This website deals with the concept of (commercial) agency. But what does that mean? The answer to this will be discussed in this chapter.

Definition of agency 

The agency agreement is defined in article 428 of Book 7 of the Dutch Civil Code. A translation of that article reads as follows: 

‘The agency agreement is an agreement whereby one party, the principal, instructs the other party, the commercial agent, who undertakes, for a definite or indefinite period of time and for a consideration, to act as an intermediary in the formation of contracts, and, where necessary, to conclude these in the name of and for the account of the principal without being subordinate to the latter.’

In short, it concerns an agreement pursuant to which the agent, for a consideration, acts as an intermediary for the principal/supplier in the formation of contracts between the principal/supplier and third parties. This 'third party' as a rule is a customer/buyer on the sales side, but a principal can also work with agents on the purchasing side, for example when selecting and contracting the manufacturers that produce the principal's products. 

Different parts of the definition of an agency agreement are discussed below.

Intermediary activities

The agent provides the principal with orders or concludes contracts in the name of and on behalf of the principal. The agent himself does not become a party to the contract he negotiates. 

For example: in the case of acting as an intermediary regarding purchase agreements, a purchase agreement is formed between the principal and the buyer introduced to the principal by the agent. The agent is not a party to that purchase agreement. The agent is a party to the agency agreement with the principal only. The agent's contacts with the buyer merely serve to give effect to the principal’s instructions to negotiate a contract for the latter. In that capacity, the agent will not have a monetary claim against the customer under the agreement he has negotiated. All that he will be entitled to is a claim against the principal for payment for the activities performed by the agent (usually referred to as a commission or a fee).

In these legal relationships between supplier, agent and customer lies the characteristic difference between the agency agreement on the one hand and a distribution agreement on the other. In the case of distribution, the distributor purchases the products from the supplier for his own account and risk. Thus, a purchase agreement is formed between the supplier (as the seller) and the distributor (as the buyer). A separate purchase agreement is subsequently formed between the distributor (as the seller) and his customer (as the buyer). The supplier in that case does not become a party to the agreement between the distributor and his customer.

Negotiated agreement

In practice, an agent often acts as an intermediary with respect to sales agreements. This may also concern other agreements, such as purchase agreements, service agreements, rental agreements and employment agreements.

In the case of sales agreements, the agent as a rule introduces potential buyers to the principal, who is a manufacturer and/or supplier of products. The purchase agreement is in that case formed between the principal and the buyer. 

Definite or indefinite period

With the words ‘for a definite or indefinite period of time’, the legislator has intended to indicate that the principal and the agent intend to enter into a long-term relationship with each other. This means that no agency agreement is formed in the case of once-only instructions to negotiate a contract. Where such instructions are given only once, we merely speak of an intermediary agreement. The intermediary agreement is regulated in articles 425 - 427 of Book 7 of the Dutch Civil Code.

Remuneration

The legal definition states that the agent performs his intermediary activities for a renumeration. That remuneration is usually a fee in the form of a percentage of the purchase price/contract price of the agreements concluded through his intermediary. 

Case law presents a mixed picture as to whether it is also permitted to work with both fixed fees and variable fees[1]. If only a fixed fee is paid, the possibility exists that the relationship qualifies as a contract for the provision of services (or an employment agreement), rather than as an agency agreement.

If no agreements have been made by the parties regarding the amount of the agent's remuneration, this does not prevent their legal relationship from being qualified as agency. In that case, customary wages are deemed to have been agreed. If the parties have agreed that no remuneration will be paid to the agent, no agency agreement will have been formed.

Not subordinate

The agent acts on behalf of the principal. This gives the principal certain powers of instruction. For example, the agent must comply with rules regarding communication and marketing. However, the agent must perform the service independently. It is a matter of interpretation of the relevant circumstances of the case whether there is sufficient independence or whether the agent is subordinate. If the agent is subordinate, no agency agreement, but rather an employment contract will have been formed.

Name of the agreement

The name given to the agreement by the parties themselves is irrelevant. Any form of cooperation that qualifies as an agency agreement based on the definition discussed above is governed by the Agency Law. The Agency Law is set forth in Part 4, Title 7 Book 7 of the Dutch Civil Code. 

Agency and contract for the provision of services

The agency agreement is a species (a special form) of contract for the provision of services. The agency agreement is therefore also governed by the general rules of the contract for the provision of services (articles 400 - 413 of Book 7 of the Dutch Civil Code). 

[1] http://deeplink.rechtspraak.nl/uitspraak?id=ECLI:NL:GHAMS:2015:3847; http://deeplink.rechtspraak.nl/uitspraak?id=ECLI:NL:GHSHE:2017:5386; http://deeplink.rechtspraak.nl/uitspraak?id=ECLI:NL:RBROT:2018:1083.