly through your webshop, you will also want to know whether the agent earns commission on it.
Territory means more than countries. The type of shop and the names of key accounts belong in the contract too. A department store chain you bring in yourself is one you may want to keep outside the arrangement.
Exclusivity cuts both ways. May you still sell in the territory yourself, and may the agent also represent brands that compete with yours? Leave that open, and you will have that discussion later with lawyers involved.
Settle as well who pays for the trade fair, the showroom and the samples. Those costs add up every season.
The notice period for a commercial agency agreement
You terminate an agreement for an indefinite period with the notice period you agreed. If nothing was agreed, it is four months. After three years that becomes five months, and after six years six (Article 7:437(1) of the Dutch Civil Code). Notice is given to the end of a calendar month.
If you agree a period yourself, the law sets a minimum: one month in the first year, two in the second and three months thereafter. A longer period is allowed, but for you as the principal it may not be shorter than for the agent (Article 7:437(2)). The contract cannot depart from that (Article 7:445).
Goodwill indemnity: what a commercial agent can claim when the agency ends
When the relationship ends, the agent can claim a goodwill indemnity, separately from any claim for damages. Two conditions. The agent has brought you new customers, or significantly increased the business with existing ones, and those customers still bring you substantial benefits. And payment of the indemnity is equitable, having regard in particular to the commission the agent loses (Article 7:442(1)).
The indemnity is capped at one year’s remuneration, calculated on the average over the last five years, or over the shorter term of the agreement (Article 7:442(2)). In the Groningen clothing case the agency had run for nineteen months. The maximum came to €159,638.41. The court awarded €84,147.23, after taking into account, among other things, how many customers had already dropped away.
Factor that indemnity in if you are considering a switch to your own sales team or to a distributor. There are three situations in which it is not owed. The most important: the agent terminates, without a reason that lies with you or in the agent’s age or health (Article 7:442(4)). And while the agreement is running, you cannot set the rule aside to the agent’s detriment (Article 7:445(2)).
If you are the agent yourself, keep track of which boutiques came in through you and what they order each season. In the Groningen case the court worked per customer with the commission from the last twelve months. Without those figures an indemnity is hard to substantiate.
A non-compete clause for a commercial agent has its limits
If you want to stop the agent from immediately representing a competitor once the agency ends, that has to be in writing. The clause may only cover the kind of products the agent sold for you, and the territory or customer group you entrusted to the agent. It cannot last longer than two years (Article 7:443).
To the extent it reaches further, the clause is not valid. A general ban on working “in the fashion industry” will therefore not help you.
Having a commercial agency agreement drafted or reviewed
We draft commercial agency agreements for brands, designers and manufacturers, and review the contracts that agents and showrooms put forward themselves. If a notice of termination or a claim is already on the table, we first work out where you stand, before any letter goes out.
Agree in the same contract whether the agent may use your brand on their own website, in a webshop or on social media. If your brand is not yet protected in the agent’s country, read more about trade mark law.
Want a commercial agency agreement drafted or reviewed, or is a termination under way? Get in touch or call 020 675 88 21.
